CoreWeave May Benefit From Blue Wave’s Potential Data Center Slowdown, Analyst Says Ahead of Q3 Results

Brett Knoblauch, Cantor’s AI infrastructure analyst, also said he expects CoreWeave’s funding needs to be smaller than the market fears during an interview with CNBC.

• The Cantor Fitzgerald analyst said that CoreWeave has “effectively sold out of compute for pretty much through 2027.” 
• According to him, the key focus for investors from the company’s third earnings call will be how the company plans to finance further expansion.
• Knoblauch expects CoreWeave’s revenue to exceed Wall Street estimates and sees the company’s margins demonstrating that “the model is working.” 

CoreWeave (CRWV) could benefit if fewer data centers are built following last week’s midterm elections, Cantor Fitzgerald analyst Brett Knoblauch said Tuesday, ahead of the neocloud’s third-quarter earnings report after the market close.

Knoblauch noted that AI stocks sold off after Democrats won control of Congress, on concerns that the party will slow construction of the data centers that power artificial intelligence. However, he flagged that the concern overlooks how CoreWeave makes money.

“If less data centers are going to get built, there is less compute being brought online,” Knoblauch told CNBC. “If there’s less compute being brought online, that compute that is currently up and running and available is going to be worth more.”

CoreWeave rents out computing power to companies building AI. Its customers include Microsoft (MSFT), OpenAI and Meta Platforms (META). According to Knoblauch, a smaller supply of data centers could let it charge more for the capacity it already has.

CRWV stock fell nearly 2% in midday trade on Tuesday amid the broader market drawdown after the Consumer Price Index (CPI) reading came in hotter than expected. On Stocktwits, retail sentiment around CoreWeave trended in the ‘bearish’ zone over the past day.

CoreWeave Q3 Earnings Call To Put Funding Needs In Focus

According to Knoblauch, investors will be focused on commentary around how CoreWeave plans to pay for its expansion during the third-quarter earnings call. The company has “effectively sold out of compute for pretty much through 2027,” he said, which means it must keep spending to build more.

“I think the market’s probably a bit expecting that number to be a lot higher than what it actually is,” he said of the company’s funding gap. “They know that’s what the market wants, and I expect them to talk up what sources of capital they have access to.”

CoreWeave’s borrowing costs have declined from levels seen two years ago, while the prices it charges customers have doubled or more, according to Knoblauch. He said the combination has shortened the estimated time it takes for the company’s chips to pay for themselves to about two years, down from roughly four years.

Analysts Expect CoreWeave Revenue To Reach $3.54 Billion

Wall Street is expecting CoreWeave to report a loss of $1.21 per share on revenue of $3.54 billion, according to the analysts surveyed by Koyfin.

Knoblauch expects revenue to come in above Wall Street’s estimates. He also expects profit margins to show “the model is working,” even after the company added about 500 megawatts of power.

He compared CoreWeave to Amazon (AMZN) in 2007, when it began renting out computing power by the hour, the start of what became its Amazon Web Services cloud business. According to Knolauch, CoreWeave’s revenue will likely come from a wider range of customers, including AI startups, rather than a few large contracts, over the next five years. 

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