Coreweave and Circle, the two major American "IPO stocks," will face earnings report scrutiny today

CoreWeave and Circle, which have jumped on the fast train of the AI and cryptocurrency boom, saw their stock prices soar after going public, becoming the hottest new stocks on Wall Street.

On Tuesday, these two focal companies will face scrutiny from investors. Since its IPO in March this year, AI infrastructure company CoreWeave's stock price has surged nearly 250%; while Circle, the issuer of the stablecoin USDC, has seen its stock price increase fivefold since its IPO in June.

This is CoreWeave's second earnings report since going public and Circle's first report card. The significant increase driven by retail and momentum investors has pushed market expectations to a high level. Their performance will directly impact investors' confidence in the future IPOs of these two hot industries: AI and cryptocurrency.

Dean Quiambao, a partner at accounting consulting firm Armanino LLP, stated that for companies in hot industries, meeting the rising expectations will be key:

“These quarterly results are absolutely important because one of the reasons some companies struggle to apply for an IPO is the lack of confidence in the predictability of their performance.”

CoreWeave: Capital is the Key Challenge

Although CoreWeave's growth momentum benefits from strong market demand for AI infrastructure, some analysts express concerns about its ability to raise funds for projects. This has become the core challenge the company currently faces.

Gil Luria, an analyst at DA Davidson & Co., stated in an interview:

“The main challenge CoreWeave faces now is obtaining capital; they need to be able to issue stock or raise more debt.”

In the previous quarter's report, the company stated that its capital expenditures this year would be between $20 billion and $23 billion.

However, according to media data, since then, the company has only announced raising $5 billion in debt funding. How to fill this significant funding gap will be the focus of investors seeking answers in the earnings report.

Circle: Interest Rate Path Determines the Future

For Circle, its future revenue will largely depend on the direction of U.S. interest rates. The vast majority of the company's revenue comes from the interest generated by short-term U.S. Treasury bonds that support its USDC stablecoin (pegged 1:1 to the dollar).

This means that the Federal Reserve's monetary policy will act as a double-edged sword. On one hand, an accommodative monetary policy will lead to lower interest rates, directly reducing Circle's interest income. On the other hand, lower borrowing costs may foster market risk appetite, driving more investors into the cryptocurrency market where USDC is widely used.

John Todaro, a senior analyst at Needham & Co., stated:

“I expect that speculative activity in the crypto space will increase under the influence of accommodative monetary policy.”

He holds a "buy" rating on Circle with a target price of $250, indicating that the stock still has 55% upside potential

IPO Momentum and Valuation Game

Since the beginning of this year, some newly listed companies have successfully dispelled investors' concerns about their high valuations with strong earnings reports, leading to further increases in their stock prices.

For companies like CoreWeave and Circle that are in "hot" industries, meeting or even exceeding the market's high expectations is key.

Daniel Polsky, co-head of syndicate at William Blair & Co., pointed out that "momentum remains a very important part of the IPO and book-building process." He stated that a successful theme in the market this year is "starting with a reasonable valuation and discovering prices in a way that is most favorable to the issuer, thereby driving subscriptions."

The successful listings of CoreWeave and Circle are a reflection of this strategy. During the marketing process of their stock offerings, they repeatedly raised the price range and issuance scale, ultimately achieving great success due to strong market demand.

This upward momentum, driven by enthusiasm from institutions and retail investors alike, helped them establish a solid footing right from the start of their listings