CoreWeave’s Stock Rises on Nasdaq Debut, But Can It Keep Up With AI Hype?
CoreWeave, a company that provides AI computing power, saw its stock price jump nearly 18% as it started trading on Nasdaq. The Nvidia-backed firm initially set its stock price at $40, but investors pushed it up to about $47, bringing its total market value to around $27.4 billion, according to Reuters.
However, CoreWeave faced challenges before its big launch. Reuters reported that the company had to lower its initial expectations for the IPO, meaning it didn’t raise as much money as it originally hoped. Still, its strong debut could signal good news for other companies planning to go public, showing that investors are still interested in AI stocks despite recent market struggles.
What Makes CoreWeave Special?
CoreWeave rents out powerful data centers equipped with Nvidia’s advanced chips, which are in high demand for AI projects. Big tech companies like Microsoft use CoreWeave’s services to power AI models. In fact, Reuters noted that Microsoft was responsible for a huge 77% of CoreWeave’s revenue last year, which raises concerns about whether the company is too dependent on a single customer.
Challenges CoreWeave Faces
Despite its success, CoreWeave isn’t profitable yet. Reuters highlighted that the company has a massive $8 billion debt and leases instead of owning its data centers, adding financial risks. Some investors worry that if Microsoft changes its AI strategy, it could hurt CoreWeave’s business in the long run.
Additionally, Reuters pointed out that investors are becoming cautious about AI companies because of concerns over high spending and competition. For example, China’s AI startup DeepSeek is emerging as a strong rival, which could make things tougher for CoreWeave.
From Crypto Mining to AI Powerhouse
Interestingly, CoreWeave didn’t start as an AI company. Reuters explained that it was originally a cryptocurrency mining firm focused on Ethereum. However, when Ethereum changed its system in 2022, making mining less profitable, CoreWeave switched to AI computing, a move that helped the company grow rapidly.
CoreWeave has secured a five-year, $11.9 billion deal with OpenAI, which gives it a strong foundation, but some investors remain skeptical. Reuters quoted experts who said that while the AI boom has boosted stock prices, companies like CoreWeave need more than just hype to prove their long-term success.
What’s Next for CoreWeave?
CoreWeave’s IPO was managed by 18 major banks, including Morgan Stanley, J.P. Morgan, and Goldman Sachs, according to Reuters. Now, the big question is whether the company can turn its rapid growth into lasting profits.
As Reuters noted, many recent IPOs have struggled because investors are hesitant to back companies that lose money. CoreWeave will need to prove that its AI business model is sustainable in the long run.
For now, investors are excited about CoreWeave’s potential, but only time will tell if it can truly compete in the fast-changing AI industry.
Source: Reuters