Why I'm Skipping the CoreWeave IPO

The Nasdaq Composite has dropped by about 8% this year, and broad sell-offs in mega-cap artificial intelligence (AI) stocks are some of the biggest drags on the market. Despite these murky conditions, one AI unicorn has its eyes set on an initial public offering (IPO). CoreWeave, a start-up backed by Nvidia, recently filed its S-1, showing the company and current shareholders are marketing the shares from $47 to $55. With 48.7 million shares in potentially in play, the IPO is valued at roughly $2.7 billion. While CoreWeave's public debut has been highly anticipated, I'm wary about investing in the company right now. Let's explore CoreWeave's business, the current state of the company's financial profile, and why a different Nvidia-backed AI data center stock may be the better buy.

CoreWeave specializes in renting out high-performance chipsets known as graphics processing units (GPUs). GPUs are an integral component for training generative AI applications, and are primarily developed by the likes of Nvidia, Advanced Micro Devices, and Broadcom. In addition, cloud hyperscalers Microsoft, Amazon, and Alphabet are exploring their own custom silicon solutions, as is social media and metaverse leader Meta Platforms. Per CoreWeave's S-1 filing, many of these businesses leverage the company's compute rental services.

While all of this looks impressive, some of the finer details packed deep in CoreWeave's filings have me concerned. For example, in 2024 CoreWeave posted revenue of $1.9 billion -- an increase of 736% from 2023. But that growth came at a cost. Last year, CoreWeave's net loss widened to $863 million -- materially higher than the company's loss of $593 million in 2023.

To be fair, many start-ups invest aggressively in growth for years -- choosing to double down on product development and marketing at the expense of profitability. While I'd like to be lenient as it pertains to CoreWeave's mounting losses, there's a more pernicious trend that spooks me.

During 2022 and 2023, CoreWeave derived 41% and 73% of its revenue from just three customers. Then in 2024, 77% of the company's revenue came from just two customers -- with Microsoft accounting for 62% of sales (up from 35% in 2023).

So, CoreWeave has high degrees of customer concentration -- and it's actually rising. To me, CoreWeave is a high-cash-burn business relying on a select number of customers for the majority of its growth. All in all, I think the business is quite risky.



Investing in IPO stocks tends to carry outsize risk. Given how much hype has surrounded AI over the last few years, my hunch is that investors are eager to buy something new. For this reason, I think it's highly likely that CoreWeave's shares could experience a dramatic melt-up during its first few days of trading.

Given the financial analysis explored above, I would not encourage investors to chase any momentum in CoreWeave stock though.

Instead, I'd look for alternative opportunities that may witness some tangential interest as a result of CoreWeave's IPO. For example, Nebius Group (NASDAQ:NBIS) is a AI data center stock also backed by Nvidia, and I think it's a more compelling opportunity than CoreWeave right now.

Nebius specializes in AI infrastructure, outfitting data centers with GPUs such as Nvidia's new Blackwell architecture. For now, the company operates primarily in Europe but has recently started expanding its footprint in the U.S. Outside of infrastructure, Nebius also operates across cloud software and robotics.

In 2025 alone, Alphabet, Microsoft, Amazon, and Meta are planning to spend upward of $320 billion on AI infrastructure -- from chipware, data center construction, robotics, and more. Given Nvidia's Blackwell chips are projected to capture a portion of this spend, I see rising interest in AI infrastructure as a bullish secular tailwind for Nebius in the long run.

While Nebius is a much smaller company than CoreWeave today, I see it as more of a diversified business spanning several different pockets of the AI realm. Over time, I think investors may come to appreciate Nebius' multifaceted AI platform -- which could come with meaningful upside to the company's current valuation.

By contrast, if CoreWeave does not swiftly demonstrate an ability to acquire more customers and identify a concrete path to profitability, investors will likely sour on the stock -- leaving those who chased the momentum during the IPO holding the bag.