CoreWeave shaves IPO valuation down to $23B amid Microsoft dependency concerns

CoreWeave‘s planned IPO downsizing signals growing caution in the AI startup market, as the cloud computing company prepares to seek a valuation closer to $23 billion instead of the originally targeted $30 billion. This adjustment comes amid questions about the company’s heavy reliance on Microsoft and a challenging market environment for tech stocks, making this debut a critical test case for both AI startups and the broader IPO market that has been largely dormant.

The big picture: CoreWeave is scaling back both its valuation expectations and potentially the amount of capital it aims to raise in its upcoming public offering.

• The cloud computing company now appears likely to pursue a valuation around $23 billion, matching its private market valuation from a year ago, rather than the $30 billion it initially targeted.
• The company may also reduce its fundraising goal below the original $3 billion target.

Behind the numbers: Market conditions and investor concerns about CoreWeave’s business model appear to be driving the more conservative approach.

• Tech stocks have underperformed other sectors recently, suggesting investors are growing skeptical of growth-focused narratives.
• Hedge funds, typically major participants in IPOs, have struggled in 2024 and may be especially cautious about deals with any perceived weaknesses.

Key concerns: CoreWeave’s heavy dependence on a single major customer has emerged as a significant issue for potential investors.

• Microsoft purchases the vast majority of CoreWeave’s AI capacity, creating concentration risk that appears to be affecting investor sentiment.

Why this matters: CoreWeave’s public debut represents a crucial barometer for both the AI sector and the broader IPO market.

• As one of the first significant AI infrastructure companies to test public markets, CoreWeave’s reception will signal investor appetite for AI-focused businesses.
• The long-stagnant IPO market is watching closely to see if this offering can help thaw the freeze in new public listings.

What’s next: The share allocation is expected to occur Thursday evening with trading scheduled to begin Friday.

• Market conditions during Thursday’s session could still influence the company’s final pricing decisions.