Today marked CoreWeave’s first day on the stock market, but the AI industry may not be celebrating. The company originally aimed to price its shares between $47 and $55, yet trading commenced at just $39. Even with a substantial $250 million buy-in from Nvidia at $40 per share, investor enthusiasm remained tepid. Beneath the surface, CoreWeave’s fundamentals reveal potential red flags, likely explaining the lackluster response from the market.
Having carved out a niche for itself in recent years, CoreWeave started in 2017 by acquiring GPUs for the cryptocurrency mining sector. As AI became the next big thing, the company swiftly pivoted to meet that demand. Essentially, CoreWeave operates as a “picks and shovels” supplier, providing the much-needed GPU resources to AI developers.
However, industry needs appear to be shifting. CoreWeave’s public debut coincides with a slowdown in AI infrastructure spending, particularly from its largest customer, Microsoft. The tech giant has recently reduced its AI investments, relinquishing data center leases globally and allowing OpenAI to seek alternative partners. While there was a major GPU shortage following OpenAI’s ChatGPT launch in 2023, the landscape is changing. Reports suggest the chip scarcity has eased considerably, potentially spelling trouble for CoreWeave.
A stark statistic highlights the risk: Microsoft accounted for a staggering 62% of CoreWeave’s revenue in 2024. However, Microsoft opted out of an additional $12 billion infrastructure commitment, forcing OpenAI to step in instead.
Adding to the complexity, Nvidia has played a crucial role in CoreWeave’s financial backing, only for those funds to cycle back into Nvidia’s own business as CoreWeave purchased its GPUs. With CoreWeave relying so heavily on just two companies—Microsoft and Nvidia—it does not appear to be in a position of strength, particularly as Microsoft scales back its AI investments.
The company’s financial health is another point of concern. Despite generating $1.9 billion in revenue in 2024, CoreWeave burned through $6 billion last year and $1.1 billion the year prior while expanding its AI infrastructure. Carrying nearly $8 billion in debt, the company has raised eyebrows for using its GPUs as collateral—an approach that looks increasingly risky as GPU prices drop and AI models become more efficient. The public offering is expected to raise about $1.46 billion, which will help pay down some of this debt, but concerns remain.
CoreWeave’s performance in the coming weeks could impact other AI startups eyeing the public markets. Investor expectations are high, and after years of limited IPOs, profitability is a key concern. Some tech stocks have stumbled on their first trading day only to recover later, so today’s weak performance isn’t necessarily a death sentence. However, broader economic pressures, including uncertainty stemming from President Trump’s tariff policies, are already weighing on the stock market.
The bigger question remains: is CoreWeave’s business model sustainable? While industry leaders like Nvidia’s Jensen Huang insist that more powerful AI models will continue driving demand for GPUs, history suggests that companies selling “picks and shovels” will always claim more are needed. OpenAI’s Sam Altman recently posted that demand for ChatGPT’s new image generator was “melting” GPUs, but whether that surge is temporary or indicative of long-term demand remains unclear.
CoreWeave’s future hinges on several unknowns: Will AI chip prices continue to decline? Will major tech players like Microsoft develop in-house Nvidia alternatives? And most importantly, what happens if the much-hyped AGI revolution never materializes? Despite the buzz, CoreWeave’s lofty $32 billion valuation on its first trading day raises significant doubts.
Critics argue that the generative AI sector has yet to prove its profitability. “None of these companies are making real profits from generative AI, and outside of OpenAI, demand for these services is questionable,” said public relations expert Ed Zitron. “If demand were truly there, Microsoft wouldn’t have just abandoned 2GW of future compute capacity.”
Regardless of how CoreWeave fares, its founders are already in a comfortable position, having cashed out $500 million of their holdings between 2023 and 2024. Whether their company can justify its sky-high valuation in the long run remains to be seen.
