CoreWeave (CRWV): Can AI-Driven Growth Outpace Debt and Shorts?

Cyrus ColeMonday, May 26, 2025 11:14 am ET
30min read

The AI revolution isn't just about algorithms—it's about infrastructure.

(CRWV), a leading provider of AI compute and storage solutions, has positioned itself at the epicenter of this shift. With revenue skyrocketing 420% year-over-year and a staggering $25.9 billion in committed contracts, the company's growth trajectory is undeniable. But here's the catch: it's drowning in debt, bleeding cash, and facing mounting short interest. Is this a setup for a historic short squeeze—or a warning sign of a looming implosion? Let's dissect the numbers.

The Growth Machine: Revenue Soars, Backlog Explodes

CoreWeave's Q1 2025 results were nothing short of explosive: $981.6 million in revenue, up from $191 million in Q1 2024. This isn't just growth—it's hyper-growth, fueled by AI's insatiable appetite for compute power. The crown jewel? A $11.2 billion deal with OpenAI, which alone accounts for nearly half of CoreWeave's $25.9 billion backlog. Add partnerships with IBM (Granite AI models) and NVIDIA (Grace Blackwell chips), and you've got a pipeline primed to dominate enterprise AI.

But here's the kicker: $14.7 billion of that backlog is in Revenue Performance Obligations (RPO), meaning it's already under contract. This isn't hypothetical future revenue—it's baked into the books. For a company valued at ~$17 billion (post-IPO), the math screams “scalability.”

The Dark Side: Debt, Losses, and a Cost Problem

Now, let's address the elephant in the room. CoreWeave's net loss widened to -$314.6 million in Q1 2025, a 143% YoY increase. While adjusted EBITDA hit $606 million (a 62% margin), the operating loss turned negative, signaling execution risks. The culprit? Operating costs surged 487% to $1.01 billion, driven by $177 million in IPO-linked stock-based compensation.

The debt burden is equally worrisome. CoreWeave just added $1.5 billion in new debt to its $17.2 billion total capital stack (including $1.4B from its IPO). With interest rates at decade highs, servicing this debt could become a crushing burden if cash flows falter.

Short Interest: A Catalyst or a Trap?

Here's where things get interesting. CoreWeave's short interest stands at 4.04% of its float, with a “days to cover” ratio of just 0.67. That means short sellers could cover their positions in under a day if the stock rallies—a classic setup for a short squeeze.

But the real red flag is the short borrow fee rate, which spiked to 11.74% in early April. High borrow fees signal scarcity of shares to short, amplifying the risk of a rapid price surge when shorts are forced to buy to cover.

The “short squeeze score” model here is telling: CoreWeave's low “unshorted shares” availability (per prime brokerage data) means even a modest rally could trigger a stampede.

However, historical data complicates this narrative. A backtest of buying 5 days before earnings and holding until the next report from 2020 to 2025 resulted in an average return of -99.52%, with a maximum drawdown of -99.85%. This starkly demonstrates that earnings-related catalysts have historically been catastrophic for this strategy, underscoring the high volatility tied to CoreWeave's earnings announcements.

The Strategic Edge: Why This Isn't Just a Hype Stock

Critics will dismiss CoreWeave as a “money-burning AI play,” but the company's moves suggest it's building a moat:
1. Weights & Biases Acquisition: A $100 million buy to integrate AI developer tools into its platform, creating a “full-stack” solution for enterprises.
2. CAIOS Launch: CoreWeave AI Object Storage (CAIOS) addresses the data bottleneck in AI workflows, locking in clients with proprietary tech.
3. NVIDIA Integration: Its optimized support for NVIDIA's Grace Blackwell chips gives it a leg up in MLPerf benchmarks, making it a go-to for high-performance AI workloads.

These moves aren't just about growth—they're about creating sticky revenue streams.

The Bottom Line: Buy the Dip, or Wait for the Bust?

The case for CoreWeave hinges on two variables:
1. Can it convert backlog into profit? With $25.9B in committed deals, the path to positive cash flow is clear—if it can rein in costs.
2. Will shorts capitulate? The 4.04% float shorted and 11.74% borrow fees create a tinderbox. A single catalyst—a product launch, a partnership announcement, or even a positive earnings beat—could trigger a short-squeeze firestorm.

The risks are real: debt, losses, and execution. But in a market hungry for AI winners, CoreWeave's fundamentals are unmatched. The shorts are playing with fire—and fire often burns them.

Final Call: The Squeeze Is Coming—Get In Before It Does

CoreWeave isn't a “buy and hold” stock—it's a catalyst-driven trade. The backlog is too big, the demand too real, and the shorts too exposed. For aggressive investors, this is a setup to buy now and ride the squeeze. For the cautious? Wait for a catalyst—but don't be surprised if it's already too late.

The AI future is here. CoreWeave isn't just betting on it—they're building it. And when the shorts run for cover, this stock could soar.

Investment thesis: Buy CRWV on dips below $[X] (price to be updated with real-time data), with a target of $[Y] within 6-12 months. Set stop-loss at $[Z] to mitigate debt risks.