Goldman Sachs Backs CoreWeave After Sell-Off, Citing Strengths Among AI Cloud Rivals

Investors may be overlooking CoreWeave’s competitive advantages following last week’s exaggerated sell-off, according to Goldman Sachs.

The investment bank upgraded the neocloud stock to Buy from Neutral. Although Goldman Sachs reduced its price target to $106 from $139, the revised target still implies nearly 73% upside from Friday’s closing price.

“Not all neoclouds are created equal, and we view CoreWeave as being toward the top of the quality rankings in the ecosystem,” analyst Gabriela Borges said Monday in a note to clients. “We define quality as: a) the ability to execute, including deploying and scaling high-performance graphics processing unit clusters at speed; and b) the potential to build durable moats by moving up the stack beyond pure GPU-as-a-service infrastructure.”

Neocloud companies provide cloud computing infrastructure tailored to artificial intelligence workloads. CoreWeave shares rose 6% in premarket trading following the rating change.

CoreWeave shares fell 25% last week amid credit-market concerns that the company had taken on excessive debt to finance its AI infrastructure buildout. The company has borrowed more than $51 billion to support that expansion.

Borges said CoreWeave’s cost of capital is unlikely to rise significantly because many of its agreements use asset-backed financing with lower interest rates.

“CoreWeave’s primary funding method for scaling AI infrastructure is via DDTLs, or delayed draw term loans. These are asset-backed project financings rather than traditional corporate debt,” Borges wrote. “By the time the contract expires, the associated debt has often been substantially or fully repaid, leaving CoreWeave to capture any residual value from the GPU fleet or potential re-leasing opportunities without the burden of ongoing interest expense.”

The analyst added that CoreWeave’s blended cost of debt is likely to increase by between 100 and 200 basis points. However, the company is expected to cap its weighted average cost of capital at a level that preserves attractive equity returns, she said.

Goldman Sachs’ recommendation aligns with the broader consensus on Wall Street. Of the 45 analysts covering CoreWeave, 31 rate the stock as Buy or Strong Buy, according to LSEG data.

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