Exploring CoreWeave: An NVIDIA-Backed AI Play

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.

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Key Topics Covered:

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

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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]).

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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])

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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])

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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])

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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.

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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])

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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]

Foreign.

[Lou Whiteman]

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]

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.

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?

[Lou Whiteman]

Oh, I saw it, Rick. Every time we talk Chewy, I think about pets.com maybe being 20 years too soon in the hype cycle. Which brings us to our next segment, the Hype Meter, right after this break.

[Auden Chocolate Blue]

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[Lou Whiteman]

It'S time for the Hype Meter. Rick, you've spent a career trying to separate the future Mag 7s from the pretenders. We've got an AI hyperscaler that's backed by Nvidia Core Weave, IPO'd in late March. And as you might guess, when you mix words like AI and Nvidia Seal of approval, its stock has quadrupled in less than three months. The hype meter goes from a 1990s era Amazon at a 1 to a pandemic era celebrity backed SPAC at 10. So a 1 is believe the hype and get some money in now. And a 10 is this is all hype. Run away. What are you ranking? Core Weave.

[Rick Menarez]

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. So it started eight years ago by a couple of hedge fund Bros who bought GPUs to mine Ethereum as a hobby. So they're crypto dudes. And then coreweave was initially called the Atlantic Crypto Corporation. And so when the crypto market crashed a couple years later, Atlanta Crypto, they sort of shifted gears and and became Core Weave. It took advantage of the pullback in digital currencies to snap up gpus from failed crypto mining companies like they were doing. And then refreshing its business model to use its growing arsenal of graphic chips and an infrastructure play playground catering to special effects companies and generative generative AI startups. So getting in on the ground floor of an emerging industry can be pretty sweet. And Corev's business, it's booming. It generated 1.9 billion in revenue last year. It's on track to top 5 billion this year. Analysts see Corey's top line clocking in more than 11 billion next year, 16 billion in 2027 and more than 21 billion in 2028. Put another way, Corey's annual revenue expected to soar tenfold in the next four years. So talk about putting the hyper or the hype in hyperscaling. But it's losing money and the deficits do keep widening. However, analysts see Core Weave turning profitable on an adjusted basis next year and on a reported basis the following year. There are two things I think that can trip Corewev up at this point. The first, Microsoft accounted for 62% of its business last year and I don't think that's a big deal. Clearly Corweave's client base is going to grow beyond Microsoft Copilot and ChatGPT as the AI boom tosses out a bigger net. The other potential trip up does bear watching. Offering up a cloud based infrastructure platform and it's building out data centers while also leasing capacity elsewhere is going to attract a lot of new competitors in the coming years. And is Corey differentiated enough to stand out? Or is it just another commodity market in the making, something that the founders know all too well from their energy trading days? The amazing thing here is that Core we went public at 40 in late March, as you said. And for the first few weeks, you could have bought the shares in the mid-30s. In less than three months on the market, it has gone from a broken IPO to a four bagger. Only in New Jersey. Lou, any thoughts on core weave? Or like a lot of us, a few months ago, did you just think this was the name of a Pilates workout?

Yeah, it's a legs day for me. It's not a core weave day. Look, I'll say this. I love equipment leasing businesses. I love the economics of these businesses. I have a lot of net worth tied up in aircraft lessors, but it works with aircrafts because airplanes, they have 50 year lives. I'm concerned about this model loading up on debt to buy GPUs, which become outdated basically the second they're installed. That would be my big caution. Just watch the debt, watch the growth, and hopefully this can keep running. But there is some risk with just taking on all those GPUs. They get old quick, right?

[Lou Whiteman]

Either of you buying Core Wave?

[Rick Menarez]

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.

[Lou Whiteman]

Right on. But you rated a 3, so that's very low hype, so something.

[Rick Menarez]

Yes, I think it's living up to the hype. So, yeah. So, yes, a low score.

[Lou Whiteman]

Lou, have I heard right that two full favorites are fighting?

[Rick Menarez]

You did hear right. Sezzle, who is a really interesting player in the Buy now, pay later space, they filed a lawsuit, antitrust lawsuit against Shopify, alleging that Shopify is engaging in monopolistic and anti competitive practices to limit Buy now, pay later competition on its platform. Got to read into that. To limit Sezzle, right? And look, I have a lot of respect for Sezzle, but I read this suit and, you know, kind of my reaction was, come on, man, I don't get it. Sezzle isn't being excluded from Shopify. In fact, about 5% of Sezzle's revenue comes from Shopify. The complaint seems to be that someone other than Sezzle is the preferred Buy now, pay later option on Shopify. And look, we'll see how it plays out. I'm. I'm not a lawyer, I'm not playing one on a podcast. But I don't care that Shopify is a preferred vendor. Okay, Feels like this is, you know, this is a Sezzle problem. For years, retailers have chosen not to take Amex cards or to charge fees. If you pay in certain ways, it feels like the same thing to me here, guys. I don't see why Shopify should be stopped from basically doing what others have done, which is working with a preferred partner. And you know what? I think the market agrees. The day this was announced, Shopify stock was up and Sezzle fell. So I. I don't know. That's not the jury, but it is a jury, I think.

[Lou Whiteman]

Yeah.

[Rick Menarez]

And 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 SNPL There you go.

[Lou Whiteman]

Here are Motley fool money we live on feedback and peanut M&MS. To be part of that feedback or to ask a question, email [e-mail] as always, people on the program may have interest in the stocks they talk about, and the Motley fool may have formal recommendations for or against. Don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley fool editorial standards, is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes for Lou Whiteman, Rick Benares, and the entire Motley Fool Monte team, Aman and Chocolate Balloon. We'll see you tomorrow.