Coreweave’s $4 Billion IPO: What Investors Should Know

Market strategists are increasingly optimistic about a revival in initial public offerings (IPOs) following a period of sluggish activity. Although it may take time for the IPO market to fully recover, especially after recent market turbulence, more private companies are beginning to announce plans to go public.

One such company is Coreweave (CRWV), an artificial intelligence infrastructure firm. Coreweave aims to raise $4 billion, potentially valuing the company at around $35 billion, and positioning it as one of the larger IPOs in recent years. Given the strong performance of AI stocks, Coreweave’s IPO is anticipated to generate considerable interest in 2025. Here are three key points to consider.

1. Data Centers Tailored for AI Operations

Coreweave initially focused on infrastructure for crypto miners, utilizing data centers in New Jersey to mine Ethereum when it relied on an energy-intensive proof-of-work system. However, following the cryptocurrency market crash in 2018, the company pivoted to providing data center solutions designed for generative AI workloads.

The firm’s data centers are equipped with Nvidia’s latest graphics processing units (GPUs), liquid cooling systems, AI-optimized storage, and heightened security. This setup allows companies to develop and deploy AI solutions without needing to invest heavily in their infrastructure. By the end of 2024, Coreweave operated 32 data centers, harnessing over 250,000 GPUs.

Image source: Getty Images.

2. Strong Financial Performance

In contrast to many tech and AI companies that go public with unprofitable financials, Coreweave presents a different picture. While the company reported a loss of over $863 million in 2024, it also recorded substantial depreciation and amortization, improving its operating metrics. Notably, Coreweave achieved over $324 million in operating income for 2024, a significant recovery from a $14.5 million operating loss in 2023.

Revenue surged by approximately 740% in 2024, indicating effective capital investments that created substantial revenue potential. The vast majority of this new revenue, over 95%, came from existing customers as demand increased. Moreover, Coreweave’s long-term infrastructure viability and multiyear contracts enhance its financial attractiveness.

3. Dependency on Major Clients

Coreweave has strategically targeted a core group of customers, including Microsoft and Nvidia, leading to significant revenue growth. Microsoft accounted for 35% of total revenue in 2023, increasing to 62% in 2024. This relationship signals strong market validation for Coreweave’s offerings but also presents risks. A decision by Microsoft to end this relationship could pose challenges for the company.

Nonetheless, this strong partnership not only boosts credibility but also helps attract additional clients in the AI sector. Recently, Reuters reported that Coreweave secured a five-year contract worth $11.9 billion with OpenAI, the developer of ChatGPT, which will also acquire a stake in Coreweave as part of the deal.

Investment Opportunities

As Coreweave prepares for its IPO, potential investors should carefully consider the financial fundamentals and market dynamics. While many IPOs might come with less favorable financial projections, Coreweave’s growth trajectory might present unique opportunities in the evolving AI landscape.

Bram Berkowitz holds positions in Ethereum. The Motley Fool has stakes in and recommends Ethereum, Microsoft, and Nvidia. They also have a recommendation policy.

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