Investor fatigue: CoreWeave slashes IPO valuation by $12B as AI infrastructure dreams meet reality

CoreWeave‘s stumbling IPO marks a turning point for the AI industry as the infrastructure provider slashes its valuation from $35 billion to $23 billion amid significant concerns. The first pure-play AI startup to go public has seen its initial offering delayed and dramatically scaled back, raising questions about the viability of AI business models and investor appetite for the sector. With 60% of revenue dependent on a single customer (Microsoft) and profitability throughout the industry remaining elusive, CoreWeave’s IPO serves as a critical test case for both AI infrastructure providers and the broader tech market.

The big picture: CoreWeave’s IPO reveals fundamental weaknesses in the AI industry’s foundation as the company’s valuation drops by $12 billion before trading even begins.

• Once valued at $35 billion, the AI infrastructure provider has slashed its expected valuation to $23 billion according to Semafor, with trading expected to commence tomorrow.
• The dramatic scaling back comes after the company’s initial public offering was stalled last week, sending troubling signals about investor confidence in AI business models.

Why this matters: As the first pure-play AI startup to go public, CoreWeave’s performance serves as a bellwether for the entire AI sector and tech industry.

• Investors had positioned CoreWeave as the “picks and shovels of the AI universe,” drawing comparisons to Levi’s jeans during the gold rush – reliable profit generators regardless of which specific AI applications succeed.
• The troubled offering follows a period of cooling enthusiasm for AI, with early-adoption failures, Wall Street burnout, and declining business support already challenging the sector.

Behind the numbers: CoreWeave’s S-1 filing reveals a company with concerning dependencies and questionable long-term viability.

• Over 60% of the company’s revenue comes from a single customer – Microsoft – creating extraordinary vulnerability should that relationship change.
• Microsoft reportedly withdrew from several formal agreements with CoreWeave earlier this month due to delivery problems and missed deadlines, though the company has denied these claims.
• The tech giant is simultaneously cutting data center leases across the US and Europe, further threatening CoreWeave’s business model.

The business model: CoreWeave’s entire strategy depends on two speculative premises that are looking increasingly questionable.

• The company requires “explosive growth” in the AI industry to succeed, based on the assumption that generative AI will become both massively profitable and dependent on large data processing centers.
• These assumptions face significant challenges as China’s DeepSeek model demonstrates more efficient approaches to AI development and the industry struggles to convert technological promise into actual profits.

Reading between the lines: The IPO is increasingly resembling the WeWork disaster rather than a triumphant tech market debut.

• Despite backing from tech investor Mark Klein, whose $25 million stake triggered an investment cascade from tech firms, hedge funds, and venture capitalists, fundamental business concerns remain unaddressed.
• A last-minute cash injection from Nvidia, which has its own vested interest in the success of data-center-heavy AI development, suggests desperation rather than confidence.

What’s next: CoreWeave must now rely on its recent OpenAI partnership and Nvidia’s support to weather the skepticism while hoping for an AI revolution that may never materialize as envisioned.