Artificial Intelligence (AI) Chip King Nvidia Recently Piled Into a Stock That Already Doubled Since Its IPO Earlier This Year
However, some may not know that Nvidia also uses its own capital to invest in publicly traded stocks or late-stage start-ups. Most of the company's investments support the AI sector or have a partnership with Nvidia. Recently, Nvidia piled into a stock that's already doubled from its initial public offering (IPO) earlier this year.
From disappointment to quick success
Even before CoreWeave (NASDAQ: CRWV) went public at the end of March, Nvidia had been an investor and owned about 5% of the company's total shares, according to CoreWeave's prospectus.
CoreWeave operates data centers specifically set up to run artificial intelligence applications. The company purchases graphics processing units (GPUs) from Nvidia, puts them in its data centers, and then essentially rents its data centers and services to companies looking to run AI applications but don't want to invest in the necessary infrastructure.
Nvidia is also a customer of CoreWeave. While on CNBC, CoreWeave's CEO Mike Intrator described the relationship between the two companies as "symbiotic."
CoreWeave had been one of the most anticipated IPOs of the year, trying to go public at a $35 billion valuation. However, whether due to the emergence of China's DeepSeek, which seemed to slow the meteoric AI market, or other market conditions, investors didn't buy into the hype, and CoreWeave launched at a $23 billion valuation and $40 per share.
It turns out that Nvidia actually stepped in to support the IPO. In Nvidia's first-quarter 13F filing with the Securities and Exchange Commission, Nvidia reported owning close to 24.2 million shares, up from the 17.9 million shares it owned previously, according to CoreWeave's prospectus.
Despite the disappointing IPO, CoreWeave more than doubled not even two months into its public life, with the stock now at $107. That includes a 19% jump on Wednesday, which appeared to be triggered by a couple of bullish actions -- Citigroup analyst Tyler Radke raised his price target from $43 to $94, and Coreweave announced it increased its private offering of senior notes by $500 million to $2 billion total.
Can CoreWeave continue its strong run?
CoreWeave is undeniably a strong company in a red-hot sector of the market, so it's going to have plenty of visibility. In its recent earnings report, the company raised its revenue guidance for this year from $4.6 billion to $5 billion.
However, the market's response was less enthusiastic than one might have expected because the company also raised its capital expenditures (capex) outlook well above what analysts have been forecasting. Other concerns about CoreWeave include the fact that 62% of the company's revenue in 2024 came from Microsoft, and the company isn't yet profitable.
Overall, I'm neutral on the stock right now. I view the company's business and ties to Nvidia as positives but think the valuation may need time to simmer after such a strong rally in just two months.
Should you invest $1,000 in CoreWeave right now?
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