Nvidia-backed CoreWeave's shares likely to open up to 25% above IPO price

Reuters

28-03-2025

March 28 (Reuters) - CoreWeave's (CRWV.O), opens new tab shares were set to open up to 25% above their offer price in the company's debut on the Nasdaq on Friday.
The Nvidia-backed AI infrastructure firm's stock was indicated to trade at $50, compared with the IPO price of $40.
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At the higher end, it could notch a valuation of around $29 billion on a fully diluted basis.
The first major AI startup to list in recent years suffered a setback on Thursday when it downsized its initial public offering.
A strong debut would be a welcome sign, offering hope to other IPO candidates that smooth listings are achievable with tempered valuations, but a lackluster performance may deepen skepticism at a time when equity markets are already grappling with tariff-related turmoil.
"The U.S. IPO market is at an inflection point. This next batch of deals will determine whether the U.S. IPO momentum continues through the second quarter, or whether issuers decide the risk now isn't worth it," said Samuel Kerr, head of equity capital markets at Mergermarket.
The debut will also test the limits of the AI hype, given increasing frustration over Big Tech's massive spending spree and fears of competition from China's artificial intelligence startup DeepSeek.
While investors have propelled AI-related companies such as Nvidia (NVDA.O), opens new tab and Microsoft (MSFT.O), opens new tab to stratospheric valuations, CoreWeave has stirred concerns among risk-averse investors.
The company provides access to data centers and high-powered Nvidia chips, which have become the most sought-after resource in the race to develop AI applications.
However, 77% of CoreWeave's revenue last year came from just its top two customers, including Microsoft.
At its roadshow, some expressed worries about CoreWeave's heavy reliance on Microsoft as the tech behemoth's shifting AI data center strategy could impact long-term demand for chips.
CoreWeave's capital-intensive business model also raised questions about sustainability, sources said.
"I don't know how receptive the market's going to be," said Kamran Ansari, managing partner at Kapital Ventures, noting that while the growth of the company has been meteoric, its long-term sustainability is yet to be tested.
CoreWeave had around $8 billion in debt as of last year. The company said earlier this month it plans to use about $1 billion of the IPO proceeds to pay down debt.
It also leases its 32 data centers and some equipment instead of owning them, resulting in operating lease liabilities of $2.6 billion.
While investors appear comfortable with the company's high leverage since it has strong free cash flow, the risk of commitments not being fulfilled remains a worry.
The startup has also consistently posted losses, and IPO investors in the last few years have been wary of backing companies with no history of profitability.
FROM CRYPTO TO AI
Founded as an Ethereum-focused crypto miner in 2017, CoreWeave pivoted to AI a few years later. It shuttered its mining business after Ethereum's 2022 upgrade, "The Merge," slashed rewards for miners.
It signed a five-year contract worth $11.9 billion with OpenAI in the lead-up to the IPO, forging ties with the most prominent startup in the industry.
CoreWeave's revenue has also grown at a breakneck pace, climbing more than eight-fold last year.
But it may need to do more to convince investors.
"For most venture-backed deep tech startups, it's going to take more than hype to make it through the public markets right now," said Anthony Georgiades, founder and general partner at Innovating Capital.
CoreWeave's shares are set to trade under the symbol "CRWV". The IPO was underwritten by a syndicate of 18 banks, including Morgan Stanley, J.P.Morgan and Goldman Sachs.