CoreWeave (NASDAQ:CRWV) shareholders could lose everything if the AI spending boom weakens, D.A. Davidson analyst Gil Luria warned, despite the company’s $104 billion revenue backlog.
“The equity value is going to be zero,” Luria said on Wednesday’s Prof G Markets podcast, calling CoreWeave particularly vulnerable if the AI investment cycle turns.
Luria remains bullish on AI demand. His concern is that CoreWeave’s expensive borrowing could leave it unable to meet its debt obligations if the AI boom slows.
Why Luria Thinks CoreWeave Could Be First to Fall
CoreWeave is borrowing money at around 9%, Luria said, but he estimates it is earning returns of just 1% on its investments. Even the 4% to 5% he said the company is targeting would fall short of its borrowing costs.
He compared it to taking out a loan at 9% to buy Treasury bonds yielding 5%, a strategy he argued would destroy value.
CoreWeave reported $640 million in second-quarter net interest expense, more than double the $267 million recorded a year earlier, alongside a $626 million net loss. Its unsecured bond yields neared 15% Tuesday.
CreditSights analyst Jordan Chalfin told the Financial Times that CoreWeave had been “very creative” with its financing, but investors were worried about its long data-center leases and shorter customer contracts.
“If there’s an overbuild, why would [customers] renew their contract with CoreWeave?” he asked.
In a severe restructuring, creditors would have priority over shareholders.
CoreWeave’s Co-Founder Defends the Borrowing
Co-founder Brannin McBee offered a sharply different view to the FT.
“I don’t look at that as scary debt at all,” he said, arguing that borrowing allows CoreWeave to expand faster.
The company is seeking cheaper financing from insurers to continue building AI infrastructure. Its combined debt and lease obligations stood at approximately $52 billion at the end of June.
Visible Alpha consensus forecasts cited by the FT project $71 billion in cumulative negative free cash flow between 2026 and 2028.
But McBee argued the spending reflects expansion rather than weakness in the existing business.
“If we stop building today, [we’d be] immensely cash-flow positive,” he said.
McBee said nearly all CoreWeave’s 2027 capacity was sold. Its $104 billion backlog represents contracted future revenue, however, not profit.
D.A. Davidson downgraded CoreWeave to Neutral from Buy in May as Luria assumed coverage, cutting the firm’s price target from $175 to $100. His wipeout warning describes a downside scenario, not his formal forecast.
On Polymarket, traders Wednesday morning assigned a 13% probability to CoreWeave announcing bankruptcy by December 2027, with approximately $50,600 traded. The odds rise to 27% by 2029. Bankruptcy is distinct from an equity wipeout.
CoreWeave shares fell approximately 7% in Wednesday’s premarket trading after closing Tuesday at $77.81.
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