Economic Uncertainty, Tech Values Cool Demand Even For Hot AI IPOs

Uncertainty about the US economy and about the actual value of AI is creating volatility in the equity markets which is depressing demand for new IPOs.

Given the flood of investment in AI over the past few years, as well as expectations that 2025 would become a banner year due to lower regulation, Wall Street anticipated a revival of the IPO market. But growing questions about whether AI can really deliver anticipated returns as well as the impact of new economic policies has caused many companies and investors to hold off on major strategic decisions until they see greater certainty. JL

Corrie Driebusch and Deepa Seetharaman report in the Wall Street Journal:

Coreweave, the startup that rents out access to Nvidia chips priced its initial public offering below expectations late Thursday, a sign of flagging investor enthusiasm for artificial-intelligence companies as well as the chilly state of the U.S. market for new listings. Investors pushed back on the price tag, citing the company’s high costs and debt load. The uncertainty echoes broad concerns about the sustainability of the AI boom, for which the world’s biggest companies are spending hundreds of billions of dollars. Stock-market volatility isn’t helping. Swings in the broader stock market make it tricky for investors to value companies. The up-and-down is sapping confidence about business prospects.

It was supposed to be one of the splashiest IPOs of the year. Now CoreWeave’s stock-market debut is turning into a high-profile stumble for both the AI industry and new public listings.

The startup that rents out access to Nvidia chips priced its initial public offering below expectations late Thursday, a sign of flagging investor enthusiasm for artificial-intelligence companies as well as the chilly state of the U.S. market for new listings.

 

It’s a sharp contrast from just last year. Investor mania for all things AI drove up shares of Nvidia, making the chip maker the world’s most valuable publicly traded company for the first time (a title it has since ceded). CoreWeave raised money in May at a $19 billion valuation, nearly triple its price just five months prior. Its backers include OpenAI and Fidelity.

The sheen has since worn off. 

The New Jersey-based company priced its offering at $40 a share, well below the $47 to $55 range it was targeting for a fully-diluted valuation of up to $32 billion. The lowered price reflects a valuation of approximately $23 billion. The company also sold fewer shares than planned.

CoreWeave is set to open for trading on the Nasdaq stock exchange on Friday under the symbol CRWV. 

Investors pushed back on the price tag during CoreWeave’s IPO roadshow, citing the company’s high costs and debt load. The uncertainty echoes the broad concerns many hold about the sustainability of the AI boom, for which the world’s biggest companies are spending hundreds of billions of dollars.

Some of the issues are specific to CoreWeave’s business, including its concentrated customer base. Microsoft accounted for nearly two-thirds of the company’s revenue in 2024. 

CoreWeave operates a network of data centers that house the chips and equipment the company rents out to clients, who in turn create and deploy AI systems. The company brought in $1.9 billion in revenue in 2024, yet still lost $863 million, due in part to high operating expenses.

Its business took off in 2023 when AI startups were taking any route possible to grab a hold of specialized graphics chips, or GPUs, that firms use to build and train AI systems that they then sell to companies. One founder at the time compared looking for GPUs to hunting for “toilet paper during the pandemic.”

The supply shortage has since subsided, and companies say it’s comparatively easy to buy the required chips. Renting a GPU for an hour cost about $5.50 in mid-2023; it’s now $1.55, said Evan Conrad, chief executive of San Francisco Compute, a market for GPUs.

CoreWeave’s IPO pricing is likely to disappoint a host of private companies that had been considering U.S. listings.

 

Bankers had hoped 2025 would be a return to normal for the IPO market after many private companies refrained from going public the last three years. Ticketing marketplace StubHub and fintech company Klarna are among those waiting in the wings with springtime IPO plans. Chime Financial and Medline Industries are also expected to go public later this year. A poor showing by CoreWeave could delay—or derail—their plans.

It isn’t the first big IPO that hasn’t lived up to expectations this year.

In January, gas exporter Venture Global slashed its price by more than 40% from its initial goal in the biggest offering of the year. Its shares still fell in opening trading. At the time, bankers told clients the poor showing was company-specific and not reflective of broader investor demand for new listings.

The second biggest IPO of the year, cybersecurity firm SailPoint, also fell in its stock-market debut last month.

Both SailPoint and Venture Global stocks remain below their IPO prices, meaning if investors bought shares in those offerings they are sitting on big losses.

Stock-market volatility isn’t helping. Swings in the broader stock market make it tricky for investors to value companies. The up-and-down could give companies cold feet, by sapping confidence about their business prospects.