CoreWeave Secures $6B Jane Street Deal, Stock Surges 1.2% as AI Compute Demand Accelerates

Quick overview

CoreWeave Inc. (NASDAQ: CRWV) is having a great week. Its stock price has reached its highest point since November, and it has signed a huge $6 billion expansion contract with quantitative trading powerhouse Jane Street. The deal shows that there is a growing need for AI computing infrastructure that goes beyond the frontier AI model researchers and into the world of high-frequency finance.

The CoreWeave-Jane Street AI Deal

With the new deal, Jane Street will be able to use CoreWeave’s AI cloud computing infrastructure in several data centers, incorporating Nvidia’s next-generation Vera Rubin platform and CoreWeave’s own software and services stack. Jane Street said it requires GPU-based computing capacity to stay competitive in trading and research as more and more financial companies use AI.
Jane Street also agreed to a $1 billion equity investment in CoreWeave’s Class A Common Stock at $109 per share. This shows that Jane Street is quite sure about the company’s long-term future.

Evercore ISI boosted its price target on CRWV from $120 to $150 after the news and kept its Outperform rating. It thinks the deal will bring in more than $1 billion a year in revenue and give the company about 100 to 120 megawatts of compute capacity, assuming the contract lasts for five years.

CoreWeave’s Deal Streak That’s Hard to Ignore

CoreWeave has won three big contracts in just a few weeks, the latest of which is the Jane Street deal. The company said earlier this month that it has signed a new deal with Anthropic. The Claude AI models will run on CoreWeave’s infrastructure. Before that, Meta added $21 billion to the platform on top of a $14 billion deal that had already been announced. After the Anthropic deal, company spokespeople said, “Nine of the top ten AI model providers now use CoreWeave’s platform.” This is a big reason why the stock is going up.

CoreWeave (CRWV) Financials: The Numbers Behind the Rally

CoreWeave’s most recent financial statistics reveal that its sales rose 168% year over year to $5.13 billion, and its revenue backlog rose 342% to $66.8 billion. Analysts think that growth will keep going, with a consensus prediction of $12.4 billion in revenues this year, a 142% increase, and $23 billion the year after that.

On Wednesday, CRWV shares went up around 1.27% to close at about $118.69. This is more than 80% higher than their year-to-date low of $67, which is when technical experts say the stock formed a “triple-bottom” pattern. If momentum stays strong, analysts at one business think the next important resistance level is $152.60, and a move to $200 is possible.

The Bear Case for CRWV Stock: Debt and Dilution

Some people don’t think the rally is completely justified. CoreWeave’s total debt has gone above $14 billion, thanks in part to $4 billion in Convertible Senior Notes and $1.75 billion in Senior Notes that were sold in private offers. For example, Bernstein kept its Underperform rating even though it raised its price objective to $67.

Investors are still worried that convertible bonds could lower the value of their investments, and InvestingPro data shows that CRWV is one of the most overvalued companies right now. There is still a lot of short interest in the name.

Bulls say that the debt-fueled buildout is like the early, capital-intensive stages of companies like Tesla and Netflix, which lost a lot of money before switching to high-margin profitability. CoreWeave’s management has said that they anticipate to eventually sell GPUs at a profit or at least break even, and that the infrastructure spending has a natural end point.

CoreWeave Stock Outlook: From Crypto Mines to the Cloud

In many respects, Weave’s narrative provides a model for how to change infrastructure. The company started out as Atlantic Crypto in 2017, but by 2019 it was already moving toward AI cloud computing. This was long before the rest of the crypto mining sector started to move into high-performance computing. That early-mover advantage helped it become the leader in the “neocloud” sector, which is a group of GPU-first cloud providers that are different from typical CPU-based hyperscalers like Amazon Web Services or Microsoft Azure.

Bernstein’s analysts found that CoreWeave has “by far the strongest commercial machine” compared to neocloud competitors like IREN and Nebius. This is because it has long-term contracts, on-demand revenue, and a wide range of customers, including AI labs, tech giants, and Wall Street trading firms.

ABOUT THE AUTHOR See More

Arslan Butt

Lead Markets Analyst – Multi-Asset (FX, Commodities, Crypto)

Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics. His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker. His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.

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