CoreWeave has shown a definite knack for being in the right place at the right time. Its initial public offering could test the limits of that ability.
The provider of specialized cloud-computing services for artificial intelligence is expected to price its IPO late Thursday and debut for trading on the Nasdaq on Friday morning. The offering could raise CoreWeave as much as $3 billion at the high end of the proposed price range. It would also mark the latest stage of a very rapid ascendance for a company that started life as a cryptocurrency miner and then -- when the bottom fell out of that market -- pivoted its fleet of Nvidia chips toward AI computing.
It was a smart move, and a lucrative one. CoreWeave's revenue surged more than eightfold in 2024 alone to hit $1.9 billion. The company also had $15.1 billion in "remaining performance obligations" at the end of last year and has said a little over half of that will be recognized as revenue by the end of 2026. That doesn't include a "master services deal" with OpenAI announced earlier this month that carried a contract value of $11.9 billion running through October 2030.
But serving that kind of growth doesn't come cheap. CoreWeave burned nearly $6 billion of cash last year and $1.1 billion the previous year because of the heavy capital expenditures to build out its AI infrastructure.
It is also carrying nearly $8 billion in total debt on its balance sheet, which is primarily backed by the Nvidia graphics processing units it has amassed to power AI workloads for its customers. That is a novel approach to be sure, especially considering that those chips lose value relatively quickly. Huge tech companies like Google, Microsoft and Amazon depreciate data-center gear such as chips and servers over a period of five to six years.
CoreWeave's relationship with Nvidia, which has a 6% ownership stake, has helped it compete effectively with much bigger companies in securing supply of the most advanced GPUs.
But that doesn't free CoreWeave from having to keep pace with those rivals to secure chips in a spending race that is only getting bigger. Microsoft, Amazon, Meta Platforms and Google-parent Alphabet will drop nearly $340 billion combined on capital spending this year -- a 39% increase from 2024. Wall Street's projections also have all four increasing their spending every year through 2029, according to consensus estimates from Visible Alpha. Microsoft is also a major customer -- accounting for 62% of CoreWeave's revenue last year.
CoreWeave spent more than four times its revenue on capex last year and still only managed a fraction of what those bigger companies spent. And the money it raises in the IPO won't go a long way toward closing that distance, especially because the company has already earmarked $1 billion of it to pay down debt. "We believe this structure may continue to work as long as demand for AI continues to grow exponentially," Gil Luria of D.A. Davidson wrote in a report Monday, where he set a neutral rating on CoreWeave's shares.
Exponential growth for AI is one concept investors seem to have gotten a lot more skeptical about of late. The market's turbulence this year has been especially brutal for AI names: Nvidia's stock has shed 10% so far this year while most of the big techs dumping billions into its chips are down as well -- and exceeding the S&P 500's 1.8% loss. A dearth of high-profile tech IPOs so far this year could still give CoreWeave some appeal. But companies writing huge checks to Nvidia are no longer getting a blank check from investors.
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