I mentioned CoreWeave $CRWV in our initial coverage of Nebius $NBIS because it helped underscore how very attractive Nebius was at the time trading at just $18. Nebius had an excellent run to $50 and has retreated with the recent market weakness to $26. (Our WhatsApp room cleaned up on this one.)
The headline numbers look great: from nothing to $1.9B in revenue with positive operating margins, a $15B backlog, 32 AI datacenters and a significant recent deal with OpenAI. What's not to love?!
Quite a few insiders and existing investors stand to profit from CoreWeave. All good for the founders who have already taken out $500M, Magnetar with a stunningly good no risk "investment" and PE firms Blackstone and Coatue.
Retail investors in the IPO are being given much less attractive terms.
The CoreWeave IPO investment case has some serious negative factors:
- The company has limited operating history in a business where this matters. The founders are ex-crypto, ex-Wall Street traders who raised $7B in debt financing to buy lots of Nvidia chips.
- High customer concentration (Microsoft) is exacerbated by the possibility that they will become competitors. Microsoft has the leverage here.
- Nvidia-only focus has been an asset but is already poised to become a liability as more heterogeneous compute models and architectures usher in more nuanced AI compute infrastructure.
- There are more issues to sift through but the potential $30b+ proposed valuation doesn't offer public market investors a good risk/reward.
The Weave: How does it go?
Let's put the rose-colored glasses on and consider the most bullish case:
