Investing

This Could Be 2024’s Biggest Artificial Intelligence IPO

Eric Bleeker

Published: May 19, 2024 8:44 pm

The AI space is bustling with excitement and crowded with established players, but new opportunities are emerging. CoreWeave, backed by NVIDIA (NASDAQ: NVDA), is one such company to watch. Specializing in GPU-based cloud computing, CoreWeave’s partnerships with tech giants like Microsoft (NASDAQ: MSFT) have driven remarkable growth, with revenue increasing 1,700% in 2023. Valued at $19 billion, CoreWeave is poised to become a significant IPO in 2024. However, the sustainability of its success may depend on its ability to compete as GPU supply constraints ease. For investors seeking pure AI exposure, CoreWeave presents a promising, though potentially volatile, opportunity.

Why CoreWave Could Become 2024’s Hottest IPO

Key Highlights

• CoreWeave is a company that NVIDIA backed and allows companies to rent GPU resources. Think of it as cloud computing built for AI.
• The company raised $1.1 billion at the start of May, and was valued at $19 billion in this round. That’s up from a prior valuation of $7 billion and the company just announced a $7.5 billion debt deal to continue investing in data centers.
• 24/7 Wall Street Analyst Eric Bleeker has previously been a little dismissive of CoreWeave because cloud build-outs are so capital-intensive. How can any entrant compete with companies with the resources of Amazon or a Google?
• For now, one of Coreweave’s biggest advantages has been access to NVIDIA GPUs thanks to their partnership with the company.
• Revenue increased almost 1,700% to $440 million in 2023 and projections are for revenue to rise 425% to $2.3 billion in 2024.
• The company signed a partnership with Microsoft last year, which might seem odd since Microsoft has its own cloud offerings and GPUs.
• The big question is: will CoreWeave still be as valuable when GPU bottlenecks come down and their relationship to NVIDIA isn’t as big a competitive advantage?
• CoreWeave has announce no intentions to IPO in 2024, but it’s likely the company will need additional capital if it wants to continue scaling. Building out data centers filled with GPUs is very expensive!

Transcript:

Okay, it feels like the AI space is incredibly exciting, but also incredibly crowded at this point.

There are a couple dozen companies out there, but it seems like investors really have to pick and choose from the same relatively small basket of AI-focused companies, whether they’re producing chips or generating models off of them.

There’s a somewhat limited range of companies that are available to investors today.

So let’s look at potential artificial intelligence IPOs.

What new companies could be coming on the market that investors can look forward to this year?

Yeah, I wanted to get the company CoreWeave on investors’ radar.

It’s a company that was backed by NVIDIA.

And basically, when you think about cloud computing, running computing resources, they have specialized in GPUs, the kinds of processors made by NVIDIA.

So it’s basically cloud computing for the age of AI.

Now, they raised $1.1 billion at the beginning of May, which gave them a valuation of $19 billion, which is up from $7 billion previously.

Now, I’ve been a little bit dismissive of CoreWeave just because cloud computing, it’s an incredibly capital-intensive industry to play in with companies with huge resources.

I’m talking about Amazon.

I’m talking about Google.

I’m talking about Microsoft.

So it might shock investors that Microsoft decided to actually partner with CoreWeave and revenue for the company jumped 1,700% to $440 million in 2023.

And projections for this year are another 440% growth to $2.3 billion.

So you can see why this would be the hottest possible IPO right now because of its artificial intelligence, its partnerships with Nvidia and Microsoft, and its 400% revenue growth.

You know, you can’t write a sweeter story than that.

I will issue one note of caution, though, with CoreWeave.

One of their biggest assets has been, believe it or not, it’s been very hard to buy NVIDIA GPUs.

And their partnership with NVIDIA has given them preferential access to GPUs.

It’s believed that’s part of the reason Microsoft signed their partnership was it’s just another path to getting GPUs.

So we’re seeing the supply constraints begin to slowly fade away with GPUs.

The question will be, was this company’s run a feature of this era of limited GPUs when they had them, or are they truly built to compete with these giant companies for the long run?

Regardless, I think there’s a good chance we could see an IPO path opening up with the kinds of valuations it’s fetching.

This could be one of the biggest IPOs of 2024.

It’s one company to put on your radar.

You know, one of the things that’s really interesting about that too, is it’s a bit more of a pure AI play.

Whereas a lot of the companies that investors have had to look at are, you know, their AI is only part of the story.

You know, Microsoft is certainly an AI company, but they’re also a Microsoft Office company and a gaming company and a cloud company.

So being able to actually get that pure play AI exposure is really interesting.

Certainly, it invites a little bit more volatility as well, but for the long-term patient investor, that volatility can spell a lot of upside.

Yep, and when we look at a lot of these startups that might be looking at the IPO market, if you’re a company that does servers, you need to track AI growth against losing revenue to other servers that are seeing their spending decline.

So we’re going to be able to see companies where, as you said, it’s all upside as AI grows.