CoreWeave acts as a key indicator for AI in a weak IPO market.
One cloud computing company is making waves in the artificial intelligence IPO scene, attempting to go public despite challenging economic conditions and minimal competition in the market. CoreWeave, based in New Jersey, has filed a plan with the US Securities and Exchange Commission to list on the public market, with expectations to list later this month as reported by The Information.
This move by CoreWeave comes at a time when the IPO market is experiencing a significant decline. Over the past three years, the number of tech companies entering the public market has reached decade-lows, with minimal activity compared to previous years. Recent stock market volatility, driven by concerns over tariffs and inflation since President Donald Trump’s second term began, has further dampened market confidence, particularly affecting major stock indexes and tech ETFs.
Describing itself as an “AI hyperscaler,” CoreWeave offers a unique service of renting out GPUs, CPUs, and other computing equipment to tech companies, eliminating the need for them to buy and maintain their own hardware. If successful, CoreWeave’s IPO would stand out as one of the first major companies supporting AI expansion to go public in recent years, serving as a key indicator for both the tech industry’s future trajectory and the public market’s perception of AI technologies.
The potential success of CoreWeave’s IPO can be evaluated by looking at recent tech IPOs as benchmarks. British chip designer Arm went public in 2023 amid a sluggish IPO market and managed to raise $4.87 billion, becoming one of the year’s largest IPOs and showcasing positive market conditions. Similarly, social media platform Reddit raised $748 million in its IPO last year, signaling a favorable investment environment. Reddit’s subsequent data licensing partnership with OpenAI and its stock price increase of 250% since its launch further reinforce the positive outlook for tech IPOs.
Reportedly aiming to raise $4 billion at a $35 billion valuation, CoreWeave faces competition from other AI IPO candidates, including Genesys, Databricks, and Cerebras, all of which have delayed their IPO plans due to market volatility or regulatory reviews. While the AI IPO market is still in its early stages, it is expected to evolve over the coming years, potentially welcoming heavyweight players like OpenAI and Anthropic onto the public market.
Despite the promising outlook for CoreWeave’s IPO, the company faces risks, particularly in its lack of customer diversification. With 62% of its revenue in 2024 coming from Microsoft, CoreWeave’s heavy reliance on a single client exposes it to vulnerabilities. Recent reports of Microsoft reducing commitments over delivery issues highlight the potential challenges CoreWeave may encounter. However, CoreWeave’s recent high-value contract with OpenAI, worth $11.9 billion over five years, offers a significant revenue boost and a step towards mitigating customer concentration risks.
Whilst a company’s IPO performance can offer insights into investor sentiment, it is essential to consider it within a broader context. The case of Uber, whose IPO was perceived as disappointing due to profitability concerns and increased competition, does not necessarily reflect the overall tech industry’s performance. Other successful IPOs, such as Zoom and Cloudflare, provide contrasting examples of strong market gains in the same year, indicating multiple factors at play in evaluating IPO success.
