Today, CoreWeave has begun trading in the stock market and looks like an ominous start to the AI sector. The company initially wanted to sell the stock at $47-$55 per piece, but despite being backed by Nvidia, it began trading with an order of $250 million at $40 per share. Looking under the hood, CoreWeave is a company dog, with the foundation of the business that raises many questions, explaining the enthusiastic demand by investors.
In recent years, CoreWeave has found himself in an enviable position. Starting in 2017, it purchased GPUs and supplied them to the cryptocurrency mining industry. CoreWeave is basically a pick and shovel business. It supplies GPUs to an industry that has desperately sought them.
Unfortunately, the industry doesn’t seem to need that much today. CoreWeave is now public as its biggest customer, Microsoft, has retreated spending on AI infrastructure, releasing leases globally in data centers, allowing OpenAI to find other partners. After Openai launched ChatGPT in 2023, chips suddenly came into great demand, but the supply shortage appears to be subsidering in a bad way for CoreWeave. From the Wall Street Journal:
The supply shortage has since subsided, and companies say it’s relatively easy to buy the chips they need. Renting a GPU for an hour would cost around $5.50 in mid-2023. It’s currently at $1.55, according to Evan Conrad, CEO of San Francisco Compute, a GPU market.
To reduce the risk here, Microsoft accounted for a whopping 62% of CoreWeave’s revenue in 2024. However, instead, they refused to choose an additional $12 billion option for the infrastructure Openai needs to acquire.
Additionally, Nvidia is a major backer of CoreWeave, only to make money straight back to CoreWeave to buy Nvidia GPUs and make up 6-7% of Nvidia’s business. It is supported only by two companies, Microsoft and Nvidia. The former is cooled with AI, but it doesn’t look like a strength position.
Worse, CoreWeave is suffocating under heavy debt burdens. Despite bringing $1.9 billion in revenue in 2024, CoreWeave spent $6 billion last year and $1.1 billion the previous year due to the heavy costs of building AI infrastructure. It has frowned upon its past debt, carrying nearly $8 billion in debt and using the GPU itself as collateral. This certainly seems to be a concern as GPU prices drop and more efficient AI models require fewer resources. At the very least, CoreWeave is expected to raise approximately $1.46 billion in a public offering that will allow it to repay its debt.
If CoreWeave continues to be overwhelmed in the coming days and weeks, it could cause problems for other AI companies that want to be exposed. In addition, there are few companies that have been made public in recent years, so investors’ demand returns are also required. Tech companies only fell into their first deals of the past, and today is not necessarily a confession of CoreWeave’s death. President Trump’s tariff strategies have recently hurt the broader stock market.
CoreWeave can be considered the first barometer of current market stress for GPUs, if any. Nvidia CEO Jensen Huang and others say new “thinking” models require more resources, and GPU demand could continue to grow for years, even as more consumers use AI. But these are pick and shovel business. Of course, they’ll say you need more picks and shovels. Openai’s Sam Altman posted yesterday on X that demand for ChatGpt’s new image generators is “melting” the GPU. That’s whether it was a short-lived trend, or whether there’s no more sustainable, as people made imitations of novelty studio Ghibli.
In any case, there’s no doubt that CoreWeave appears to be on particularly unstable ground. What happens as chip prices continue to fall and major tech giants build their own Nvidia competitors internally? Why would CoreWeave become a $32 billion company, as it is expected to be valued on the first day of a transaction? And what happens if the AGI boom doesn’t pass? The company has sold picks and shovels, backed by excessive hype over the past two years.
“None of these companies are making profits from generative AI. There is no demand for these services outside of Openai,” said Ed Zitron, a public relations expert and a better offline host. “If there was, Microsoft would not have been drawn from its future computational capacity of 2GW.”
The three founders of CoreWeave are fine either way. They cashed in their $500 million holdings between 2023 and 2024.
