CoreWeave Inc. (NASDAQ:CRWV) stock has plunged about 20% this week, but JPMorgan analyst Samik Chatterjee believes investor fears over the AI infrastructure company's debt and cash flow outlook are overblown.

In a Friday note, Chatterjee maintained an Overweight rating on CoreWeave, arguing that strong demand, profitable contracts and the company's ability to expand capacity support its long-term growth.

Why CoreWeave Investors Are Worried

Chatterjee linked the selloff to rising bond yields and a new Gartner forecast that raised questions about the profitability of AI data centers.

Gartner estimates that AI data center owners need $8.5 trillion in cumulative revenue through 2030 to earn a 12% return on invested capital. However, it forecasts no more than $3.6 trillion in AI revenue during that period.

The gap has fueled concerns about excess capacity and whether companies can sustain debt-funded expansion.

Still, Chatterjee sees CoreWeave differently.

Long-Term Contracts Reduce Risk

Unlike companies building data centers based on projected demand, CoreWeave sells its computing capacity through long-term take-or-pay contracts before bringing it online.

According to JPMorgan, this model limits exposure to weaker demand.

Moreover, CoreWeave added nearly 500 megawatts of active power capacity in the second quarter, bringing its total to 1.5 gigawatts.

Its contracted power capacity reached 4.2 gigawatts as of Aug. 11, compared with a target of at least 8 gigawatts by 2030.

Chatterjee also highlighted CoreWeave's ability to deliver capacity on schedule, an advantage in a market where construction and deployment remain difficult.

Strong Contract Economics Support Returns

JPMorgan estimates that CoreWeave's typical five-year contracts generate project-level returns in the mid-teens, exceeding its estimated 9% to 11% cost of capital.

Under the company's illustrative model, capital spending represents about 51% of contract value, with debt financing covering roughly 80% of that spending.

After repaying the debt, CoreWeave could retain cash equal to about 16% of contract value.

Additionally, graphics processing units could continue generating revenue beyond their initial contracts, creating another opportunity for cash flow.

When Could CoreWeave Turn Cash Flow Positive?

Chatterjee acknowledged that CoreWeave's aggressive expansion requires substantial upfront investment.

However, he argued that its cash burn reflects the speed of expansion rather than weak contract economics.

JPMorgan estimates that each gigawatt of fully operational capacity could generate $10 billion to $15 billion in annual revenue. Meanwhile, adding a gigawatt could require more than $35 billion in upfront capital spending.

The firm estimates that CoreWeave needs four to five times as much established capacity as newly added capacity for operating cash earnings to cover expansion spending.

Under JPMorgan's illustrative projections, the company reaches that threshold around 2030.

Although rising borrowing costs pose a risk, Chatterjee expects strong AI computing demand to help CoreWeave pass higher financing costs to customers through new contract pricing.

As a result, JPMorgan views the company's current cash flow pressure as a consequence of rapid growth, rather than a sign that its underlying business model is failing.

CoreWeave Price Action

CRWV Price Action: CoreWeave shares were down 11.28% at $61.83 at the time of publication on Friday. The stock is trading near its 52-week low of $60.55, according to market data.