Nvidia-backed CoreWeave, a prominent player in the AI cloud infrastructure sector, has revised its U.S. initial public offering (IPO) plans, scaling back both the size and pricing of its offering. Initially planning to sell a larger volume of shares at a higher price range, the company now aims to sell 37.5 million shares—23.5% fewer than originally intended—at $40 per share, which is below the lower end of its earlier price range. This adjustment is expected to raise approximately $1.5 billion, valuing CoreWeave at $23 billion on a fully diluted basis. Nvidia, a key investor in CoreWeave, will anchor the IPO with a $250 million order, underscoring its commitment to the startup despite market challenges.

The decision to downsize follows a lukewarm response during CoreWeave's IPO roadshow, attributed to risk-averse investors navigating volatile market conditions. Concerns centered on CoreWeave’s capital-intensive business model and heavy reliance on Microsoft as a major client for its AI datacenter needs. Shifts in Microsoft’s AI strategy could potentially impact demand for CoreWeave’s GPU-based services, raising doubts about long-term growth prospects. While the company has demonstrated strong free cash flow and high leverage tolerance among investors, uncertainties surrounding its ability to meet financial commitments have tempered enthusiasm.

CoreWeave has rapidly emerged as a critical player in the AI cloud ecosystem since its founding in 2017. Leveraging Nvidia’s cutting-edge GPUs, it provides cost-effective solutions for compute-intensive applications like machine learning and visual effects rendering. The company has expanded its data center footprint from three locations in 2023 to 14 by late 2024 and plans to establish an additional 10 centers in 2025. With over $12 billion raised through equity and debt financing over the past year and a half, including a $1.1 billion funding round that valued it at $19 billion, CoreWeave has positioned itself as a formidable competitor to traditional cloud giants like AWS and Google Cloud.

Despite these achievements, CoreWeave faces significant challenges in convincing investors of its long-term viability. The company’s reliance on Nvidia’s GPUs for its services makes it vulnerable to supply chain constraints and shifts in market dynamics. Additionally, while Microsoft’s partnership provides substantial revenue streams, it also exposes CoreWeave to risks associated with dependency on a single major client. These concerns have cast a shadow over the IPO’s potential to reignite investor interest in public offerings within the tech sector, which has been cautious amid broader economic uncertainties.