CoreWeave’s IPO Signals Surging AI Market Potential Amid Risks

Since artificial intelligence (AI) gained market attention in November 2022, Nvidia (NASDAQ: NVDA) has led the way for AI-related stocks with remarkable growth. The GPU manufacturer has recorded five consecutive quarters of triple-digit revenue growth through fiscal 2024 and 2025, culminating in a staggering 265% increase in the third quarter of fiscal 2024.

In a related development, the recently public CoreWeave (NASDAQ: CRWV) has provided an exciting testament to AI’s explosive growth, outperforming even Nvidia in revenue increases. Although CoreWeave is significantly smaller than Nvidia, it achieved a remarkable 737% revenue surge in 2024, reaching $1.9 billion.

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As a dedicated cloud infrastructure platform for AI, CoreWeave marks the first major initial public offering in this new AI landscape, having gone public on March 28. This article examines the essential details about CoreWeave and the question of whether it represents a solid investment opportunity.

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CoreWeave: Transforming Cloud Computing for AI

CoreWeave’s evolution into an AI cloud computing platform is surprising. Founded in 2017 by three entrepreneurs involved in trading carbon credits as The Atlantic Crypto Corp., the company initially focused on mining Ethereum during the cryptocurrency boom. In 2019, it rebranded as CoreWeave, shifting towards becoming a data center business that utilized GPUs purchased for Ethereum mining and acquired distressed hardware during the “crypto winter” from 2018 to 2019.

Utilizing its computing infrastructure, CoreWeave began rendering videos and training AI models for clients. The company transitioned into a cloud platform in 2020 by renting Nvidia GPUs, attracting customers due to faster service compared to traditional platforms. Its revenue escalated from $16 million in 2022 to $1.9 billion in 2024, a 119-fold increase. Notably, Nvidia and OpenAI became investors during this growth.

CoreWeave positions itself as a purpose-built AI platform, contrasting with conventional cloud services which cater primarily to hosting websites, databases, and SaaS applications with different needs than those of high-performance AI.

High Growth Accompanied by Significant Risks

Impressive as CoreWeave’s growth rates may be, it also presents considerable risks. Customer concentration poses a substantial threat; in 2024, 62% of its revenue originated from Microsoft (NASDAQ: MSFT), while 15% stemmed from the company’s second-largest customer.

Concerns have emerged regarding a potential slowdown in Microsoft’s demand for CoreWeave’s computing services. In March, Microsoft opted not to exercise a $12 billion option for additional data center capacity, interpreted by some as a sign of diminishing demand for AI computing services, including those from CoreWeave.

However, CoreWeave’s prospectus indicates a strategy to diversify away from Microsoft. The company anticipates that Microsoft will constitute less than 50% of future committed revenues, bolstered by an expected $11.55 billion from OpenAI as part of a master services agreement. Additionally, its remaining performance obligations rose by 53% last year, suggesting robust business growth.

While Microsoft’s contribution to CoreWeave’s revenue increased from 35% in 2023 to 62% in 2024, other customers show increasing demand, as evidenced by the OpenAI deal.

Despite growth potential, the relationship with Microsoft has caused investor anxiety, reflecting in a less-than-enthusiastic response to CoreWeave’s IPO, which was undersubscribed and priced below expectations. The stock debuted flat but suffered a 7% decline on its second trading day before recovering those losses.

CoreWeave’s Investment Potential

At present, CoreWeave is considered a high-risk investment. Initial public offerings (IPOs) typically carry risks, as stocks need time to stabilize in the market. The current market cycle adds to the risk, particularly as the Nasdaq Composite (NASDAQINDEX: ^IXIC) is experiencing correction territory.

Despite concerns regarding Microsoft, CoreWeave’s fundamentals and valuation remain strong, trading at a price-to-sales ratio under 7. It reported a generally accepted accounting principles (GAAP) operating profit of $324.4 million on $1.9 billion in revenue. However, it remains unprofitable on an adjusted basis due to $7 billion in debt and corresponding interest expenses.

The challenges faced by CoreWeave’s IPO seem more indicative of investor sentiment surrounding market conditions than weaknesses in its business model. If AI infrastructure investment continues, CoreWeave is expected to prosper in the long run.

Volatility is likely to characterize CoreWeave’s stock price in the coming months. Yet, the long-term prospects appear promising. For patient investors, acquiring exposure to CoreWeave could be a wise move.

Explore This Potentially Lucrative Opportunity

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Currently, we are issuing “Double Down” alerts for three promising companies, and this opportunity may not last long.

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*Stock Advisor returns as of April 1, 2025

Jeremy Bowman has positions in Ethereum and Nvidia. The Motley Fool has positions in and recommends Ethereum, Microsoft, and Nvidia. The Motley Fool also holds positions in long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool maintains a disclosure policy.

The views expressed in this article are those of the author and do not necessarily represent the views of Nasdaq, Inc.