CoreWeave's stock (CRWV) is enjoying a rip-your-face-off rally since debuting to a muted reception on the Nasdaq less than a week ago. 

Shares of the AI cloud play spiked 41% on Tuesday and popped 11% to $58.60 in early Wednesday trading. 

"In the first few days of trading, I would expect it to be added to various AI baskets which are very prominent right now," D.A. Davidson software analyst Gil Luria told me on what's driving the robust market action this week.

CoreWeave priced its initial public offering (IPO) at $40 a share in March. The company initially expected to sell shares in the range of $47 to $55, but concerns about the pace of AI spending and CoreWeave's business model caused it to downsize the offering. Nvidia (NVDA) — an early CoreWeave investor — reportedly anchored the IPO at $40.

The company raised $1.5 billion for a valuation of $23 billion on a fully diluted basis. It had planned to raise $4 billion at a valuation of $35 billion.

The stock opened around $40 per share on March 28, fell as much as 6%, then turned green and rose by as much as 4%. Shares were flat to conclude their first day of trading. 

When asked whether customers are getting worried about the pace of investment in artificial intelligence, CoreWeave co-founder Brannin McBee told me, "Not that we see," on the company's IPO day (video above). "And this discussion of an AI bubble — we don't understand it."

Brian Sozzi

CoreWeave was founded in 2017 as a crypto miner by Michael Intrator, Brian Venturo, and McBee, who largely have backgrounds in the energy industry.

The company took a $100 million investment and $320 million contract from Nvidia (NVDA) as well as a multiyear deal with Microsoft (MSFT) to raise $1.6 billion in equity and $12.9 billion in debt commitments. This allowed CoreWeave to purchase 250,000 GPUs from Nvidia, or about $10 billion worth.

Today, the company provides access to data centers and high-powered chips for AI workloads. It competes with cloud providers like Microsoft and Amazon (AMZN).

Financial results have been solid for an early-stage tech player.

Sales last year rose to $1.9 billion from $228 million in 2023. Adjusted operating profits increased to $1.2 billion from $103 million in 2023.

But CoreWeave is not without a few risks staring down investors.

Concerns linger about CoreWeave using large amounts of debt to fund purchases of a depreciating asset in AI chips. The company has raised $14.9 billion in debt and equity across 12 financings to buy chips and build data centers.

It spent $941 million to service its debt in 2024, according to the company's S-1 filing.

In addition, OpenAI has committed $11.9 billion in orders to CoreWeave. If the large language model builder can't raise enough money to support its growth ambitions, CoreWeave could see order cancellations. Currently, Microsoft accounts for 62% of CoreWeave's sales.

Brian Sozzi is Yahoo Finance's Executive Editor. Follow Sozzi on X @BrianSozzi, Instagram, and LinkedIn. Tips on stories? Email brian.sozzi@yahoofinance.com.

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