UBS Initiates CoreWeave at 'Buy,' Citing Underappreciated AI Demand and 40% Upside

UBS initiated coverage on AI infrastructure provider CoreWeave with a ‘Buy’ rating and a $120 price target, suggesting a potential upside of approximately 40% from current levels. The bank's analyst, Karl Keirstead, described the move as a "non-consensus positive call," challenging what he sees as overly cautious sentiment from the broader market.

A Contrarian Bet on AI

In a note to clients, Keirstead argued that the primary investor concerns surrounding CoreWeave, namely its leverage and credit risk, are likely peaking. The analyst believes the market has priced in these risks, reflected in a low 2027 revenue multiple of just 3 times.

UBS framed the positive rating as a bet that investors will soon "rotate back into the long-AI trade," a scenario the bank views as increasingly probable given muted sentiment and strong underlying demand signals for artificial intelligence infrastructure.

Underestimated Demand and Pricing Power

UBS contends that investors may be underappreciating the strength and durability of demand for AI computing power. The bank highlighted several key factors supporting its bullish thesis:

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• Broadening Demand: A significant portion of future demand is expected to come from enterprise clients, not just the frontier AI labs that have been the primary customers to date.
• Revenue Growth: Favorable GPU pricing trends are projected to lift CoreWeave's revenue per gigawatt from approximately $11 billion today to more than $15 billion over time.
• Operational Excellence: The company has established a strong reputation for reliability, which differentiates it from its peers in the competitive AI infrastructure space.

Valuation and Acknowledged Risks

While bullish, UBS acknowledged several risks, including high leverage in a rising interest rate environment, uncertain long-term profitability, and significant customer concentration, with 72% of revenue reportedly coming from just three clients. However, the bank concluded these concerns are more than reflected in the stock's current valuation.

CoreWeave currently trades at 5.1 times adjusted EBITDA, a valuation UBS considers "attractive" for a company with a reported 112% revenue growth rate facing substantial AI-driven demand. The firm's $120 price target is based on a multiple of 3.8 times its forecast for the company's 2028 sales.