CoreWeave (CRWV) Stock: $1.5 Billion IPO Makes History as Largest AI Infrastructure Public Offering

TLDR

• CoreWeave raised $1.5 billion in its IPO, pricing shares at $40 each after initially targeting $47-$55
• The stock opened at $39, below the offer price, before closing flat at $40, giving the company a $23 billion valuation
• Nvidia backed the IPO with a $250 million order and is both a supplier and investor
• Microsoft accounts for 62% of CoreWeave’s revenue, with analysts citing customer concentration as a risk factor
• The debut occurred amid broader tech market declines, with the Nasdaq down nearly 3% on the day

CoreWeave marked its first day as a public company on Friday with a muted debut on the Nasdaq. The AI infrastructure provider, trading under the ticker CRWV, closed at its $40 IPO price after opening slightly lower at $39.

The company raised approximately $1.5 billion in the offering, making it the largest tech IPO in the United States since automation software maker UiPath went public in 2021.

CoreWeave had initially targeted a price range of $47 to $55 per share, which would have valued the company higher and raised about $2.5 billion. However, market conditions and investor concerns led the company to downsize its offering.

“There’s a lot of headwinds in the macro,” CoreWeave CEO Michael Intrator acknowledged on CNBC’s “Squawk Box” on Friday. “And we definitely had to scale or rightsize the transaction for where the buying interest was.”

The IPO gave the company a valuation of $23 billion on a fully diluted basis. This represents a significant milestone for the AI sector, as CoreWeave is considered the first pure-play AI infrastructure company to go public during the generative AI boom.

Nvidia, which supplies the crucial graphics processing units (GPUs) that power CoreWeave’s services, placed a $250 million order in the offering. The chip giant is both a key supplier and investor in CoreWeave.

The company’s business model involves renting out access to hundreds of thousands of Nvidia GPUs to large tech and AI companies. These chips have become a highly sought-after resource in the race to develop artificial intelligence applications.

CoreWeave reported impressive revenue growth in 2023, with sales soaring 737% to reach $1.92 billion. However, the company also posted a net loss of $863 million during the same period.

Microsoft

Microsoft represents CoreWeave’s largest customer, accounting for 62% of its revenue last year. The heavy concentration on a single client has raised concerns among some investors about the company’s long-term prospects.

“The OpenAI contract… materially decreases the single client concentration, and we’ll continue to do that over the next several years,” Intrator told Reuters when asked about these concerns. CoreWeave recently signed a five-year contract worth $11.9 billion with OpenAI.

The company’s debut coincided with a challenging day for tech stocks. The tech-heavy Nasdaq fell nearly 3% on Friday, heading toward its worst quarterly performance since mid-2022.

Some analysts have suggested that CoreWeave’s performance could serve as a bellwether for investor sentiment toward the AI sector. “CoreWeave stands to be a bellwether for the AI industry as a whole — a must-watch stock as questions about return on investment grow ever louder,” Bloomberg Opinion columnist Dave Lee wrote.

The company began in 2017 as an Ethereum-focused crypto mining operation before pivoting to AI infrastructure. It completely shut down its mining business in 2022 following Ethereum’s upgrade that reduced rewards for miners.

CoreWeave operates with substantial debt, having raised almost $13 billion in debt financing. As of last year, the company had around $8 billion in debt, with plans to use about $1 billion of the IPO proceeds to repay some of these obligations.

The company doesn’t own its data centers, instead leasing its 32 facilities and some equipment, resulting in operating lease liabilities of $2.6 billion. This capital-intensive business model reflects the high costs associated with building AI infrastructure.

CoreWeave faces competition from major cloud service providers including Microsoft, Amazon, Google, and Oracle, all of which offer their own AI infrastructure services.

The IPO was underwritten by a syndicate of 18 banks, led by Morgan Stanley, JPMorgan, and Goldman Sachs. Prior to the offering, CEO Michael Intrator controlled 38% of CoreWeave’s voting power, while Nvidia held 1%.

Investors and industry observers are now watching closely to see if CoreWeave’s public debut will encourage other AI-focused companies to pursue IPOs. Data analytics company Databricks and chatbot maker OpenAI have both recently raised funds at high valuations and could be candidates for future public offerings.