Here’s why the CoreWeave stock price rally is set to accelerate

CoreWeave stock price has staged a strong comeback this week, pushing it to its highest point since November last year, and this trend may continue in the foreseeable future as its business momentum accelerates. CRWV jumped to $120, up by over 80% from its lowest level this year.

CoreWeave stock jumps as its market share gains steam

The neocloud industry is seeing robust growth as demand for computing accelerates, with the biggest hyperscalers using these companies to complement their growth strategies.

CoreWeave has emerged as the most preferred neocloud provider in the industry, with its revenue backlog soaring to over $66 billion this year.

There are signs that the neocloud industry will be dominated by a few companies, with Nebius being the closest competitor to CoreWeave. The other large names like IREN, Bitfarms, and TeraWulf will be the second tier of this industry.

CoreWeave made headlines this month when it expanded its business with Meta, which committed an additional $21 billion in the company on top of the previously announced $14 billion deal. It also reached a deal with Anthropic.

The company now counts the biggest companies in the AI industry as its customers. These include top names like Microsoft and OpenAI, which have committed to continue the spending this year.

The most recent results showed that CoreWeave’s business continued to fire on all cylinders, with its revenue soaring by 168% YoY to over $5.1 billion and its revenue backlog soaring by 342% to $66.8 billion. If this growth continues, it means that the backlog will soar to over $100 billion soon.

Soaring short interest amid debt binge

Still, despite these excellent growth momentum, analysts and investors are concerned about the company’s soaring debt binge as the cost of GPUs, memory, and servers continue rising.

The most recent results showed that its total debt load has jumped to over $14 billion and this trend will continue.

Investors are still concerned about the potential dilution as the company is mostly using convertible bonds to raise capital.

However, there are signs that these fears are overblown as the company needs money to fund its data center build up. It will then get a point where the spending will end, leaving the company to start generating high margin revenues.

There are many examples of companies that focused on this approach and are now highly profitable. Some of the top names in this are popular names like Tesla and Netflix. Today, these companies have become highly profitable and have managed to handle their debt well.

The debt binge will be overshadowed by the ongoing revenue growth. For example, the average estimate is that its revenue will grow by 142% this year to $12.4 billion followed by 87% next year to $23 billion.

The management believes that the investment in GPUs will be worth it over time. For one, it expects to sell the GPUs at a profit or at par in that period.

CoreWeave stock price technical analysis

CRWV stock price chart |Source: TradingView

The daily chart shows that the CRWV stock price bottomed at $67, where it formed a triple-bottom pattern. It then rebounded and reached its highest level since November last year.

As it jumped, the stock moved above the descending trendline that connects the highest swings since June last year. It has moved above all moving averages,while the Relative Strength Index (RSI) and other oscillators have continued rising.

Therefore, the most likely scenario is where the stock continues rising, potentially to the next key target at $152.60. A move above that level will point to more gains to $200.