AI computing power shortage continues until 2026, Wells Fargo upgrades CoreWeave rating to "Overweight"
Wells Fargo raised CoreWeave's rating from "Hold" to "Buy," increasing the target price from $105 to $170 due to strong demand signals. Analysts noted that CoreWeave demonstrates expansion capabilities in the artificial intelligence computing power market and is expected to benefit from supply shortages until 2026. Optimistic factors include demand from hyperscale enterprises being stronger than expected, significant order volumes, and adjustments in capital expenditures
According to the Zhitong Finance APP, Wells Fargo has upgraded the rating of CoreWeave (CRWV.US) from "Hold" to "Buy," and raised its target price from $105 to $170, noting that "demand signals are becoming increasingly strong and cannot be ignored." On Tuesday, CoreWeave's stock price remained essentially flat.
Analysts led by Michael Turing stated: "While other software companies are still struggling to monetize artificial intelligence, CRWV is currently benefiting from the ongoing construction cycle and will continue to benefit from an industry supply shortage that is unlikely to ease until 2026."
The analysts mentioned that although the long-term outlook for the artificial intelligence market remains uncertain, they chose to upgrade the stock rating because CoreWeave has demonstrated the ability to expand towards the largest consumer group of artificial intelligence computing power, which may allow it to gain a larger market share over time.
Key considerations for the analysts' optimistic outlook include: large-scale enterprises confirming that artificial intelligence demand is stronger than expected; significant order volumes from recent industry-wide artificial intelligence labs; substantial adjustments in capital expenditures by large-scale enterprises; and Wells Fargo's updated unit economic effect assumptions—higher demand driving the hourly GPU pricing from $2 to $2.5, with NVIDIA (NVDA) underwriting all unused computing power through contractual commitments (the terms of which may be favorable to CoreWeave).
Other supporting factors include: upward potential in profit margin estimates (as its vertically integrated technology stack gradually takes shape, financing rates are better than expected); continued expansion with benchmark clients such as Microsoft (MSFT.US), OpenAI, and Google (GOOGL.US); and the expected end of the company's IPO lock-up period, which is anticipated to reduce future stock price volatility
