By Echo Wang
(Reuters) -CoreWeave plans to reduce the size of its U.S. initial public offering and price its shares below the indicated range, a person familiar with the matter told Reuters on Thursday, dampening expectations that the listing would boost investor appetite for IPOs.
The Nvidia-backed cloud services provider is now looking to sell 37.5 million shares, 23.5% less than originally planned, and price them at $40 apiece, well below even the low end of the indicated range, the source added, requesting anonymity discussing confidential information.
Nvidia will anchor the CoreWeave IPO at the price with a $250 million order, the source said. The sale would raise about $1.5 billion and value CoreWeave at about $23 billion on a fully diluted basis, according to Reuters’ calculations.
The company did not immediately respond to Reuters’ request for comment. It is expected to price the IPO later on Thursday.
CoreWeave’s roadshow, which began last week, received a weaker-than-expected reception as risk-averse investors in a volatile market weighed concerns over the company’s long-term growth, financial risks and capital intensity, according to four sources familiar with the matter.
Among the concerns is CoreWeave’s heavy reliance on Microsoft, whose shifting AI datacenter strategy could impact long-term demand for chips known as graphics processing units, or GPUs. While investors appear comfortable with the company’s high leverage since it has strong free cash flow, the risk of commitments not being fulfilled remains a worry.
Additionally, CoreWeave’s capital-intensive business model raises questions about sustainability, adding to broader market uncertainty.
CoreWeave has been a significant customer for Nvidia, deploying over 250,000 of Nvidia’s GPUs by the end of 2024. Investors’ lukewarm reception to the CoreWeave IPO could signal reduced confidence in the AI infrastructure market, as the scaling of GPU assets in AI training slows down.
“The business model doesn’t appear fundamentally flawed, but this suggests investors are recalibrating AI infrastructure valuations,” said Lukas Muehlbauer, research analyst at IPOX.
CoreWeave and some existing investors had initially aimed to sell 49 million shares in the offering priced between $47 and $55 each to raise as much as $2.7 billion. That would have valued the company at up to $32 billion on a fully diluted basis.
MOUNTING CONCERNS
CoreWeave’s stock market debut has been closely watched as a test of the strength of a recovery in the U.S. IPO market and whether investor enthusiasm for AI newcomers remains strong or has started to wane.
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