CoreWeave’s IPO is Somehow Making Everyone Feel Right and Wrong at the Same Time

If you were planning to throw money at CoreWeave’s IPO no matter what, because “AI is the future” and “Nvidia backs them, bro”... or if you were Johnny Raincloud in the corner saying, “Actually, the valuation seems a bit rich,” well… congratulations. You both get to high-five today. Somehow, this IPO managed to reward the optimists and the skeptics (a rare feat usually reserved for Tony Robbins).

Let’s walk through how we got here. CoreWeave spent most of 2023 sprinting through the AI boom with a Jordan-like run. Revenue exploded from $229 million in 2022 to $1.9 billion in 2023… a historic 730% increase. The company built its business around renting out high-performance Nvidia GPUs, the kind used to train AI models like GPT-4. Demand was surging, investors were lining up out the door, and CoreWeave looked like it was about to muscle its way into the same conversation as the Amazons and Microsofts of the cloud world. Then the Microsoft bombshell dropped. 

In early March, Microsoft quietly backed out of a major partnership with CoreWeave after repeated missed deadlines and delivery issues. Considering Microsoft made up 62% of CoreWeave’s revenue last year, this is horrible news especially since CoreWeave was already making rounds all over the financial mainstream news media that they were gonna be in the hall of fame of IPOs.

To CoreWeave’s credit, they didn’t sit in a corner and cry for long. To plug the hole, CoreWeave locked in a five-year deal with OpenAI worth up to $11.9 billion. Under the agreement, CoreWeave will provide cloud infrastructure to power OpenAI’s compute needs. As part of the package, OpenAI will receive $350 million worth of CoreWeave stock through a private placement tied to the IPO… basically a vote of confidence (and a strategic hedge) from Sam Altman and team. But when the IPO finally landed, the outlook had clearly shifted.

Originally, CoreWeave had grand plans…  raise $4 billion at a $35 billion valuation, with shares priced between $47 and $55. But by the time the offering hit the market, reality had stepped in. Shares were priced at $40, the number of shares offered dropped from 49 million to 37.5 million, and the company walked away with about $1.5 billion… cutting the valuation down to roughly $19 billion.

Still a monster IPO by current standards. In fact, it’s the biggest U.S. tech IPO since 2021… which is either impressive or terrifying depending on how much trauma you still carry from the SPAC era. But the downgrade reflects a huge shift in investor mood. High-growth, loss-heavy companies aren’t being welcomed with the same open arms they were during the peak-ZIRP (zero interest rate policy) era.

In 2024, the company brought in $1.9 billion in revenue (up from just $15 million two years earlier) but it still managed to lose $863 million. Financing that kind of growth wasn’t cheap… CoreWeave shelled out $949 million in interest and financing expenses, piling on debt like it was going out of style. By year-end, the company was sitting on $8 billion in liabilities, making it one of the most debt-heavy tech names to hit the public markets in recent memory.

Even more concerning is how dependent the company still is on a small handful of customers. Microsoft might’ve backed off, but it still remains CoreWeave’s top revenue source. According to their S-1, the top five customers accounted for 85% of their sales. That’s a lot of eggs in a few baskets, especially in a volatile space.

The market wasn't exactly thrilled heading into the offering, either. Nvidia (CoreWeave’s primary chip supplier and 4% equity holder) saw its stock fall over 9% this week leading up to the IPO, which doesn’t help. And don’t forget that broader IPO activity has been nonexistent since early 2022, with inflation and high interest rates pushing many institutional investors toward safer plays (probably why gold keeps hitting new ATHs).

Still, CoreWeave’s debut matters. It’s the first major AI infrastructure company to go public, and its performance could set the tone for other big names like Anthropic, OpenAI, or even Discord. But with its crypto-mining roots (yes, it started mining Ethereum in 2017), its balance sheet full of debt, and its heavy reliance on just a few customers, CoreWeave probably isn’t the perfect poster child for the AI IPO wave.

With all that said, CRWV is now available to buy on the Nasdaq.

P.S. Just when you thought our beloved congressmen couldn’t get any greasier, one Republican lawmaker decided to YOLO $175k into a stock… right before a major FDIC announcement hit. Lucky timing? Insider edge? You be the judge. We broke it all down inside our recent Stocks.News premium article… click here to check it out ASAP. 

Stock.News has positions in Amazon and Microsoft.