This article does not constitute investment advice, and the author holds no positions in any of the mentioned stocks.
CoreWeave’s IPO: A Bumpy Prelude
As we highlighted in early March, the imminent IPO of CoreWeave is under increasing stress. This highly anticipated public offering now faces several challenges, including declining GPU prices, concerns regarding excess data center capacity influenced by Microsoft’s recent cutbacks, and questions surrounding the sustainability of CoreWeave’s revenue growth. These issues have converged just as CoreWeave prepares to go public.
Understanding CoreWeave
For those unfamiliar, CoreWeave is a pioneer in the cloud sector, focusing on GPU-intensive AI tasks. Over recent years, the company has distinguished itself by partnering with NVIDIA to provide scalable access to the latest generation of GPUs, all integrated into a robust infrastructure tailored for AI applications. With features such as remarkably low network latency and efficient GPU lifecycle management, CoreWeave offers a comprehensive package aimed at appealing to AI startups in need of reliable computational power.
IPO Valuation Adjustments
Initially, CoreWeave aimed to raise a minimum of $4 billion through its IPO, targeting a valuation of $35 billion. However, recent reports indicate a significant shift in focus.
Scoop: CoreWeave is planning to downsize its IPO and cut the price — I’m hearing closer to the $23B valuation it had in the private market a year ago than the ~$30B it wanted.
— Liz Hoffman (@lizrhoffman) March 27, 2025
Newly surfaced information reveals that CoreWeave is now adjusting its target valuation to approximately $23 billion. This revelation comes just as Bloomberg reported the necessity to reduce the IPO size, with aspirations to raise around $1.5 billion instead of the previously intended $4 billion.
*COREWEAVE IS SAID PLANNING TO CUT IPO SIZE TO ABOUT $1.5B.
Was supposed to be $3BN. Couldn’t fill half the orderbook. This is very bad for revenue roundtripping schemes https://t.co/adSrC6vqjy
— zerohedge (@zerohedge) March 27, 2025
Reports suggest that CoreWeave’s order book remains critically undersubscribed, with the company unable to fill half of its projected IPO commitments, drawing attention to deeper concerns regarding its financial health.
This IPO is a total disaster: NVDA forced to step in and “anchor”the IPO with a $250MM order at $40 per CNBC.
Without NVDA, which already owns 5% of CRWV, IPO would bust https://t.co/GS9rPpneGb
— zerohedge (@zerohedge) March 27, 2025
Additionally, CNBC disclosed that NVIDIA has committed to investing $250 million to stabilize CoreWeave’s IPO at a share price of $40, signaling the tech giant’s vital role in bolstering CoreWeave’s market debut.
Market Sentiment and Analyst Insights
TD Cowen’s recent evaluation has contributed to the prevailing negative sentiment surrounding CoreWeave’s IPO. Analyst Michael Elias emphasized that Microsoft’s data center lease cancellations are more prevalent than previously realized, casting doubt on the sustainability of ongoing capital expenditures associated with AI. His analysis revealed that Microsoft has deferred or canceled more than 2GW of data center capacity across the US and EU over the last six months.
Microsoft’s changes are significant, as they previously accounted for 62% of CoreWeave’s revenue in 2024, with prospects of investing over $10 billion in the company’s services by 2030.
Financial Position and Performance
Concerns over CoreWeave’s cash flow and growth trajectory continue to surface. In 2023, the company reported a cash burn of $1.1 billion, which skyrocketed in 2024 to an astounding $6 billion, primarily due to hefty capital investments in AI infrastructure. As of late 2024, CoreWeave operated over 250, 000 NVIDIA GPUs in its 32 data centers, mainly powered by the Hopper architecture.
To support its expansive ambitions, CoreWeave has raised $14.5 billion through 12 financing rounds and currently faces a debt burden of approximately $11 billion. Notably, a significant portion of this debt is secured against its extensive NVIDIA GPU inventory. However, the market has seen fluctuations, with the price of GPU compute dropping to just $2 per hour by the end of 2024, down from $8 earlier in the year, raising red flags about the stability of CoreWeave’s collateral.
Revenue Growth versus Profitability Challenges
On a positive note, CoreWeave’s revenue for 2024 soared by an impressive 737% year-over-year, reaching $1.92 billion compared to just $229 million in 2023. However, the company remains unprofitable, reporting net losses of $863 million in 2024 and $594 million in 2023, highlighting a significant gap between growth and profitability.
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