Nvidia invested in CoreWeave, a start-up specializing in AI computing, with planned $35 billion IPO.

From Nasdaq: 2025-03-05 09:30:00

Tech giants like Microsoft and Meta are investing heavily in artificial intelligence (AI) accelerators and data centers. CoreWeave, a start-up, is meeting the demand for AI computing capacity with its specialized cloud platform, generating revenue primarily from long-term contracts with major tech companies and operating over 250,000 GPUs by the end of 2024. Nvidia, a leader in the AI accelerator market, invested in CoreWeave in 2023, with plans for a $35 billion IPO to raise over $3 billion for further expansion.

CoreWeave’s profitability is driven by operating basis, but interest payments on debt consume operating profit. Despite positive factors like long-term contracts and high demand, the company’s extreme customer concentration, with 77% of revenue from two clients in 2024, poses risks. Microsoft, a key customer, plans to lease more capacity in 2027-2028, potentially impacting CoreWeave’s business model.

CoreWeave’s business model relies on long-term take-or-pay contracts, ensuring revenue predictability. However, a potential oversupply of AI computing capacity could shift the market. Microsoft’s plans to increase leasing activity in response to industry expansion hint at possible price reductions. CoreWeave’s revenue predictability could suffer if forced to adopt a pay-as-you-go model without multi-year commitments.

Investors should be cautious about CoreWeave’s IPO. While the company has experienced rapid growth, any potential oversupply of AI computing capacity could disrupt its business model. Reports of Microsoft canceling AI data center leases raise concerns about the sector’s future growth and pricing pressures on AI accelerators, impacting companies like Nvidia and CoreWeave.



Read more at Nasdaq: Nvidia Invested in CoreWeave, but I Won’t Be Buying the IPO