CoreWeave Inc

CoreWeave, a US-based AI infrastructure company, issued its first European high yield bond, raising €2 billion at an 8.5% coupon. This trend is accelerating as data centre financing moves into the high yield market, reflecting strong structural demand and appealing characteristics of these bonds. The market is still learning how to price the sector, creating potential mispricing for investors able to underwrite the collateral, contracts, and refinancing path. We believe data centre high yield bonds can offer a meaningful yield premium versus comparable BB/B industrial credit.

CoreWeave is positioned as a leading neocloud provider, with a significant $104 billion backlog and a market valuation of $62 billion. The company reported a 24% increase in revenues quarter-over-quarter to $1.7 billion, while successfully reducing its operating loss by 65% to $49 million. Despite a constant capex of $7 billion, the rapid growth and strategic partnerships, particularly with Nvidia, bolster its competitive edge in the AI infrastructure market. The demand for specialized computing power is expected to drive further growth, making CoreWeave a compelling investment opportunity.

CoreWeave is positioned to benefit from the ongoing AI infrastructure buildout, which is expected to drive significant demand for its services. The manager highlights that the AI buildout is creating a demand inflection that the market has been slow to appreciate, particularly at the small cap level. CoreWeave's involvement in this sector, alongside other major players, indicates a strong competitive position. The manager's confidence in CoreWeave is bolstered by the belief that companies with durable competitive positions will thrive as the demand for AI infrastructure continues to grow.

The letter discusses the broader context of AI spending and its impact on the market, mentioning that smaller, more levered companies within the AI ecosystem, such as CoreWeave, may experience challenges. However, there is no explicit bullish or bearish stance taken on CoreWeave itself.

CoreWeave's shares declined in 4Q25 following the company’s 3Q25 report. While revenue grew more than 40% year-over-year, results came in slightly below elevated investor expectations, with management citing elongated lead times for GPU deliveries and a slower ramp in certain enterprise AI workloads. However, we believe CoreWeave’s purpose built infrastructure is uniquely positioned within the high-performance cloud compute market. Its differentiated architecture, deep relationships with leading AI model developers, and strategic partnerships across the semiconductor and infrastructure supply chain create a compelling long-term opportunity. As capacity expands and utilization improves, we expect CoreWeave to emerge as a high-growth, high-return platform within next-generation cloud computing.

CoreWeave's purpose built infrastructure is uniquely positioned within the high-performance cloud compute market. Its differentiated architecture, deep relationships with leading AI model developers, and strategic partnerships across the semiconductor and infrastructure supply chain create a compelling long-term opportunity. As capacity expands and utilization improves, we expect CoreWeave to emerge as a high-growth, high-return platform within next-generation cloud computing.

CoreWeave is positioned to benefit significantly from the AI revenue ecosystem. The manager illustrates how CoreWeave generates revenue by leasing GPUs to major players like Microsoft, which in turn supports AI services. The projected spending dynamics show that for every dollar of revenue generated by AI services, CoreWeave's infrastructure plays a crucial role, indicating a strong revenue stream. The manager notes that CoreWeave's capital expenditures are reusable, enhancing its financial efficiency. This positions CoreWeave favorably within the rapidly growing AI sector, suggesting a robust future outlook.

CoreWeave Inc started as a crypto-mining company but transitioned into an AI business by leveraging its infrastructure to build data centers and lease capacity to major players like Microsoft. They have solid orders for Nvidia chips, which are crucial for their operations. Despite a disappointing IPO that raised $1.5 billion at a diluted valuation of $23 billion, the stock became a retail favorite, peaking at $187 per share. The company has faced significant short interest, particularly around lock-up expirations, leading to high borrow costs in the stock market.

CoreWeave, founded in 2017, is expected to have $5bn in revenue this year but spend $20bn on capital investment funded by debt. This raises significant concerns about its financial health and sustainability, echoing the cable build-out during the dotcom bubble. The manager highlights the risk of misallocation of capital in the AI sector, particularly with new entrants like CoreWeave, suggesting that the aggressive spending could lead to a glut in the market. This situation indicates a potential overvaluation and financial strain for the company.

In Q3 2025, we rotated into CoreWeave (CRWV) as we believe it better fits our principles of finding companies with potential for operating leverage, brand reinvention, and long-term relevance. This decision was made after selling underperformers like Shark Ninja and Academy Sports and Outdoors, which no longer met our objectives. CoreWeave's alignment with our investment strategy positions it as a strong candidate for future growth, especially as we anticipate increased demand driven by the AI sector.