Nvidia-backed CoreWeave slashes IPO size and price amid investor concerns

CoreWeave plans to reduce the size of its U.S. initial public offering and price its shares below the indicated range, a person familiar with the matter told Reuters on Thursday, dampening expectations that the listing would boost investor appetite for IPOs.

The Nvidia-backed cloud services provider is now looking to sell 37.5 million shares, 23.5% less than originally planned, and price them at $40 apiece, well below even the low end of the indicated range, the source added, requesting anonymity discussing confidential information.

Nvidia will anchor the CoreWeave IPO at the price with a $250 million order, the source said. The sale would raise about $1.5 billion and value CoreWeave at about $23 billion on a fully diluted basis, according to Reuters’ calculations.

The company did not immediately respond to Reuters’ request for comment. It is expected to price the IPO later on Thursday.

CoreWeave’s roadshow, which began last week, received a weaker-than-expected reception as risk-averse investors in a volatile market weighed concerns over the company’s long-term growth, financial risks and capital intensity, according to four sources familiar with the matter.

Among the concerns is CoreWeave’s heavy reliance on Microsoft, whose shifting AI datacenter strategy could impact long-term demand for chips known as graphics processing units, or GPUs. While investors appear comfortable with the company’s high leverage since it has strong free cash flow, the risk of commitments not being fulfilled remains a worry.

Additionally, CoreWeave’s capital-intensive business model raises questions about sustainability, adding to broader market uncertainty.

CoreWeave has been a significant customer for Nvidia, deploying over 250,000 of Nvidia’s GPUs by the end of 2024. Investors’ lukewarm reception to the CoreWeave IPO could signal reduced confidence in the AI infrastructure market, as the scaling of GPU assets in AI training slows down.

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

CoreWeave and some existing investors had initially aimed to sell 49 million shares in the offering priced between $47 and $55 each to raise as much as $2.7 billion. That would have valued the company at up to $32 billion on a fully diluted basis.

Mounting concerns

CoreWeave’s stock market debut has been closely watched as a test of the strength of a recovery in the U.S. IPO market and whether investor enthusiasm for AI newcomers remains strong or has started to wane.

The number of U.S.-listed equity capital markets deals, including both IPOs and block trades of shares, fell to 187 in the first three months of this year, down from 243 during the same period last year, according to Dealogic data through Wednesday. The total value of these transactions also dipped, falling from $74.02 billion to $63.48 billion.

Despite the AI boom, there are growing concerns that data center spending will be uneven, with investments concentrated among a few giants while others struggle to keep pace.

DeepSeek, China’s low-cost AI rival, has also emerged as a growing threat, fueling concerns about pressure on data center spending.

CoreWeave had debt of about $8 billion as of last year. It also leases its 32 data centers and some equipment, instead of owning them, resulting in operating lease liabilities of $2.6 billion.

In its offering filing, the company had said about $1 billion of the IPO proceeds would be used to pay down debt. The company has said it would continue to borrow.

CoreWeave has yet to turn a profit, and IPO investors in the last few years have been wary of backing companies with no history of profitability.

Ahead of its IPO, CoreWeave secured partnerships with major AI players, including Sam Altman’s OpenAI. Earlier this month, it signed an $11.9 billion infrastructure deal with the ChatGPT maker.

The cloud services provider, which offers access to data centers and high-powered Nvidia chips for AI workloads, will also issue $350 million in shares to OpenAI through a private placement as part of the offering.

Morgan Stanley, J.P. Morgan and Goldman Sachs are the lead underwriters of the IPO.

The downsizing was first reported by Semafor on Thursday.

—Echo Wang, Krystal Hu, Milana Vinn, Manya Saini, Niket Nishant, and Ateev Bhandari, Reuters

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