CoreWeave Cuts IPO Size, Prices Shares Below Expectations

NEW YORK, March 27 (Reuters) – CoreWeave has scaled back its initial public offering (IPO) in the U.S., reducing the size of its share sale and pricing them below the projected range, raising concerns over investor enthusiasm for recent IPOs. The Nvidia-backed cloud computing company announced on Thursday that it now intends to sell 37.5 million shares at $40 each, a 23.5% reduction from its original offering plan.

CoreWeave will offer 36.6 million of these shares, while existing stockholders will contribute 910,000 shares. Nvidia is set to anchor the IPO with a $250 million order, as per a source familiar with the deal. The revised share sale is expected to generate approximately $1.5 billion and value the company at around $23 billion on a fully diluted basis.

The company initiated its roadshow last week, but investor interest has not met expectations, largely due to the volatile market conditions and rising concerns about CoreWeave’s long-term growth and financial stability. According to four sources, these apprehensions center around CoreWeave’s heavy reliance on Microsoft, whose evolving AI datacenter strategy may influence future demand for graphics processing units (GPUs).

While investors may be willing to overlook CoreWeave’s significant leverage due to its strong free cash flow, there are worries regarding the fulfilling of financial commitments. Concerns over its capital-intensive business model and its ability to sustain operations amidst broader market uncertainties have also dampened investor enthusiasm.

CoreWeave has been a notable customer for Nvidia, utilizing over 250,000 Nvidia GPUs by the end of 2024. However, the tepid response to this IPO could indicate waning confidence in the expanding AI infrastructure sector, particularly as the scaling of GPU assets for AI training begins to slow.

Lukas Muehlbauer, a research analyst at IPOX, remarked, “The business model doesn’t appear fundamentally flawed, but this suggests investors are recalibrating AI infrastructure valuations.”

Previously, CoreWeave had aimed to sell 49 million shares at a price range of $47 to $55 each, potentially raising as much as $2.7 billion and valuing the firm up to $32 billion based on a fully diluted basis.

The current state of the U.S. IPO market seems to be impacted significantly, with the number of equity capital market deals—including IPOs—falling to 187 in the first quarter of this year, down from 243 in the same period last year, as reported by Dealogic. The total transaction value also decreased, dropping from $74.02 billion to $63.48 billion.

With the ongoing AI revolution, concerns are growing that data center expenditures may not remain consistent, as investments tend to concentrate among major corporations, leaving smaller entities to struggle. CoreWeave faces competition from a rising low-cost AI rival in China, DeepSeek, exacerbating worries about capital accessibility for data center investments.

As of last year, CoreWeave reported debts nearing $8 billion, alongside operating lease liabilities of $2.6 billion, due to leasing its 32 data centers and some equipment rather than owning them outright. The company indicated that roughly $1 billion of the IPO proceeds would be allocated towards debt repayment.

Moreover, CoreWeave, in its efforts to secure a strong market position, recently forged alliances with prominent AI entities, including OpenAI, where it established an $11.9 billion infrastructure deal. As part of this offering, the company plans to issue $350 million in shares to OpenAI through a private placement.

Leading the IPO will be Morgan Stanley, J.P. Morgan, and Goldman Sachs as the underwriting team. The initial downsizing of the IPO was reported earlier by Semafor.