What is CoreWeave and why is the stock market rising and falling on its earnings?

Markets got off to a good start on Wednesday after an earnings report Tuesday night from a company that doesn’t make a lot of headlines: CoreWeave.

CoreWeave has been responsible for both widespread anxiety and reassurance among AI investors. Companies like Meta, OpenAI, or Microsoft all turn to a business like CoreWeave to build their data centers.

“CoreWeave is the architect for the AI era,” said Brent Thill, a managing director at Jefferies. “They’re the general contractor that puts together the data center, the power, the cooling the chips, the rack.”

Investors looked at CoreWeave as a bellwether for the country’s entire AI buildout. A few months ago, they started to have qualms.

“There’s a lot of fear among investors that the AI trade is softening,” Thill said.

Interest rates have been rising, making debt more expensive: Investors were demanding 15% interest on CoreWeave's bonds.

And the recent election spelled friction ahead for new data centers.

“Investors are really questioning whether the company has taken on too much debt, and whether the business model is sustainable over the long term,” said Luke Yang, a technology equity analyst at Morningstar.

On Tuesday, CoreWeave had some answers, and investors liked them. Revenue was up 168%, it was not going to issue more bonds at those crazy interest rates, and it has already built out a lot of data center infrastructure.

“They’ve gotten big chunks of capacity across the country and key markets, and we’re down to less than 1% vacancy,” said Andy Cvengros, executive managing director of brokerage at JLL.

CoreWeave is in a seller’s market, and as investors start to feel better about CoreWeave, they also feel better about AI-related stocks in general.