CoreWeave shares are up 200% in the last month and now trade at 14.4x 2025 revenue guidance. That is a high multiple, that can easily go much higher, for this NVIDIA/AI-focused hyperscaler cloud platform (optimized for generative AI workloads, such as Microsoft, Meta and Open AI) through multiple expansion or revenue growth (they can keep landing new contracts/deals).
I just took some profits:
Despite the incredible upside and momentum, I just sold two-thirds of my shares (taking my position size back down just below 1% of my Disciplined Growth Portfolio). Perhaps noteworthy for you, I owned them in an IRA account so there are no short-term capital gains taxes (even though I have big gains).
Why are the shares rising so fast? Lock-Up Period (6 months post IPO)
The majority of these shares are owned by pre-IPO institutions and they are NOT able to sell their shares until 6-months after the IPO (so in September). As such, trading is dominated by “retail” investors mesmerized by the NVIDIA/AI story (CoreWeave builds custom data center facilities for the latest NVIDIA Blackwell chips clients, including Meta, Microsoft and Open AI). And of course, the company keeps landing new deals/contracts as demand is insatiable right now.
What are the Risks?
Aside from extreme volatility, the big risk is that CoreWeave is just the capex “fall guy” for the hyperscalers, so when AI growth slows (even temporarily) CoreWeave will fall VERY hard and VERY fast (this could be soon, it could be next year). I wrote about this in more detail here.
Why I am still long
Given the ongoing AI/NVIDIA megatrend, these shares can easily trade at twice the current 14.4x price-to-2025-sales multiple, and sales can also rise dramatically higher if/when the company lands new big deals.
Risk Management
However, for risk management purposes, I have reduced my position size by 2/3rds (back just below a 1% position size). For some people, when you reach a certain point in your investing life, using discipline (to protect what you’ve got) becomes more important that taking massive wild risks (for example, I consider anything more than 5-7% to be a big risk—unless we’re talking about select mega caps which are 5-7% of the entire US market cap already anyway).
Furthermore, given the massive price increase, I’d not be surprised to see CoreWeave start issuing more shares because they can get so much for them right now (but it would also be diluting to existing shareholders—even if it is for certain types of growth).
Bottom Line:
I suspect these shares are still going dramatically higher from here (via multiple expansion and/or new very big deals/contracts). Nonetheless, for risk management purposes (and because I am a disciplined investor) I have reduced my CoreWeave position size (this company is still only 20bps of the US market cap) to less than 100bps (<1%) in my prudently concentrated Disciplined Growth Portfolio. Long CoreWeave!