CoreWeave faces significant downside risk from poor balance sheet health (high debt/low cash) and negative free cash flow driven by excessive capex.

Cororeweave is the best Neocloud buy. What does Wall Street have against Cororeweave? Shares of the Neocloud have been stalled for 12 months.

Coreweave is now trading at just 2.2 times its expected 2028 revenue, well below both Nebius and iron. Cororee has the biggest business expected to generate 12.9 billion in revenue this year about four times that of Iron which in turn is about four or sorry of Nebius which is in turn about four times that of iron.

Core currently has the most data centers in operation at least 51. and it has 1.5 gawatts of active power as well as 3.7 more under contract.

Cory's valuation discount likely reflects concerns that is overly dependent on a handful of big customers, notably Microsoft, which accounted for nearly all of its revenue. So you have that concentration risk uh for more than a third of its business. Other big customers, including Meta and OpenAI.

The problem for corewave is that some big firms may move away from using their services in the future. Microsoft, for instance, which relies more on outside cloud firms than its rivals do, is investing heavily in expanding its own centers,

Good news is Corwe is diversifying. Corwe signed a deal with a hedge fund, Jane Street. Query is also far more efficient with his capital. Every dollar generated spent the lowest amount on capex with a ratio of 2.5 revenue to capex 9* 4.

Investors may be worried about financial exposure. Debt was eight times EBITDA in comparison.

it'd be interesting to see where Corewave sits on this. Coreweave and Nebius like if we had like a breakdown.

Neoclouds, uh, like Coreweave started off with mostly, you know, hopper generation chips. Coreweave takes as much financial engineering as it does data center design.

We think Cororeef has maybe 600,000 GPUs, mostly Hopper, H100s, and 200s with a rising number of Blackwells.

if the Neoclouds are building their business around these frontier level chips and not the enterprise level chips that like Dell is... and uh Neoclouds are suffering and uh explain why uh Sam thinks the Neoclouds are overbuilding.

So, let's go look at how much debt they've got and what we got cooking there. So, that might give us a little color on the Sam Oldman move or commentary. Could also be why Cerebrus is popping a little bit.

Okay, we got the 10 Q for Corewave. Let's download this and pull it up. Coreweave 10 Q. So if I now pop open Coreweave, let's do a brief look at their balance sheet. Let's see what we have.

So I've got current bills to pay. Uh deferred take out 2.7 20 9us 2.7 182 in bills long debt a lot. I've got deferreds of seven. So I've got 25 plus 2.4 plus deferreds. I'll leave out 15.7 plus that's another 7.7 or so.

So I got another 43 over here. 43.8 long and I've got cash of five. Yeah, that's not good. 5.5 with 08 restricted. We are out of money. So Cory is out of money. That's the problem.

Their cash flow is going to be negative. Oh wow, it's really negative. Uh at 14 billion versus the 36 that came in in the last six months. So their cash flow is crap, but we already knew that all of the Neoclouds are spending there.

So repayments of debt. So yeah, we had to take on over 11 billion of net financing, $3 billion stock raise, over 11 billion net financing. I've got they're losing money on revs even but but this is because of depreciation.

A lot of this includes big depreciation and do we have deposits? Let me see if there's talk about deposits. 1 bank deposits. What? That's it. There's got to be more on deposit.

Deposit to debt deposit amount. Oh, they don't really tell us much. Crazy. Okay. So, this is the balance sheet here. So, that the balance sheet alone is what's creating the concern here is that you're financing up your balance sheet for these frontier level chips.

And you know, maybe that's not maybe that's where some of the risk is. Okay. Okay. I could I could see it. That might make sense.

So, if I go into Corewave, yeah, Core's really gotten hammered since their uh since their peak. Still up over IPO pricing. 187 now at 80 bucks. Although it's kind of they've kind of been sideways for like a year and a half about a year.

We'll talk about Core Weave.

this hardware issue with uh the CPOS's, the Nvidia, the Dell, the Sam Alman, the Core Weave. All of this kind of loops together.

One of the companies they bought surplus compute from or promised to buy surplus compute from was Coreweave and they said, "Hey, let us know if you ever need us to buy your surplus compute."

And then they did. Coreweave said, "Yeah, we've got surplus compute. We can't get rid of Nvidia. You said you would guarantee it. You would buy it. Here you go. Buy it."

The best way to analyze that is to look at the financials for Coree, which we'll do in just a moment. So, how does that circular nature work? And then what are we actually seeing at Coreweave?

Okay, so the idea basically is if a company like Coreweave says, "Hey, we're going to build it and they will come, they build a bunch of compute, if they're only able to rent out a portion and they can't rent out all of their compute, then they don't need to buy any more Nvidia chips."

Okay? So, if this is the unused uh portion right here, the dark portion, we'll call it kind of like dark fiber in the internet days, then they end up going to Nvidia and saying, "Look, we need you to take this over. We need you to do something with it."

Because after all, the information ran a piece on Cororeweave and they were actually pretty bullish on Cororeweave. They argue the following. They say that Cororeweave is the best Neocloud buy right now.

And they make some fair fair points here. They say they're trading at just 2.2 times revenue. There's an opportunity for risk tolerant investors looking to bet on the AI boom. We've got uh 12.9 billion in revenues coming this year.

That's four times that of Nebus, which is four times that of IRM. We've got uh you know 1.5 gawatts of active power, another 3.7 gawatts under contract. Okay, fine. So we've got a lot of enthusiasm that they argue is uh coming to core but they argue is being discounted because of customer concentration risk notably Microsoft which is now going and buying their own compute.

So, is there a risk that if Meta and OpenAI producing their Jalapeno chip uh and Meta acquiring their own hardware and Microsoft acquiring their hardware, is it possible that maybe they don't need Coree and is that the risk?

They think that Cororeweave is diversifying away. They've got Jane Street to sell to. Hey, there are plenty people who are going to rent this

But if there's over supply in that compute, why is Core why is OpenAI buying Mac Ult and at the same time Coreweave trading for a discount?

Data center technologies like credo slowing on margin issues. I'll show you those in just a moment. And then of course coreweave the information argues is a buy, but then you got people like Sam Alman bagging on them going, I don't know, man, they might be getting a little speculative in their buildout.

So, you look at a corewave, the majority of their chips, at least based on public filings and reporting on this, the majority of their chips are expected to be uh frontier level training style chips.

Yeah, they're moving into inference. They're moving into the RTX 6000. They moved into that last year. Expectations are that's a very low exposure and enterprise inference is the next frontier.

But if you're holding the bag on a lot of frontier data center chips, is there a debt risk that's keeping a company like coreweave down? And personally, when I go look at the core financials, I think the answer is yes.

We don't need to know that they're losing money technically. That's already old news. If you add back in depreciation, they're making money. But this is a return on the investment on their cash flow, which they're spending massive amounts of money on capex.

They're spending $14 billion on 3.6 of operating cash flow. So, they're obviously needing to borrow money or raise money, which is exactly what they're doing. Here you go. They were they spent $14 billion on capex.

They raised $3 billion in stock and net 11 billion in financing.

Coreweave, on the other hand, they have $5.5 billion in cash with $18 billion in bills. They have $3 in short-term debt for every $1 of cash they have. That's not good. that slows the buildout and makes financing more challenging,