By Adam Levine
When the artificial-intelligence cloud company CoreWeave made its stock market debut on Friday, less than 10% of the fully diluted share count made its way into trading, signaling that the price may well be volatile.
While the stock finished its first day unchanged, the next two days have shown that volatility. On Monday, CoreWeave shares fell as much as 10%, finishing up the day down 7.3%. On Tuesday, they reversed course with a gain of as much as 25%. At midday, the stock was up 19%, putting it 12% above the offering price.
CoreWeave shares may continue on this roller coaster. It is a very fast-growing company, and if investors believe that demand for AI cloud computing will continue to outstrip supply, that rapid growth could continue.
CoreWeave also has a very close relationship with the AI leader, Nvidia, which is its main supplier, second-largest customer, and an investor. It owns 24 million shares, including six million, one-sixth of all the new shares, added during the initial public offering. Some investors see Nvidia as a source of support for the stock.
On the other side, bears are focused on some red flags. CoreWeave had to cut both the price of its offering and the amount of shares sold. Nvidia had to step in and take a sizable portion of the offering, which doesn't instill confidence.
CoreWeave's rapid growth in revenue is supported by a growing mountain of debt and capital expenditures, and a large portion of the capex goes to Nvidia. Only two customers, Microsoft and likely Nvidia, account for 77% of revenue.
All that makes the pace of the company's expansion appear precarious.
So CoreWeave stock may become a battleground for the AI trade on Wall Street. Even if the company maintains its growth as demand for AI rises, shareholders may be in for a choppy ride.
Write to Adam Levine at adam.levine@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
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April 01, 2025 14:47 ET (18:47 GMT)
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