CoreWeave Shares Pop as Revenue Doubles, Cava’s Strong Traffic Growth Ignites Investor Appetite

**Zaid Admani** (0:00)
Public.com presents The Rundown, your daily market update in 10 minutes. My name is Zaid Admani, and today is Wednesday, August 12th. In today's episode, we'll break down the July inflation report that just dropped this morning and what it means for the Fed. We'll also recap earnings from CoreWeave, Cava and Lumentum. Then stick around to the end of the show to find out how you'll soon be able to trade AI computing power like a barrel of oil. We got a great show for you today.
Let's go.
Tuesday was another slow day for the markets. The S&P 500 fell 0.3% and the NASDAQ dropped 0.6%. It was a relatively light volume day. I think traders were waiting for the July CPI report before making any big moves. And we got the numbers this morning. Headline inflation for the month of July was up 3.4% year over year, which was right in line with expectations. And then on a monthly basis, prices were up just 0.1%. Core CPI, which strips out food and energy, rose 0.2% for the month and was up 2.5% from a year ago. Again, both those numbers were in line with expectations. So overall, this was a pretty tame inflation report. The big picture is that the energy shock from the Iran war continues to fade. Energy prices fell another 1.5% in July after dropping 5.7% in June. Now, gas prices are still much higher than they were before the war started, but they were lower on average in July than they were in June. Now, keep in mind, inflation is still above the Fed's 2% target, not to mention oil prices are starting to take back up again. But I think this report will take the pressure off the Fed to raise rates in September. Remember, there were three Fed officials that wanted to hike rates at the last meeting. But after this CPI report and the cooler than expected job report from last week, the market is now pricing in a 42% chance of a rate hike at the September meeting. And overall, investors seem to like what they saw. I'm recording this in the pre-market, and stock futures are flashing green, and treasury yields are falling too. The next big thing to watch will be what Fed Chair Kevin Warsh says at the Jackson Hole meeting later this month. That meeting starts on August 27th. I'm still waiting for my invite. I'm sure it's coming. We'll be staying on top of that, whether we're there in person or not, along with everything else happening in the market. So definitely get subscribed to the podcast, and tune in every day to stay in the loop.
Let's run through some headlines, starting with CoreWeave. CoreWeave reported earnings yesterday after the bell, and the stock is surging. The AI Cloud company had a solid quarter. Revenues more than doubled from a year ago to $2.58 billion. That slightly beat Wall Street estimates, but the company still isn't profitable yet. They reported a net loss of $626 million, which to be fair was smaller than what Wall Street was expecting. But I think the most important number to come from the earnings was the backlog. CoreWeave ended June with $104 billion of contracted future revenue. And since the quarter ended back in June, the company says they've already signed another $25 billion in customer commitments. Now, just a quick refresher on what CoreWeave does. They're one of these new NeoCloud companies. Essentially, they build data centers packed with NVIDIA GPUs, and they rent out that computing power to companies. Their customers include Microsoft, OpenAI and Meta. And right now, the demand is really strong. Management says that CoreWeave is effectively sold out for the rest of the year. Management also said that all the new deals that they're signing right now carry margins that are five to 10% higher than before because capacity is so tight that they can charge more. So on the surface, CoreWeave is doing great. But here's the catch, building all this capacity in all these data centers is insanely expensive. And unlike the hyperscalers like Google, Microsoft and Amazon, CoreWeave doesn't have an existing business that generates a ton of cash. So CoreWeave has to borrow a ton of money to pay for the build out. CoreWeave has roughly $35 billion in debt on their balance sheet, which is a pretty heavy debt load for a company this size. Not to mention CoreWeave expects to spend between 35 and $39 billion on capital expenditure this year. So their spending isn't slowing down anytime soon. But Wall Street seems to be ignoring the debt concerns for now, at least CoreWeave stock is up around 15% this morning in pre-market trading. You know, personally, I just don't know how CoreWeave will be able to compete long term with the hyperscalers. Like they're not going to be able to outspend Google, Microsoft and Amazon. Not to mention all the money that CoreWeave is borrowing to build out their data centers probably carries a higher interest rate than what Google, Amazon or Microsoft can borrow money for. And you know, if we ever see a slowdown for AI compute, a company like CoreWeave could be one of the first to take the biggest hit. So you guys could probably tell how I feel about NeoClouds. I just don't know how they're going to be competitive in the long term. I could be wrong though, if you're someone that's bullish on CoreWeave and the NeoCloud space in general, let me know in the comments on what I'm missing.