Unwoven
How CoreWeave’s IPO may mark the beginning of the end
CoreWeave rents out GPUs. NVidia has invested in them. NVidia sold them GPUs on good terms. A few weeks ago at peak AI hype people thought CoreWeave was worth maybe $32 billion. But in an initial public offering yesterday CoreWeave valued themselves at just $23 billion - a major retreat.
Many are now expecting their stock market debut on NASDAQ today to go badly. If it does go badly, there may well be shockwaves, perhaps affecting the whole AI industry.
Cory Weinberg has a good analysis of the situation at The Information:
The real test will come when CoreWeave stock starts trading Friday, but this is shaping up to be the kind of IPO flop we haven't seen in a while.
A poor showing on Friday would be both pretty shocking-and not surprising at all. The surprising part is due to the whipsaw nature of AI hype. Just a couple months ago, an investment banker was telling me how enthusiasm from investors was so strong that one of the biggest challenges for bankers was managing the hype.
But that hype has begun to deflate on its own, and tech investors seem a bit overstuffed on AI...
He continues
investor sentiment has clearly swung toward the bears. I found more-revealing details about investors' sour feelings in the results of a confidential survey recently produced by an investment bank not involved in the deal.
The bank anonymously surveyed 135 investors, including hedge funds and "long-only" stock pickers. A whopping 90% of the participants said they didn't think CoreWeave had "sustainable moat”
The lack of a moat is of course something I have emphasized often re LLMs themselves, and a key reason why I think GenAI models (and hence chips) are overvalued.
If the CoreWeave IPO turns out to be a debacle, people may also sour on NVidia, too. Things could get wild, fast.
I tend to think that people will always find uses for computing power. Maybe, post-Gen-AI, those uses will take a bit of time to show up, and maybe they won't be as lucrative as people had been expecting, but I have a hard time believing these GPUs are going to sit idle for years.
That doesn't mean I want to buy into this IPO, though. Likely to be a wild ride.
Hi Gary, you forgot to mention how deep in debt CoreWeave
is in building data centers. Once it becomes apparent,
like to the Chinese, that data centers are losers, that will begin
the run to the exits.
CoreWeave also “has a lot of idiosyncrasies that make it a difficult I.P.O. candidate,” Mr. Kerr said, including the huge amount of debt it took on to build new data centers and its unusual background as a cryptocurrency mining firm.