Nvidia-backed CoreWeave targets up to $32 billion valuation in test for AI IPOs

By Manya Saini and Niket Nishant

(Reuters) -CoreWeave is targeting a valuation of up to $32 billion on a fully diluted basis in its U.S. initial public offering, as the Nvidia-backed startup bets on strong demand for generative artificial intelligence.

The listing is seen as crucial to the revival of a largely moribund U.S. IPO market, as well as a gauge for investor appetite for new entrants in a sector that has propelled stock markets to record gains over the past two years.

The cloud services provider and some of its investors are looking to sell 49 million shares priced between $47 and $55 each to raise as much as $2.7 billion in the offering, the company said on Thursday. Reuters was the first to report the terms on Wednesday.

Meanwhile, ahead of the IPO, CoreWeave had tied up with some of the biggest AI heavyweights, including Sam Altman's OpenAI. Last week, the company signed an $11.9 billion infrastructure contract with the ChatGPT maker.

CoreWeave, which provides access to data centers and high-powered chips for AI workloads, mainly supplied by Nvidia, will issue shares worth $350 million to OpenAI through a private placement in the IPO.

Nvidia currently owns 5.96% of CoreWeave's Class A shares, which is expected to be reduced to 5.05% after the offering.

The company has about 583 million fully diluted shares outstanding, according to a person familiar with the matter.

Based on the total number of shares listed in the filing, its targeted valuation was $26 billion at the top end of the range.

LITMUS TEST

A strong CoreWeave debut could reignite confidence in IPOs and encourage more companies to go public, while a weak showing may aggravate concerns that appetite remains fragile despite improving market conditions.

With AI demand in focus, CoreWeave's IPO is expected to serve as a key test of whether investors believe specialized data centers can outpace traditional cloud giants.

Nvidia rival Cerebras is also reportedly readying a 2025 listing, while data center operator Switch is weighing an IPO at a valuation of about $40 billion, Reuters reported in September.

The offering comes after the launch of Chinese startup DeepSeek's low-cost model and an analyst report that Microsoft had cut back on data-center leases tempered the once red-hot demand.

"There are growing concerns that the explosion in AI-related data center demand won't be as strong as previously thought, meaning investors will either demand a bargain price for CoreWeave shares or they might sit on the sidelines for now," Dan Coatsworth, investment analyst at AJ Bell, told Reuters.

The company, founded in 2017 as a crypto miner, had initially planned to raise over $3 billion in its share sale at a valuation topping $35 billion, sources told Reuters in November.

CoreWeave discontinued that business after Ethereum underwent an upgrade in 2022, called "The Merge", which reduced rewards for miners.

Morgan Stanley, J.P. Morgan and Goldman Sachs are the lead underwriters of the IPO. CoreWeave aims to trade on the Nasdaq under the ticker symbol "CRWV."

(Reporting by Manya Saini and Niket Nishant in Bengaluru; Editing by Sriraj Kalluvila)