CoreWeave's retail appeal may be tempered by IPO timing, financial pressures

By Niket Nishant and Manya Saini

(Reuters) - Concerns sparked by CoreWeave's debt pile and other financial challenges may weigh on retail investor enthusiasm as it prepares to go public after what analysts said was a poorly timed IPO.

The Nvidia-backed AI infrastructure company, which focuses on data centers and cloud services, is listing at a time when the equity markets are under pressure from tariff uncertainty and on rising concerns over the competition posed by China's artificial intelligence startup DeepSeek.

Frustration is also mounting over when Big Tech's massive investments in AI will yield returns, leading to concerns CoreWeave may have missed the ideal window to list its shares.

"It feels like the IPO was poorly timed. Had it floated a year ago, demand might have been much stronger than now as AI interest has started to wane," Dan Coatsworth, investment analyst at AJ Bell, said.

The listing comes at a time when IPO-bound companies, even in the most high-profile sectors, have been under intense scrutiny. Despite a recovery, the IPO market is nowhere near the pandemic years when listings had soared.

CoreWeave already suffered a setback on Thursday when it downsized its IPO. Under the new terms, it fetched a fully diluted valuation of around $23 billion compared with the $32 billion it was targeting earlier.

"It's got a lot of risks. I don't know what is the long-term sustainability of the business," said Kamran Ansari, managing partner at Kapital Ventures.

CoreWeave's revenue jumped more than eight-fold last year, but sustaining that growth will be critical.

"There will be risks over the longer term around the company maintaining its impressive growth and not missing earnings estimates," said Samuel Kerr, head of equity capital markets at Mergermarket.

CoreWeave had about $8 billion in debt as of last year. The company said earlier this month that it plans to use about $1 billion of the IPO proceeds to reduce debt.

Some investors have also flagged concerns about the company's heavy reliance on Microsoft, whose shifting AI data center strategy could impact long-term demand for chips known as graphics processing units, or GPUs.

AI HYPE

Top AI players have sparked massive interest from retail investors in recent years. Nvidia, Microsoft, Amazon, Apple and Alphabet were among the top 20 stocks drawing retail investor inflows in 2024, according to Vanda Research.

Some experts have also brushed aside concerns stemming from DeepSeek, noting that heightened competition will drive more investment rather than leading to cutbacks.

"AI remains a very hot investment theme despite doubts earlier this year following the emergence of DeepSeek," Mergermarket's Kerr said.

Those seeking opportunities beyond the top tech names may back CoreWeave.

Net inflows from retail investors into U.S. equities and exchange-traded funds totaled $69.8 billion as of March 25 this year, only slightly below the $71.7 billion invested in the final quarter of 2024, according to Vanda Research.

"Retail investors will be drawn to (CoreWeave) as they continue to look for other avenues of returns away from the potentially lackluster performance of the MAG7 (Magnificent Seven) stocks," Josef Schuster, CEO of IPO research firm IPOX, said.

The Magnificent Seven - a group of tech giants that have driven much of the stock market's gains in recent years - have been battered so far in 2025.

CoreWeave did not immediately respond to a request for comment. It is set to debut later on Friday.

(Reporting by Manya Saini and Niket Nishant in Bengaluru; Editing by Shounak Dasgupta)