Fund II First IPO

On March 28, CoreWeave (Nasdaq, CRWV) became the first truly AI-centric company to go public, debuting at $39 per share with a market capitalization of $19 billion.

CoreWeave started in 2016, when its founders began buying GPUs for crypto mining. They eventually started renting out those GPUs to other miners and, by 2019, they pivoted to cloud infrastructure. From 2022 to 2024, following the rise of LLMs, revenue skyrocketed from $20M to $1.9B.

CoreWeave’s business centers on acquiring Nvidia GPUs (Nvidia is also an investor) and renting them out for high-performance, AI-specific workloads. Its largest customer is Microsoft. While most companies aim to diversify their customer base before going public, CoreWeave has done the opposite. Microsoft’s share of CoreWeave’s revenue grew from 35% in 2023 to 62% in 2024.

To serve its customers, CoreWeave relies on a capex-intensive model. Since its main value lies in offering access to the latest Nvidia GPUs for AI workloads, every hardware purchase starts a countdown to obsolescence. At its current scale, CoreWeave’s capex are four times its revenue.

CoreWeave’s substantial hardware investments come with high depreciation costs. The company reports gross margins of 75%, but including depreciation in COGS would lower those margins to about 30%.

Now you might be wondering: if Microsoft plans to spend $80B on AI data centers this year alone, why is it also expected to spend $10B on CoreWeave by the end of the decade? In a November 2024 earnings call, Microsoft noted it was struggling “to have enough GPU servers online to meet customer demand.” CoreWeave helps fill that gap. At the same time, though, Microsoft has started pulling back from some new data center projects.

So the real question is: are we facing an oversupply or an undersupply of compute for what AI demand will look like in the next few years?

Conclusion

We believe digital intelligence — AI solving real-world problems — is fundamentally valuable. That belief is why we invested in CoreWeave.

At the same time, we approached with caution, given the company’s heavy reliance on a single customer, Micro, and its complex financial profile.

CoreWeave was an important IPO for tech — best of luck!