BUBBLES POP: I looked into CoreWeave and the abyss gazed back.

You may not have heard of it because it’s not doing the consumer-facing part of AI. It’s a data center company, the kind people talk about when they say they want to invest in the “picks and shovels” of the AI gold rush. At first glance, it looks impressive: it’s selling compute, the hottest resource in the industry; it’s landed a bunch of big-name customers such as Microsoft, OpenAI and Meta; and its revenue is huge — $1.4 billion in the third quarter this year, double what it was in the third quarter of 2024. The company has almost doubled in share price since its IPO earlier this year, which was the biggest in tech since 2021. So much money!

But as I began to look more closely at the company, I began feeling like I’d accidentally stumbled on an eldritch horror. CoreWeave is saddled with massive debt and, except in the absolute best-case scenario of fast AI adoption, has no obvious path toward profitability. There are some eyebrow-raising accounting choices. And then, naturally, there are the huge insider sales of CoreWeave stock.

After I unfocused my eyes a little, I realized CoreWeave did make a horrible kind of sense: It’s a tool to hedge other companies’ risks and juice their profits. It’s taking on the risk and the costs of building data centers that bigger tech companies can then rent while they build their own data centers which may very well wind up competing with CoreWeave. What’s more, it’s part of a whole stable of companies that are propping up demand for the behemoth of the AI boom: Nvidia.

I don’t think CoreWeave’s weaknesses are a secret. It just seems like a lot of investors are ignoring them.

To be fair, there’s nothing wrong with riding the bubble, provided you’re savvy enough to get off before it pops.