As CoreWeave Inc.
What Happened: Dan Niles, the founder and portfolio manager of Niles Investment Management, described the CoreWeave IPO as a "tough" one as it closed at the exact IPO price on its listing day. He said in an X posy that a solid deal is one where the stock is up 15-30% from its IPO price on the opening day of trade.
According to Niles, the AI cloud infrastructure company closed at the IPO price because it was backed by Nvidia Corp.
"What is more troubling to me is the news story that $MSFT, a 62% customer of Coreweave, turned down a $12B option for more capacity. OpenAI reportedly took this capacity, but Microsoft generates a lot of free cash flow to fund their spending, while OpenAI loses a tremendous amount and will need to raise capital in the future to fund their capex desires," he said.
He also recalled Alibaba Group Holding Ltd.
Niles said that these factors, along with reciprocal tariffs on April 2nd, do not bode well for how CoreWeave is likely to trade this upcoming week or related AI names.
"AI capex spending by mid-year will be going through a digestion phase due to a slowdown in training demand," Niles said.
Why It Matters: The shares of CRWV dropped 3.73% to $38.51 apiece in premarket on Monday.
Despite the short-term outlook, Niles said that "Longer-term, I still believe AI capex spending is likely to double by the end of the decade from current levels driven by inference demand."
Addressing the 62% revenue from Microsoft, CRWV's CEO, Michael Intrator, turned down the concerns over client concentration on the listing day.
"They say that we had 60% of revenue from Microsoft, and then we signed a contract with OpenAI for just under $12 billion, and now we're less than 50%," he said in an interview with Fortune on Friday. "All the big players that need this type of infrastructure ... those are our customers."
Price Action: While CRWV's shares were down in premarket, the SPDR S&P 500 ETF Trust
