In CoreWeave’s lackluster IPO, some see signs of a looming AI bust. But CoreWeave’s problems are mostly about CoreWeave
From Yahoo Finance: 2025-03-28 15:58:00
CoreWeave’s lackluster IPO and first day of trading may seem like bad news for the AI sector, but its issues are unique. The company scaled back its equity offering due to lackluster investor interest, facing challenges with its business model based on debt and depreciating assets.
The company’s reliance on debt to build data center capacity ahead of demand, along with its dependence on just two major customers, raises concerns. CoreWeave’s revenue from customers aside from Microsoft and Nvidia is seen as an indictment of AI technology, but cloud providers like Microsoft and Google Cloud continue to see significant revenue growth.
The AI industry faces challenges with the profitability of companies building foundation models. The commoditization of AI capabilities drives down prices, making it difficult for companies to earn a profit. Despite uncertainties, AI technology has the potential to be transformative, similar to past technologies like the internet boom of the late 1990s.
Investors should not discount the impact of AI based on CoreWeave’s IPO performance. The technology has the potential to reshape industries, even if individual companies face challenges. CoreWeave’s struggles are not indicative of the broader AI sector, which continues to see growth and innovation.