I asked ChatGPT whether CoreWeave stock is a good buy. It hemmed and hawed for more than 450 words about, on one hand, significant growth potential driven by demand for artificial intelligence infrastructure, and on the other, considerable risks from cash burn, high debt, and a lofty stock valuation. There was a loose smattering of facts: Last year, Microsoft accounted for nearly two-thirds of revenue, and Nvidia is both a key supplier anda top stakeholder.

CoreWeave signage in Times Square in New York.

In the end, the bot resorted to noncommittal verbs, both-sidesism, and pinning the responsibility on outside analysts, while recommending a talk with a financial advisor, blah blah blah.

In other words, AI appears to have already mastered financial column writing. Dagnabbit—I was hoping to squeeze a few more years of productivity from this fatty, three-pound neural network obsolescing by the day inside my cranium. Then again, I spoke this past week with CoreWeave co-founder and chief development officer Brannin McBee. As long as he’s still engaging in human-to-human voice interfacing, I might as well click-clack out some paragraphs about it.

CoreWeave began trading in March in the biggest initial public offering for a tech company in four years. The deal was supposed to be priced at $47 to $55 a share, but the timing was unlucky. The tech-heavy Nasdaq at the time had sold off 10% year to date, including a 3% slide on IPO day. Nvidia stepped in to buy shares at $40, and they could still be had for $41 at the end of April.

Suddenly they’re $120. That puts analysts in an awkward position. The average price target is just $69, according to FactSet. The highest is $100. Bulls must either scramble to brighten up their math to justify sticking with the stock, or downgrade it, as one did this past week.

You might say that CoreWeave got its start on Wall Street. In 2016, energy traders there bought a graphics processing unit and put it to work atop a pool table mining for the cryptocurrency Ethereum. GPUs perform the sort of highly parallel processing used to draw videogame pixels; solve problems to earn newly minted crypto; and perform AI functions. The traders, calling themselves Atlantic Crypto, expanded into a New Jersey garage and picked up new hardware on the cheap during the crypto downturn of 2018 and 2019. They changed the company name to CoreWeave while looking for new uses for their GPUs during downtime, including cloud AI computing. The pitch: lower prices than the cloud computing giants, and better performance for AI-focused tasks.

In late 2022, Microsoft-backed OpenAI published a blog note that started, “We’ve trained a model called ChatGPT which interacts in a conversational way.” Usage exploded, leading Microsoft to turn to CoreWeave for AI computing. A frenzy of AI infrastructure investment has sent Nvidia stock more than 600% higher over the past three years. CoreWeave coordinates with Nvidia to put its chips to work for cloud customers.

You might call this arrangement mutually beneficial, but so far, Nvidia is surfing a tsunami of free cash, while CoreWeave is projected to burn through $17 billion this year, versus just under $6 billion last year, as capital expenditures more than double to $20 billion.

“I think that’s probably one of the more misunderstood things about our business,” says McBee. “People will look at our debt load and say, wow, that’s a lot of debt. But in reality, when we are entering capex, it’s all success-based capex. We’re not buying infrastructure and hoping that people come and use it.” CoreWeave typically signs four-year take-or-pay deals that ensure it is paid for its infrastructure no matter what, McBee says. It then underwrites its expansion by pairing debt with the deal revenue to pay it off. The money is spent not just on GPUs, but also on data centers, cooling, cabinets, and software.

At the end of last quarter, CoreWeave listed $3.8 billion in current debt and $4.9 billion in long-term debt. Its shares jumped 19% in a day on May 21 after the company announced it had issued $2 billion of notes at 9.25% due June 2030 and would use the proceeds to pay off other debt.

Apart from Microsoft, CoreWeave’s customers include OpenAI, Meta Platforms, and IBM. I asked McBee about the company’s competitive advantage over the cloud giants. He compared what those companies are doing to a legacy car maker trying to build a Tesla Model Y by dropping a big battery into something from their existing fleet. “They’re trying to take that existing product and modify it so that it’s consumable within AI, but it typically comes with compromises,” he says.

Barclays analyst Raimo Lenschow was the one to raise his price target on CoreWeave to $100 from $70 on May 27, but he also downgraded it that day to Equal Weight from Overweight. He likes the company for its long-term exposure to AI, he wrote in a note, but the valuation, and a lack of comparable businesses to benchmark it against, are likely to produce volatility. Shares gained 20% by the end of the day.

Wall Street sees CoreWeave continuing to burn cash in declining amounts through 2027. Revenue is expected to more than double this year to $5 billion, then to triple to over $16 billion by 2027. The company is valued at more than three times predicted 2027 revenue.

All that’s left now is for me to confidently predict the stock’s next move, even though it’s surely based more on fleeting investor passion than economics. Up? Unless it’s down. Talk to your advisor.

At least I can offer a phone tip from a recently minted tech billionaire. There’s a little button on newer iPhones called the action button. “I’ve mapped that to ChatGPT,” says McBee. “That’s how I search for things now. That’s kind of becoming common amongst my friend group, my peer group, et cetera.”

The cavemen in my peer group have probably left their action buttons set to turn their ringers on or off, like me. I plan to lord this tip over all of them as soon as I figure out how to change the setting.