Exploring CoreWeave: An NVIDIA-Backed AI Play - Motley Fool Hidden Gems Investing

Summary

Motley Fool Money: Exploring CoreWeave – An NVIDIA-Backed AI Play

Podcast Information:

Title: Motley Fool Money
Host/Authors: Dylan Lewis, Ricky Mulvey, and Mary Long
Episode: Exploring CoreWeave: An NVIDIA-Backed AI Play
Release Date: June 11, 2025
Description: Motley Fool Money is a daily podcast for stock investors, offering long-term perspectives on business news with The Motley Fool's investment analysts. Weekday episodes focus on business news, while weekend shows feature investing classes and in-depth interviews.

Key Topics Covered:

Market Headlines and Economic Indicators
Earnings Discussions: Focus on Chewy
Hype Meter Segment: CoreWeave Analysis
Legal Battles in the Fintech Space: Sezzle vs. Shopify

1. Market Headlines and Economic Indicators

The episode kicks off with a rundown of current market headlines, providing listeners with a snapshot of the economic landscape:

Inflation Status: The latest Consumer Price Index (CPI) reading shows inflation at 2.4%, supported by factors such as lower gas prices ([00:05]).
China and US Trade Talks: Progress is indicated with a "green arrow," suggesting positive developments in bilateral trade relations ([00:05]).
OpenAI and Google Cloud Partnership: OpenAI is expanding its infrastructure by integrating Google Cloud to power ChatGPT, diverging from its exclusive use of Microsoft Azure. This move positions Google’s cloud business as a stronger competitor against AI-centric services like ChatGPT, which continues to challenge Google's search dominance ([00:05]).
Starbucks Annual Leadership Conference: Starbucks is hosting its leadership conference in Las Vegas, emphasizing its ongoing commitment to customer service excellence, humorously referenced as "getting me my tall decaf Americano in four minutes or less" ([00:05]).

2. Earnings Discussions: Focus on Chewy

The hosts delve into the latest earnings reports, highlighting key performances within The Motley Fool’s stock universe. Among GitLab, Stitch Fix, and Chewy, Chewy garners significant attention.

Chewy’s Financial Performance:

Earnings and Revenue: Chewy reported earnings per share just above expectations with an 8% revenue increase from the previous year, slightly surpassing Wall Street's forecasts ([01:37]).
Customer Growth: Active customers rose by nearly 4% year-over-year, with annual spending per customer increasing to $583, a 3.7% uptick ([01:37]).
Guidance Concerns: Despite strong quarterly results, Chewy forecasts a slight slowdown in revenue growth to around 7.5% for the current quarter, with full-year sales projected between $12.3 billion and $12.45 billion. This projection falls slightly below the $12.4 billion consensus, attributed more to macroeconomic uncertainty than company-specific issues ([01:37]).

Market Reaction and Valuation:

Ricky Mulvey remarks on Chewy's market valuation, noting its trading at 33 times future earnings. He emphasizes that the company's growth trajectory remains intact, which aligns with investor expectations despite concerns:

"Chewy's growth story appears to be intact and that's what investors are looking for." ([02:48])

Customer Base Fluctuations:

Rick Menarez provides historical context on Chewy’s active customer base, highlighting fluctuations from 2021 to 2023 and a recent rebound to 20.7 million by the end of last year. He suggests that while the stock may be "priced for perfection," the underlying business fundamentals remain strong:

"Sometimes that stock can be priced for perfection. See what I did there?" ([02:48])

3. Hype Meter Segment: CoreWeave Analysis

Transitioning to the Hype Meter, the hosts evaluate the buzz surrounding CoreWeave, an AI hyperscaler backed by NVIDIA that went public in late March.

CoreWeave’s Growth and Potential:

Revenue Projections: CoreWeave generated $1.9 billion in revenue last year, with projections to exceed $5 billion this year. Analysts anticipate its revenue to soar to $11 billion next year, $16 billion in 2027, and $21 billion by 2028, indicating a potential tenfold increase over four years ([05:39]).
Business Model Evolution: Originally founded by hedge fund enthusiasts for Ethereum mining, CoreWeave pivoted post the crypto market crash, repurposing GPUs for special effects and generative AI startups. This strategic shift has positioned CoreWeave at the forefront of the emerging AI infrastructure industry ([05:39]).

Challenges and Risks:

Profitability Concerns: Despite impressive revenue growth, CoreWeave is currently losing money, with deficits widening. However, analysts project profitability on an adjusted basis by next year and on a reported basis the following year ([05:39]).
Customer Concentration: Microsoft accounted for 62% of CoreWeave’s business last year. While there's optimism that the client base will diversify beyond Microsoft Copilot and ChatGPT, this concentration poses a potential risk ([05:39]).
Competitive Landscape: As CoreWeave builds out data centers and leases capacity, it faces potential competition in the cloud infrastructure space. The critical question is whether CoreWeave can maintain its differentiation or if it will succumb to becoming a commodity player ([05:39]).

