JPMorgan Chase & Co. analysts say Core Weave’s business remains sound despite worries. Shares fell 20% after rising bond yields sparked concerns. Gartner’s forecast about AI revenue added to investor anxiety.
The analysts, including Samik Chatterjee, point to strong demand for computing power and long‑term take‑or‑pay contracts that secure customers before new capacity comes online. A typical five‑year contract yields an unlevered internal rate of return in the mid‑teens, above the firm’s blended cost of capital of 9%‑11%. They also note a monetization lever by recontracting GPUs beyond five years.
Core Weave’s contract economics cushion debt risk. In a conservative scenario, capital spending is about 51% of a five‑year contract’s value, with roughly 80% financed through asset‑level debt, leaving cash equal to about 16% of contract value—enough to cover roughly five years of data‑center obligations. However, aggressive expansion will pressure cash flow; each gigawatt of capacity could generate $10‑$15 billion annually and requires over $35 billion upfront spending. Cash burn is driven by capacity ramp, not poor project economics, and the firm may not generate enough cash to fund expansion until 2030.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing