CoreWeave’s IPO: A turning point for AI investment transparency

Key topics:.CoreWeave's IPO: a pivotal moment for AI's financial transparency.Heavy reliance on Microsoft revenue poses risks for CoreWeave's future.AI industry's high burn rate: The true cost behind the AI boom..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here..Support South Africa's bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here..If you prefer WhatsApp for updates, sign up to the BizNews channel here..By Dave Lee___STEADY_PAYWALL___.I've often complained that much of the AI-driven stock price bump enjoyed by big tech companies has come despite the absence of any real data on how this new business is truly performing. The hyperscalers — those companies investing billions of dollars in building out artificial intelligence — have given only the vaguest indications of AI revenues, hiding the numbers within broader segments..Meanwhile, the key pure-play AI companies, like OpenAI, are still private. Insights into their finances dribble out from time to time, whether intentionally or through leaks, never presenting a full picture. As such, it's hard for investors to gauge just how real the AI boom really is..That was poised to change Friday when CoreWeave Inc. became a publicly traded company in the first significant IPO of the AI era. The company, which started out as a crypto mining operation, sells access to data centers outfitted with Nvidia Corp. hardware to those wanting to build AI. CoreWeave's fortunes rest entirely on generative AI being real, lucrative and sustainable. Gulp..CoreWeave stands to be a bellwether for the AI industry as a whole — a must-watch stock as questions about return on investment grow ever louder. Any slowdown in demand for CoreWeave's "compute," as the term goes, will be seen by Wall Street as a heavy indication of a softening across the board, dragging down Amazon.com Inc., Google parent Alphabet Inc., Microsoft Corp., Nvidia and several others. Even the slightest indication of shakiness in the belief of AI sends investors into a tailspin. .That may be why Nvidia, which is both CoreWeave's biggest supplier and among its largest customers, announced that it would anchor the share sale with an order of around $250 million (another motivation: Nvidia already owns 6% of the company.) Bloomberg reported on Thursday that shares would be priced at $40 each, with the intent to raise $1.5 billion — a huge pullback from its initial aim of bringing in $4 billion. On Friday, they opened at $39, 2.5% below the IPO price. .Now, you might say the tepid reaction to CoreWeave's IPO was more about concerns specific to the company and how it has been run. There's merit to that argument. CoreWeave sits uncomfortably on a huge pile of debt. The company faces repayments of nearly $7.5 billion by the end of next year, the Financial Times reported. CoreWeave's revenue last year was $1.9 billion, and it has yet to turn a profit. The company's borrowing is predicated on explosive growth that simply may never come..Read more: Sasol CEO plans US chemical revival, IPO potential.The company also relies heavily on too few customers, each with motivations to abandon CoreWeave as soon as possible. Microsoft represented 62% of CoreWeave's revenue in 2024, an arrangement that will last only as long as Microsoft feels it must turn to outside companies as it scrambles for AI data center capacity; it's spending $80 billion this year to get there. Recent headlines that suggest Microsoft is easing off its expansion plans don't bode well, nor do reports — disputed by CoreWeave — that Microsoft has already walked away from some of its plans with the company. On the other hand, CoreWeave did just seal an $11.9 billion deal with OpenAI..Even if CoreWeave succeeds in the near term, its future is one of never-ending investment in new hardware as existing technology becomes obsolete. These tough economics apply to all of the big AI players, but unlike its hyperscaling competitors, CoreWeave doesn't have a chip design/advertising/e-commerce/search engine business to lean on as it builds..Yet while CoreWeave has some unique vulnerabilities, the bigger picture here is that its accounts will finally lay bare in quarterly reports the brutal economics of an industry that is burning through an unprecedented amount of cash in pursuit of some kind of lucrative application nobody has quite figured out yet. .CoreWeave can't obfuscate growth in AI services by burying the numbers within its filings or offering imprecise measures of growth during calls with analysts. Nor can it hide the interconnectedness of the industry, where a handful of huge companies are simultaneously customers, suppliers and rivals to one another. If a bubble is forming around AI and data center buildout, as Alibaba Chairman Joe Tsai warned this week, it is on the balance sheet of CoreWeave where the clues might emerge — written, for the first time, in plain black and white for all to see..Read also:.Boxer retail soars 17% in South Africa's largest IPO since 2017Investment trends: Retail buzz around Boxer IPO, crypto hype, and US tech strategies🔒 Ted Black: SA's biggest IPO in ages – what's Boxer actually worth?.© 2025 Bloomberg L.P.

CoreWeave’s IPO: A turning point for AI investment transparency

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