On the eve of its IPO, CoreWeave was backstabbed by its largest client Microsoft, which withdrew part of its cooperation

On the eve of its IPO, was Microsoft "backstabbing" CoreWeave? The artificial intelligence data center provider originally planned to conduct its initial public offering (IPO) next month, with a valuation potentially exceeding $35 billion, making it one of the largest IPOs in the tech industry this year.

However, according to a report by the Financial Times on the 6th, CoreWeave's largest client, Microsoft, has withdrawn some of its collaboration commitments, undoubtedly casting a shadow over CoreWeave's IPO prospects.

The report cited insiders revealing that Microsoft withdrew part of the collaboration due to CoreWeave's delivery issues, failing to complete tasks on time, which affected Microsoft's confidence in CoreWeave.

Although Microsoft has retained several existing contracts with CoreWeave and still considers it an important partner, the shift in the partnership undoubtedly poses a significant blow to the New Jersey-based company, as Microsoft accounted for 62% of CoreWeave's total revenue last year.

Microsoft withdraws part of collaboration, CoreWeave's IPO prospects hindered

CoreWeave was originally a cryptocurrency mining operation named Atlantic Crypto, founded by commodity traders Mike Intrator, Brian Venturo, and Brannin McBee, primarily focused on mining Ethereum. In 2019, the company transformed into an AI company providing cloud computing services, utilizing NVIDIA's high-performance graphics processing units (GPUs) to build and train AI models.

Today, CoreWeave owns over 250,000 NVIDIA AI GPUs and is one of NVIDIA's largest customers. NVIDIA is also an investor in CoreWeave, holding more than 5% of the company's shares.

Public documents show that CoreWeave has achieved rapid growth in recent years. In 2024, the company's revenue reached $1.9 billion, a significant increase from $229 million in 2023 and $16 million in 2022. However, at the same time, CoreWeave's losses have also been expanding. In 2024, the company reported a net loss of $863 million, compared to $594 million in 2023 and $31 million in 2022.

To support its rapid expansion, CoreWeave has raised $14.5 billion in debt and equity through 12 rounds of financing, including approximately $11 billion in loans. It has become a pioneer on Wall Street in providing asset-backed loans to tech companies with a large number of AI chips. Its largest investors include private equity firm Blackstone, which has lent approximately $5 billion; hedge fund Magnetar Capital, which holds about 20% of the company; and Fidelity, which manages funds holding about 8% of the company's shares CoreWeave also acknowledged in its submitted IPO documents that any negative changes in demand from Microsoft, or changes in Microsoft's ability and willingness to fulfill contracts, would adversely affect its business, operating performance, financial condition, and future prospects.

CoreWeave also pointed out the risks of "asymmetry" and "delays" in the supply chain related to NVIDIA in its IPO documents, as all of the company's chips are supplied by NVIDIA. CoreWeave stated that it has limited control over costs and delays in the supply chain, "for example, the recent delays related to NVIDIA's Blackwell GPU." Last October, NVIDIA CEO Jensen Huang admitted that its new Blackwell chips had "design flaws," leading to delivery delays to customers.

Microsoft's Strategic Adjustment May Be the Main Reason for the "Backstab"

Industry observers believe that Microsoft's data center strategy has shifted this year, following the end of its exclusive agreement with OpenAI regarding leased computing power.

Analysts at TD Cowen reported last month that Microsoft has withdrawn two data center leasing agreements. Microsoft CEO Satya Nadella recently stated in an interview that there is an issue of "overbuilding" in AI infrastructure.

However, reports citing informed sources indicate that Microsoft's withdrawal from some business with CoreWeave is unrelated to a broader shift in Microsoft's own data center plans. In January of this year, Microsoft stated that it would invest approximately $80 billion in the fiscal year ending June 30 to build the infrastructure needed for training AI models and deploying applications.

Despite facing challenges from Microsoft, CoreWeave is still actively expanding. This Wednesday, CoreWeave announced that it has reached an agreement to acquire the AI developer platform startup Weights and Biases, which was valued at $1.25 billion in 2023.

Whether CoreWeave can successfully go public and overcome challenges from Microsoft remains to be seen. But one thing is certain: competition in the AI infrastructure sector will become more intense.

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