By Eliot Brown
The markets are about to see just how robust the fervor is for artificial intelligence.
Cloud-computing provider CoreWeave is set to start trading this morning. It raised $1.5 billion Thursday in a turbulent initial public offering that met weaker-than-expected demand.
The Nvidia-backed company builds out data centers, then sells the computing power to tech giants, billing itself as "the AI Hyperscaler driving the AI revolution." Data centers have attracted a deluge of investment amid the broader AI frenzy.
Hoping to ride that wave, the company initially hoped to raise at least $2.3 billion at a price of $47 to $55 a share. But it repeatedly scaled back its ambitions as demand proved tepid, ultimately pricing the deal at $40 and raising about 35% less than its earlier minimum goal.
Nvidia has invested in the company, which is a large customer of the chip maker's AI chips. CoreWeave's IPO struggles weighed on Nvidia shares, which fell 2% Thursday.
Revenue has taken off like a rocket-from $15 million in 2022 to $1.9 billion in 2024-but concerns are many.
Losses have surged, too. Coreweave posted a net loss of $937 million in 2024, up from $31 million in 2022, and it relies heavily on debt to build out data centers.
Its business model of selling computing power to companies that also build their own data centers makes it vulnerable in a downturn-as the tech giants would likely prioritize their own facilities. CoreWeave says its average contract runs to four years, more than enough for it to cover the costs of building data centers.
Another red flag for some investors: The three co-founders cashed out nearly $489 million in earlier investment rounds, an unusually large amount of money for startup leaders to take off the table.
Read Heard on the Street's take:
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(END) Dow Jones Newswires
March 28, 2025 07:59 ET (11:59 GMT)
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