US IPO Market Hit as CoreWeave’s $1.5B Debut Falls Short of Hype

Post by: Bandan Preet

The US stock market for new companies going public took another hit this week. One of the most awaited IPOs (Initial Public Offerings) of the year ended in disappointment, continuing a streak of deals that failed to meet the high expectations of investors. The situation didn’t improve when the company made its trading debut on Friday.

CoreWeave Inc., a cloud-computing company, was aiming for a massive $4 billion IPO just a few weeks ago. However, it ended up raising only $1.5 billion—40% less than what its bankers initially promised investors. The company finished Friday with a diluted market value of $23 billion, which was close to its last funding round but still far below its original goal of over $35 billion.

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A Rough Start for CoreWeave

CoreWeave was seen as one of the most promising startups in artificial intelligence (AI), backed by the well-known tech giant Nvidia. Many hoped its IPO would break the trend of weak public offerings and encourage other companies to follow. But that didn’t happen.

CoreWeave had planned to sell shares for up to $55 each, but they ended up pricing at $40. When trading began, the stock opened at $39 and closed at $40, leaving the company with a market value of around $18 billion—much lower than expected.

Bad Timing and Market Turbulence

The company also faced some unlucky timing. It held its final investor meetings on Wednesday, the same day the Nasdaq 100 (a key stock market index) dropped by 1.8%. By the time CoreWeave’s shares started trading, the market had fallen even further, with the index losing more than 2%.

In the end, CoreWeave narrowly avoided becoming the fifth company out of the year’s 10 largest US IPOs to lose money for its investors. Other big IPOs this year, such as Venture Global Inc. and SailPoint Inc., have performed poorly—falling 60% and 15% below their IPO prices, respectively. Overall, the 76 companies that have gone public in the US this year have dropped by 4.1% on average, according to Bloomberg data.

Investors Growing Cautious

The poor performance of recent IPOs has made investors more hesitant. With market conditions shaky, many companies planning to go public are rethinking their decisions.

“It’s still a fragile IPO market,” said West Riggs, head of equity capital markets at Truist Securities Inc. He explained that when deals are successful, companies can aim for higher valuations. But when deals underperform, it becomes a "buyers’ market," meaning investors hold more power.

Adding to the uncertainty is former US President Donald Trump’s planned announcement on April 2 about new reciprocal tariffs, which he is calling “Liberation Day in America.” This has made the market even more jittery, making companies think twice about going public.

Other Companies Still Pushing for IPOs

Despite the shaky market, some companies are still moving forward with IPO plans. Since March 14, companies like Klarna Group Plc, StubHub Holdings Inc., EToro Group Ltd., and Ategrity Specialty Insurance Co. have revealed their intentions to go public. However, whether they succeed will depend on how willing they are to adjust their prices to attract investors.

“The issue with all these IPOs is valuation,” said Jay Ritter, a finance professor at the University of Florida. He pointed out that the Nasdaq’s recent drop has affected all IPO deals. If the market continues to fall, fewer companies may choose to go public.

AI Stock Concerns and Market Anxiety

CoreWeave’s disappointing IPO also raised concerns about the AI sector. Recently, investors have been pulling back from AI stocks, fearing that the AI boom could turn into a bubble. Alibaba’s Chairman, Joe Tsai, warned that the rush to build data centers for AI might outpace the actual demand. This could lead to an oversupply problem.

Analysts at TD Cowen added to the worries by saying that Microsoft Corp. had stopped working on some of its data center projects, raising doubts about the sector’s future growth.

Nvidia’s Role in the IPO

One of the key reasons CoreWeave’s IPO didn’t completely flop was Nvidia’s support. The tech giant bought $250 million worth of shares, which made up about 17% of the entire deal. Without Nvidia’s involvement, the IPO might not have been successful.

According to CoreWeave CEO Michael Intrator, if Nvidia and other major investors hadn’t stepped in, the deal would have failed. “If 27 others didn’t show up, it wouldn’t have closed,” he said.

Cautious Investors Moving Forward

For companies still planning to go public, the focus will need to be on realistic pricing and proving they have strong financial fundamentals.

“IPO investors are being extra cautious right now,” said Joel Rubinstein, a partner at White & Case law firm. He added that investors are carefully examining companies' growth potential before deciding to invest.

In short, CoreWeave’s disappointing IPO is a reminder of how fragile the market is. With more market uncertainty ahead, companies planning to go public will need to be prepared for tough conditions and skeptical investors.

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