Investing.com -- Monday saw CoreWeave, a provider of AI cloud services, experience a decline in its stock price on its second day as a public company. The stock was last down 8% to $36.90 after a lackluster initial public offering (IPO) last Friday. The company's shares, which were priced at $40 during the IPO, opened at $39 on Friday and ended the day at the same level, $40.
CoreWeave's IPO saw the company and selling shareholders raise $1.5 billion through the sale of 37.5 million shares. This figure fell short of the initial target of selling 49 million shares at a price range of $47 to $55, which could have raised as much as $2.695 billion. Half of the funds raised came from just three buyers, according to reports, while the top 15 investors acquired 90 percent of the offering. Notably, NVIDIA (NASDAQ:NVDA), a key partner and GPU supplier to CoreWeave, invested $250 million to support the IPO.
Despite a remarkable 737% increase in revenue to $1.9 billion, driven by soaring demand for its AI services, CoreWeave reported a substantial net loss of $0.9 billion for the year. The company's financial performance reflects the challenges it faces as it scales its operations amidst rapid growth.
The tepid demand for CoreWeave's shares may be attributed to concerns that the market for its AI data centers has reached its zenith. These apprehensions have been exacerbated by recent rumors that Microsoft (NASDAQ:MSFT), CoreWeave's largest customer, has withdrawn from data center leases both in the United States and Europe, casting further doubt on the company's future growth prospects.
Following the tepid IPO, DA Davidison analyst Gil Luria - one of the few analysts that formally cover the stock so far - lowered his price target to $36 from $47, while maintaining a Neutral rating.
"NVIDIA having to save the IPO last minute supports our view that CoreWeave looks like a special purpose vehicle for NVDA - an off balance sheet arrangement to amplify $350 million investment into a $10 billion customer," Luria commented. "Some investors pointed out that CoreWeave is in turn creating its own special purpose vehicle with OpenAI to raise capital for OpenAI's own financial commitment. We believe NVDA created CRWV in order to apply competitive pressure on its largest customers and create artificial scarcity, which makes it that much more concerning a vast majority of CRWV revenue comes from MSFT, META (NASDAQ:META) and NVDA itself."
