CoreWeave Inc., the cloud-based artificial intelligence computing provider, made its public debut on the Nasdaq on Friday, marking the largest tech initial public offering (IPO) in the U.S. since 2021. However, the stock opened at $39 per share, below its $40 IPO price, reflecting a cautious investor sentiment despite the AI boom.
The AI-focused company, which specializes in renting out Nvidia-powered computing infrastructure to major technology firms, had initially targeted an IPO price range of $47 to $55 per share but was forced to lower its expectations due to market turbulence and investor caution.
The IPO raised $1.5 billion for CoreWeave, making it the biggest tech IPO in the U.S. in four years, since UiPath’s $1.57 billion debut in 2021. Originally, CoreWeave had planned to raise approximately $2.5 billion at the midpoint of its initial pricing range, but it scaled back the offering in response to investor caution and a broader downturn in the stock market.
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Speaking about the company’s decision to lower its IPO price, CoreWeave CEO Michael Intrator told CNBC’s “Squawk Box” that there were significant macroeconomic headwinds, which made it necessary to adjust the size of the offering to match market interest.
CoreWeave’s arrival on the public market coincided with one of the toughest trading days for technology stocks in 2024, as the Nasdaq fell nearly 3%, heading for its worst quarterly performance since mid-2022. The tech-heavy index has been struggling under economic uncertainty and is down 10% so far this year. The broader market downturn has negatively impacted investor appetite for high-risk, high-growth technology stocks, making CoreWeave’s debut less than ideal.
Founded in 2017 and based in Livingston, New Jersey, CoreWeave has positioned itself as a major player in the AI computing space. The company specializes in renting out Nvidia-powered computing infrastructure to firms that require high-performance computing for artificial intelligence training and inference tasks. It has benefited significantly from the generative AI boom that began with OpenAI’s launch of ChatGPT in late 2022. The company is a key supplier to OpenAI, and Microsoft, which provides cloud services to OpenAI, is CoreWeave’s largest customer, accounting for 62% of the company’s $1.92 billion revenue in 2023. Other major clients include Meta, IBM, and Cohere.
CoreWeave’s rapid growth has been fueled by the increasing demand for AI infrastructure, with revenue soaring 737% in the past year. However, the company remains deeply unprofitable, reporting a net loss of $863 million in 2023. Running a cloud computing business at this scale is extremely capital-intensive, as the company must continuously invest in costly Nvidia GPUs and operate data centers. The company has raised nearly $13 billion in debt to finance its infrastructure, much of which has been allocated toward acquiring GPUs and expanding its leased data center facilities across the U.S. and abroad.
Despite strong revenue growth, the company faces significant challenges as it enters the public market. One of the biggest concerns for investors is the increasing competition from established cloud giants like Microsoft, Amazon, Google, and Oracle, all of which are expanding their own AI computing offerings. These companies have far greater financial resources and established customer bases, making it difficult for CoreWeave to maintain a competitive edge in the long term. Additionally, its high debt levels raise concerns about whether it can achieve profitability, especially if the AI sector experiences a slowdown.
The company’s performance in the coming months will be closely watched as a potential catalyst for other AI-related IPOs. If CoreWeave is able to prove its business model and gain investor confidence, it could pave the way for more AI-driven companies to go public.
Several high-profile firms are already preparing for IPOs, including Databricks, which was valued at $62 billion in December 2023, and OpenAI, which was reportedly closing in on a $260 billion funding round last month. Other companies such as Hinge Health, Klarna, StubHub, and Discord have also been making moves toward public listings.
The subdued market response to CoreWeave’s debut signals that, while investors remain interested in AI, they are wary of companies that are not yet profitable. Unlike some of its competitors in the cloud computing space, CoreWeave does not have a diversified revenue stream, as it remains heavily dependent on a small number of customers, particularly Microsoft and OpenAI. This lack of diversification presents a risk, as any shift in business strategy from these key partners could impact CoreWeave’s financial health.
Investor skepticism surrounding the IPO is also tied to broader economic factors. The tech sector has been hit hard by rising interest rates and inflation, which have reduced risk appetite and made it more difficult for companies to raise capital. The overall IPO market has remained largely shut since the end of 2021, with only a handful of venture-backed technology companies going public in recent years. Between 2022 and 2024, there were just 13 venture-backed tech IPOs in the U.S., a significant decline from the record 77 that occurred in 2021.
CoreWeave’s public listing represents a significant milestone for AI-focused companies, but it also underscores the challenges facing the sector. While the company has successfully established itself as a major player in the AI infrastructure market, its ability to navigate competitive pressures and achieve sustainable profitability remains uncertain.