Smaller CoreWeave Valuation Signals Slower Start for AI-Focused IPOs
Hype climbed for AI cloud services provider CoreWeave’s IPO after it signed a $11.9 billion deal with OpenAI earlier this month.
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AI cloud company CoreWeave’s IPO ambitions aren’t as sky-high as they once were. The AI darling is going public with a valuation nearly $10 billion less than it initially planned.
CoreWeave, which starts trading on the Nasdaq today, sought a valuation of $23 billion, down from the $32 billion goal it set last week. Semafor first reported the Nvidia-backed cloud company would scale back its IPO to raise only about $1.5 billion. The startup initially aimed to fetch up to $2.7 billion.
Hype climbed for CoreWeave’s IPO after it signed an $11.9 billion deal with OpenAI earlier this month. But skeptics have side-eyed the not-yet-profitable company’s $8 billion debt pile (as of last year) and its dependence on leased data centers.
CoreWeave said it’d use $1 billion raised in its IPO to pay down its debt…but also that it plans to keep borrowing.
Hit the Ground Jogging
CoreWeave’s scale-back signals a slower start for AI-focused IPOs than analysts had hoped. As the first startup primarily focused on AI to debut in the US, CoreWeave was expected to set off a wave of promising public offerings that could boost markets. While the Nasdaq has fallen about 7% this year as tech stocks tanked, Forge Global estimates private AI companies gained 60% in the past six months.
Investors have hoped that CoreWeave might also mark the beginning of a wider thawing of the IPO market, which has been chilly for the past three years after dealmaking nosedived in 2022.
- Buy-now-pay-later lender Klarna and ticket-seller StubHub recently filed to go public.
- Other companies are hesitating: Payments processor Stripe and AI data company Databricks have chosen to stay private, while car-rental startup Turo pulled its listing altogether last month.
Defrost Setting: A lukewarm offering may not be enough to reinvigorate the US IPO market, which has been slowly heating up but is still far behind its pre-pandemic glory days: $30 billion worth of IPO deals went down last year compared with $152 billion in 2021. CoreWeave’s performance on the Nasdaq, however, could influence other startups’ plans to go public and investors’ overall enthusiasm for AI companies.
