CoreWeave Set to Ignite Interest in Upcoming IPO Amid AI Boom

In recent years, initial public offerings (IPOs) have been sparse, especially featuring prominent companies poised to compete with leading tech stocks. However, CoreWeave, a company positioned at the forefront of the artificial intelligence (AI) revolution, is preparing for its public debut. With remarkable growth and notable backers like Nvidia (NASDAQ: NVDA) and a major customer in Microsoft (NASDAQ: MSFT), CoreWeave is attracting significant attention.

Here’s what you need to know about CoreWeave ahead of its IPO.

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CoreWeave: An AI-Driven Evolution

CoreWeave plans to list on the Nasdaq under the ticker CRWV, marking its emergence in the booming AI sector. Originally founded in 2017 by executives from Hudson Ridge Asset Management, a hedge fund focused on natural gas, the company initially aimed to mine cryptocurrencies.

This background equipped CoreWeave with experience in leveraging Nvidia graphics processing units (GPUs) for crypto mining and in managing energy-intensive computing clusters. These skills have since transitioned seamlessly into the realm of AI computing.

The company shifted focus in 2020 to develop the CoreWeave Cloud Platform, garnering investment from Nvidia in April 2023. Nvidia’s stake now exceeds 5%, and the company not only invests but also utilizes CoreWeave to support its software products and test AI applications.

Nvidia’s investment coincided with a pivotal moment—the remarkable earnings report in May 2023 that elevated Nvidia into a hypergrowth phase driven by AI advancements.

Understanding CoreWeave’s Competitive Edge

CoreWeave differentiates itself in the competitive landscape of cloud infrastructure. An in-depth review of its Form S-1 highlights several strengths.

One core advantage lies in CoreWeave’s AI-optimized GPU clusters, built specifically for AI applications, unlike generalized cloud platforms that have to accommodate both AI and traditional computing infrastructures.

Additionally, CoreWeave’s proprietary orchestration and observability tools enhance GPU utilization efficiency. The demanding nature of AI workloads makes it challenging to optimize entire data centers for multiple clients effectively.

CoreWeave cites a metric known as model FLOPS (MFLOPS) utilization, measuring AI cluster effectiveness against theoretical compute capacity. Surprisingly, the industry average MFLOPS utilization ranges between 35% to 45%. CoreWeave aims to close this performance gap through innovative software solutions.

One such solution, SUNK, integrates Kubernetes and Slurm, allowing both platforms to operate together within cloud environments, thus enhancing computational efficiency.

Another key software, Tensorizer, optimizes both inference and training processes. For inference, it directs models from storage to the nearest GPU, offering expedited load times compared to competitors like HuggingFace and SafeTensors. During training, the Tensorizer streamlines training durations through similar efficiencies.

CoreWeave also benefits from quick access to cutting-edge Nvidia GPUs due to the investment. As noted in its S-1, the company was among the first to deploy the Nvidia H100 and H200 systems and to offer Nvidia GB200 NVL72-based instances broadly.

Image source: Getty Images.

CoreWeave’s Financial Growth Metrics

CoreWeave’s financial performance underscores its robust growth. The company has demonstrated substantial increases in revenue over the past two years:

CoreWeave	2022	2023	2024
Revenue	$15.8 million	$228.9 million	$1,915.4 million
Operating income	($22.9 million)	($14.5 million)	$324.4 million
Operating margin	(145%)	(6%)	17%

Data source: CoreWeave S-1.

The projected revenue jump for 2024 represents an astounding 737% growth, a remarkable figure for any company. Furthermore, transitioning to operating profitability adds to its appeal. It’s important to note that the recent financials reflect operations from 32 data centers housing approximately 250,000 GPUs.

CoreWeave’s IPO valuation is uncertain, yet analysts predict it may aim to raise $3.5 billion to $4 billion with an expected market cap around $32 billion. At this rate, shares would trade at approximately 16 times trailing revenue and 100 times operating income. However, with $7.9 billion in debt and $1.4 billion in cash, CoreWeave presents a more intricate picture on an enterprise value basis.

Potential Risks for Investors

On the surface, CoreWeave appears to be a strong contender in the AI sector. Yet, while its growth potential is compelling, investors should carefully consider the inherent risks.

CoreWeave’s Growth Dynamics: Exploring Microsoft Dependence and Market Risks

While the valuation of CoreWeave may appear high, a closer analysis reveals that it isn’t as costly when considering the company’s current growth rates and the long-term potential of generative AI.

Revenue Reliance on Microsoft Raises Concerns

Despite this perspective, the source of CoreWeave’s growth prompts several questions. In 2024, a striking 62% of CoreWeave’s revenue stemmed from Microsoft. The tech giant has been leveraging CoreWeave’s spare GPU capacity to enhance its Azure cloud services, even while investing tens of billions of dollars annually in its own cloud infrastructure.

One may wonder why Microsoft has become such a significant customer, particularly since competitors like Amazon and Alphabet are not major clients of CoreWeave. This situation likely arises because both Amazon and Alphabet have established their own custom ASIC programs. Alphabet developed its Tensor Processing Unit chips in 2015, while Amazon introduced its Inferentia chip in 2019 and its Trainium AI chip in 2021.

Microsoft’s Late Entry into Custom AI Chips

Microsoft was initially delayed in developing custom AI chips, only unveiling its Maia AI chip in November 2023. It remains uncertain if the absence of a custom ASIC is the sole factor contributing to Microsoft’s heavy reliance on CoreWeave’s services. Microsoft may value CoreWeave’s operational capabilities for other reasons as well, which could significantly influence the ongoing relationship.

The potential need for CoreWeave’s infrastructure may diminish if Microsoft accelerates its own chip advancements and if the Maia chip reaches parity with Google’s TPUs or Amazon’s AI chips. Given the ongoing demand for Nvidia GPUs, it’s conceivable that Microsoft could pivot to allocate funds toward Nvidia chips directly for its own data centers.

Cost Comparison: Nvidia vs. Custom ASICs

It’s important to note that cloud providers can procure custom ASICs at foundry prices, whereas Nvidia maintains gross margins in the mid-70% range. As a result, sourcing an Nvidia GPU can be significantly more expensive—three to five times more—than designing an in-house chip and purchasing it from a foundry.

Additionally, CoreWeave’s relationship with Nvidia offers early access to cutting-edge Nvidia chips, suggesting that CoreWeave’s future is closely tied to Nvidia’s product development and market position.

Volatility Ahead for CoreWeave

Looking ahead, CoreWeave is poised to be a highly volatile and potentially controversial stock when it goes public. While the filings present solid reasons for investor participation in its IPO, they also reveal several significant risks that may caution investors, particularly at launch.

Investment Opportunities: Timing Is Key

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*Stock Advisor returns as of March 3, 2025

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Billy Duberstein and/or his clients have positions in Alphabet, Amazon, and Microsoft. The Motley Fool has positions in and recommends Alphabet, Amazon, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.