CoreWeave (CRWV) IPO Encounters Increasing Challenges

This is not investment advice. The author has no position in any of the stocks mentioned.

CoreWeave: Pioneering GPU-Intensive AI Solutions

CoreWeave (CRWV), a cloud computing company at the forefront of GPU-intensive AI workload management, is poised to execute one of the most anticipated initial public offerings (IPOs) of 2025. However, the path to its public market debut is becoming increasingly fraught with challenges.

A Unique Partnership with NVIDIA

For those unfamiliar, CoreWeave has established a niche by partnering with NVIDIA, positioning itself as a leading provider of access to the latest generation of NVIDIA GPUs at scale. This collaboration is underpinned by infrastructure specifically optimized for AI workloads, featuring network latency as low as “sub-microseconds”and a robust GPU lifecycle management system.

Impressive Growth Yet Unprofitability

By the end of 2024, CoreWeave operated an impressive fleet of over 250, 000 NVIDIA GPUs spread across 32 data centers, predominantly utilizing the Hopper architecture. In an era dominated by generative AI, the company has seen astounding growth, with its revenue skyrocketing by 737% year-over-year to $1.92 billion from just $229 million in 2023. Nevertheless, profitability remains elusive, with a net loss of $863 million reported in 2024 and $594 million in 2023.

CoreWeave’s Financial Landscape

Over its operational span, CoreWeave has attracted $14.5 billion in financing across 12 funding rounds and currently faces a substantial debt burden of approximately $11 billion. Remarkably, much of this debt is collateralized by the company’s extensive NVIDIA GPU holdings. NVIDIA itself has invested $100 million, constituting a 1% stake in CoreWeave.

Anticipated IPO and Valuation

In preparation for its IPO, CoreWeave aims to raise a minimum of $4 billion, which would set the company’s valuation at over $35 billion.

Risks to Consider

However, this impending IPO is not without its risks. As the market for GPUs becomes more saturated, prices are declining, posing potential risks to CoreWeave’s debt that is backed by GPU assets. The Financial Times reported that the price for GPU compute has dropped to around $2 per hour, significantly less than the earlier $8 per hour earlier in the year.

Dependency on Major Clients

Furthermore, Microsoft accounted for 62% of CoreWeave’s revenue in 2024. Initially, Microsoft planned to invest over $10 billion in CoreWeave’s services by 2030. However, the tech giant has recently retracted some of its purchase commitments, citing issues with delivery and missed deadlines.

Assessing CoreWeave’s Future

There are also concerns regarding the sustainability of CoreWeave’s revenue growth. As NVIDIA’s GPU supply expands, hyperscalers like Microsoft are increasingly inclined to develop their own data centers. This shift may leave CoreWeave serving mainly smaller AI startups that lack the financial capacity for extensive data center investments, potentially compressing profit margins.

CoreWeave executives and VCs realizing that if they hadn’t procrastinated and filed their IPO 2 months ago they could have nailed the top and wouldn’t have to cut the price in half like they will have to do to get this thing out the door now… 💀 $CRWV https://t.co/k5pCbgGb4r pic.twitter.com/r8PX12MPEt

— MajorTom (@HFMajorTom) March 4, 2025

Conclusion: A Mixed Investment Case

In conclusion, CoreWeave’s timing for its IPO appears questionable, coinciding with market anxieties surrounding a potential resurgence of trade tensions and geopolitical restrictions on NVIDIA products, alongside competition from efficiency-driven Chinese AI startups, such as DeepSeek. However, its recent acquisition of Weights & Biases for $1.7 billion enhances its appeal by offering tools for building, training, and refining AI models, thereby streamlining services for AI startups. Despite these strengths, the reduction in Microsoft’s commitments may forecast a more significant challenge ahead for CoreWeave, suggesting a need for investors to carefully evaluate the overall investment thesis.

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