NVIDIA's CoreWeave Slashes IPO Size and Prices Shares Below Expectations Amid Market Caution
CoreWeave, a prominent cloud infrastructure provider supported by Nvidia, has significantly reduced the scale of its US initial public offering (IPO), pricing shares at $40 each—well below the previously indicated range of $47 to $55 as reported by Reuters. The company will now sell 37.5 million shares, a 23.5% cut from the original plan of 49 million shares.
Of the total, 36.6 million shares will be newly issued by CoreWeave, while existing shareholders will offer 910,000 shares. According to sources cited by Reuters, Nvidia has agreed to anchor the offering with a $250 million share purchase.
The revised sale is expected to raise approximately $1.5 billion, giving CoreWeave an estimated valuation of $23 billionon a fully diluted basis.
Investor Sentiment Dampens IPO Momentum
CoreWeave’s IPO roadshow encountered less enthusiasm than anticipated, with investors expressing caution in a volatile market, four insiders told Reuters. Concerns cited include the company’s capital-heavy business model, dependency on major clients such as Microsoft, and potential shifts in AI data center demand.
Though the firm is generating strong free cash flow, questions linger about the sustainability of its operations and the fulfillment of revenue commitments, particularly as Microsoft’s AI infrastructure strategy evolves.
Lukas Muehlbauer, research analyst at IPOX, said, “The business model doesn't appear fundamentally flawed, but this suggests investors are recalibrating AI infrastructure valuations.”
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From $2.7 Billion Ambition to $1.5 Billion Reality
CoreWeave reduced its IPO target from $2.7 billion to $1.5 billion, reflecting a more cautious outlook due to investor concerns over growth, profitability, and AI market risks. This downsizing comes amid a slowdown in the US equity markets, with fewer IPOs and lower deal values in Q1 2024 compared to the previous year.
The company has $8 billion in debt and $2.6 billion in lease liabilities for its 32 data centers. It plans to use $1 billion from its IPO to reduce debt but will continue borrowing. The company has yet to report a profit, raising investor concerns, especially with competition from China's low-cost AI provider, DeepSeek, which could affect global data center investments.
Strategic Partnerships Remain a Key Strength
CoreWeave has secured an $11.9 billion infrastructure deal with OpenAI, strengthening its position as a key player in AI workloads. As part of its IPO, OpenAI will purchase $350 million in CoreWeave shares, reinforcing the company's role as a crucial AI infrastructure partner, particularly for Nvidia GPUs used in AI processing.
