CoreWeave’s First Day of Trading Highlights Fizzling AI Enthusiasm

AI cloud computing provider CoreWeave uncorked the champagne on its Nasdaq debut Friday, but the end result was as flat as a two-day-old soda fountain Pepsi.

Markets were left with no gains, no losses and a lot of questions about where the AI boom is headed.

The Lease of Their Problems

CoreWeave started out in 2017 as a crypto miner, but ditched the sector altogether in 2022 to focus on data centers. The Livingston, NJ-based company was the dictionary definition of right place, right time: As a wise early adopter of Nvidia’s graphics chips, it was ideally positioned to capitalize on the boom in demand for processing that can handle complex AI applications.

Amid last year’s feverish AI goldrush, CoreWeave’s revenue rose more than eightfold to $1.9 billion. But then come the buts: 77% of that revenue came from its two biggest customers, one of them Microsoft, leaving analysts worried about its exposure. (Before this month’s IPO, the company struck a $12 billion, five-year deal with OpenAI to diversify its income). Coreweave also leases its more than two dozen data centers and some of its equipment, leaving it with operating liabilities of $2.6 billion.

So while the $1.5 billion raised Friday in Coreweave’s share sale marked the biggest US tech IPO since 2021, the pricing of $40 a share was well below the expected range of $47 to $55. CoreWeave also sold 23% fewer shares than first planned. And when those shares ended Friday right back where they started, at the $40 IPO price, broader questions about the AI economy were top of mind as traders headed off for the weekend:

• The data center building boom has already faced pressure this year with the debut of smaller and more efficient AI models that don’t require as much computing power. Even Microsoft, CoreWeave’s top customer, backed out of new data center projects in the US and Europe last week. At the same time, Joseph Tsai, the chairman of Chinese tech giant Alibaba warned the data center business is a potential bubble.
• Investors, spooked by inflation and tariff risks, have already been dumping riskier tech assets amid tariff volatility and inflation fears, with the Nasdaq 100 down 2.6% on Friday and more than 9% this year. While markets had hoped for more IPOs this year, that hasn’t materialized and, as far as tech firms go, California AI company Cerebras’ public offering was delayed because it’s still awaiting regulatory approval over an investment from an Abu Dhabi-based cloud company.

Waiting in the Wings: While CoreWeave’s slow start isn’t the best news for the slumbering tech IPO market, there are big names willing to test the markets. Buy-now-pay-later company Klarna filed to go public earlier this month after increasing its revenue over 20% last year to $2.8 billion and turning a profit. Meanwhile, social media platform Discord, software company Figma and AI infrastructure company Databricks are all weighing public debuts.