Why a prominent short-seller is betting against one of the market’s hottest AI plays

• CoreWeave has had a stellar post-IPO run, but one short-seller isn’t buying the hype.

• The AI infrastructure firm is up more than 200% since going public at the end of March.

• Kerrisdale Capital revealed a short position this week, claiming the optimism is way overblown.

CoreWeave is among the handful of high-profile tech companies to enjoy a wild post-IPO surge, with the AI infrastructure provider popping more than 200% since going public in the spring.

But this week, a short-seller says investors shouldn’t believe the hype.

A short report from Kerrisdale Capital questioned its growth prospects and said that its status as a giant of AI innovation is built on a shaky foundation.

“CoreWeave isn’t pioneering the future of AI — it’s a debt fueled GPU rental business with no moat, dressed up as innovation,” the firm wrote.

The short-seller says it sees shares of CoreWeave fairly valued at $10, which would represent a decline of more than 90% from Wednesday’s price.

In the report, published September 15, Kerrisdale highlighted several concerning elements that it sees. While the short-seller made it clear that it views AI as a transformational technology, it does not see CoreWeave as a smart way to gain exposure, and that its recent rally is being propelled mainly by wins among its competitors. It pointed to Microsoft’s $17.4 billion deal with Nebius and Oracle’s big revenue forecast.

“Bulls latch onto the ‘insatiable demand’ narrative and hope a rising tide will lift all boats. The reality is more nuanced: the announcements indicate strong AI demand, but also reveal how CoreWeave lacks differentiation as its anchor customers award large contracts to competitors,” the firm wrote.

Kerrisdale acknowledged the high demand for compute power unleashed by ChatGPT’s launch but said that CoreWeave will likely not be able to effectively service the hyperscaler ecosystem.

“Its model revolves entirely around leasing discounted GPU access to a handful of large customers under long-term contracts structured to support expensive asset-backed debt,” the report said.

The short-seller also said CoreWeave lacks a few fundamental components necessary for growth, such as proprietary technology, a defensible IP, and an edge to help solve the power constraints facing the AI sector.

“Demand for compute may be insatiable, but CoreWeave has no unique role in meeting it,” Kerrisdale wrote, adding that the startup’s technology is interchangeable, which it seems to see as making it more vulnerable to rising competition.