CoreWeave is set to begin trading on the Nasdaq on Friday under the ticker "CRWV," marking the largest IPO of the year. However, the AI cloud company has already reduced the size of its U.S. initial public offering and priced its shares below the initially indicated range, dampening expectations that the listing would reignite investor appetite for IPOs.

The Nvidia-backed company has priced its IPO at $40 per share, much lower than the originally planned range of $47 to $55. coreweave also reduced the number of shares being offered from 49 million to 37.5 million. At this revised price and share count, the company is raising $1.5 billion, valuing it at approximately $19 billion, or $23 billion on a fully diluted basis.

The IPO consists of 36.59 million shares of Class A common stock to be sold by the company and 910,000 shares to be sold by existing stockholders. Additionally, underwriters have been granted a 30-day over-allotment option to purchase up to an additional 5.625 million shares.

The downsizing comes amid recent market volatility and growing concerns over AI sector fatigue, with microsoft scaling back new AI data center projects and Nvidia's stock continuing to slide.

Still, nvidia remains one of CoreWeave's biggest investors, holding a 6% stake since 2023. Nvidia will also anchor the CoreWeave IPO with a $250 million order, according to Reuters, citing sources familiar with the matter.

What is CoreWeave?

Headquartered in Livingston, New Jersey, CoreWeave specializes in providing cloud-based GPU infrastructure for AI developers. By the end of 2024, the cloud provider owned a total of 250,000 Nvidia GPUs, supported by more than 360 MW of active power.

With Nvidia's backing, CoreWeave's revenue skyrocketed from $228.9 million in 2023 to $1.9 billion in 2024—an eightfold increase. However, the company remains deeply unprofitable, reporting a net loss of $863 million in 2024.

Notably, CoreWeave's three co-founders had already sold off most of their Class A shares during funding rounds in 2023 and 2024. Regardless of the IPO's outcome, they have collectively cashed out nearly $500 million.

The founders now hold less than 3% of Class A shares but retain approximately 80% of voting rights through Class B shares, which carry 10 times the voting power.

Interestingly, none of the three co-founders have a technology background. They initially formed their team to capitalize on the cryptocurrency mining boom. Before launching CoreWeave, all three worked in hedge funds focused on the oil industry.

Microsoft, OpenAI, and CoreWeave's Partnership

Microsoft is CoreWeave's largest customer, accounting for 62% of its revenue last year. However, Microsoft has scaled back some agreements with CoreWeave due to delivery issues and missed deadlines. Over the past six months, Microsoft has reportedly withdrawn over 2GW of planned data center leases in the U.S. and Europe, canceling or deferring existing agreements due to concerns about an oversupply of computing clusters. These changes put pressure on CoreWeave's growth outlook.

Public records show that Microsoft had agreed to purchase over $10 billion worth of computing power from CoreWeave by 2030 under five disclosed contracts.

CoreWeave also works closely with OpenAI. Earlier this month, the company announced a deal to provide AI infrastructure for OpenAI, expanding its compute capacity for training and deploying the latest AI models at scale. The deal is valued at up to $11.9 billion, with OpenAI becoming an investor in CoreWeave through the issuance of $350 million in CoreWeave stock.

One key concern for investors is CoreWeave's $7.9 billion in debt. However, the company's founders argue that this debt is a strategic advantage rather than a liability, claiming they pioneered GPU infrastructure-backed lending. CoreWeave's extensive collection of high-value Nvidia GPUs serves as collateral, allowing the company to secure financing to acquire even more GPUs.