Rick Mulvey rates CoreWeave a 3 on the Hype Meter:

"I'm going with a three and I wish I could go higher. This company has one of the most punchable face origin stories you'll ever hear." ([05:39])

He elaborates on his cautious optimism, noting concerns about debt from GPU acquisitions and the rapid obsolescence of such hardware:

"I'm concerned about this model loading up on debt to buy GPUs, which become outdated basically the second they're installed." ([07:49])

Lou Whiteman adds a humorous twist, referencing the challenging name:

"Or like a lot of us, a few months ago, did you just think this was the name of a Pilates workout?" ([06:28])

Despite not owning CoreWeave shares, Rick expresses interest in observing the company's trajectory:

"Not me, not yet. Unfortunately, I didn't buy it back in March when I could have gotten it as the broken IPO. So watching sadly from the sidelines, but interested, intrigued." ([08:29])

4. Legal Battles in the Fintech Space: Sezzle vs. Shopify

In a surprising development, two favored companies within The Motley Fool's universe find themselves at odds. Sezzle, a prominent player in the Buy Now, Pay Later (BNPL) sector, has filed an antitrust lawsuit against Shopify. The allegation centers on Shopify's presumed monopolistic and anti-competitive practices aimed at limiting BNPL competition on its platform.

Rick Mulvey’s Take on the Lawsuit:

He expresses confusion over Sezzle's motives, pointing out that Sezzle still derives approximately 5% of its revenue from Shopify. Mulvey suggests that Shopify’s preference for a different BNPL provider is a standard business strategy rather than an exclusionary tactic:

"The complaint seems to be that someone other than Sezzle is the preferred Buy now, pay later option on Shopify... I don't see why Shopify should be stopped from basically doing what others have done, which is working with a preferred partner." ([08:38])

He underscores that Shopify’s stock movement post-announcement, with Shopify rising and Sezzle declining, reflects the market's reception of the lawsuit:

"The day this was announced, Shopify stock was up and Sezzle fell. So I don't know. That's not the jury, but it is a jury, I think." ([09:23])

Mulvey concludes by highlighting the potential for Shopify to seek alternative partnerships if the legal battle intensifies:

"If Shopify feels that it's about to lose the legal as the legal process plays out, it can always turn to Sezzle to settle now, pay later." ([10:13])

Conclusion

In this episode of Motley Fool Money, the hosts provide a comprehensive analysis of current economic indicators, dive deep into Chewy's earnings performance, critically assess the hype surrounding CoreWeave as an NVIDIA-backed AI infrastructure play, and explore the ramifications of Sezzle's antitrust lawsuit against Shopify. Through insightful discussions and expert analysis, listeners gain a nuanced understanding of these developments and their potential impact on the stock market.

Notable Quotes:

Rick Mulvey on Chewy's growth:

"Chewy's growth story appears to be intact and that's what investors are looking for." ([02:48])
Rick Mulvey rating CoreWeave:

"I'm going with a three and I wish I could go higher." ([05:39])
Rick Mulvey on Sezzle vs. Shopify lawsuit:

"I don't see why Shopify should be stopped from basically doing what others have done, which is working with a preferred partner." ([08:38])

This summary is intended for informational purposes and does not constitute financial advice. Always conduct your own research or consult with a financial advisor before making investment decisions.

Transcript

Auden Chocolate Blue (0:00)

Foreign.

Lou Whiteman (0:05)

Are we talking about the hottest stock in the market? Motley Fool Money starts now. I'm Auden Chocolate Blue and I'm joined by two of my favorite fools, Lou Whiteman and Rick Menarez. Today we're talking about a Shopify lawsuit lodged by another full favorite. We'll bring out the hype meter on an Nvidia related stock and we'll pick today's most interesting earnings. Before we dive into the rest of today's show, here are a few headlines on our radar. Inflation is still in check. The latest CPI reading has inflation at 2.4% with help from items like lower gas prices in inflation adjacent news, the details are always morphing, but the China and US Trade talks are trending with a green arrow. We'll say OpenAI is adding Google Cloud to help power ChatGPT, a shift from exclusively using Microsoft Azure and a win for Google's cloud business. So upgrade ChatGPT from an enemy to a frenemy as ChatGPT still threatens Google search business. This week Starbucks is hosting its annual leadership conference in Vegas as it keeps its back to Starbucks aim of getting me my tall decaf Americano in four minutes or less. On to earnings, we had a few notable ones from the fool universe. GitLab, Stitch fix and Chewy are all down sizably today. Lou, I'll give you the choice which is the most interesting.

Rick Menarez (1:37)

So we have a dog in our life. So my gaze naturally falls on Chewy. And you know, you're right, Chewy is down big. They're down about 10% right now. It was actually a really solid quarter. Earnings per share were just above expectations. Revenue up 8% from last year and a little better than what Wal street had expected. Active customers grew by almost 4% from a year ago and those customers are spending more. They're spending about $583 annually, which is up 3.7% from a year ago. The issue, if there is an issue. Well, yeah, guidance. Chewy is forecasting revenue growth to slow slightly in the current quarter to about 7.5% at the midpoint. And full year sales about 12.3 billion to 12.45 billion. That is at the midpoint. It's a bit of a downside to the $12.4 billion consensus. But Rick, it feels to me like this is a lot more to do with like macro uncertainty and kind of what's going on with the consumer than it does anything. Specific to Chewy Stock's not cheap, trading at 33 times future earnings. But the growth story of Chewy appears to be intact and that's what investors are looking for.

Rick Menarez (2:48)

Yeah, one of the more frustrating things about watching Chewy in recent years was seeing its active customer base slide from 2021 all the way to 2023. It closed out 2021 with 20.7 million active customers, only default to 20.4 billion active shoppers in 2022 and 20.1 million in 2023. It bounced back to 20.5 million by the end of last year and now it's back above 20.7. So that's great. Chewy played dead and then it rolled over out of stock. But I think it has a much better report than the market's response to suggesting the shares. They were on a tear heading into the fresh financial they almost doubled over the past year. Sometimes that stock can be priced for perfection. See what I did there?