Is CoreWeave IPO a Good Investment? Everything You Need to Know

Artificial intelligence (AI) has become a generational megatrend in the last two years, which is uncommon in the capital markets. A closer look at these trends reveals that, over the past two years, investors have mostly gravitated into a tiny cohort of megacap stocks, even though the S&P 500 reported total gains of 26% and 25% in 2023 and 2024, respectively.

The market has reached new heights thanks in large part to the combined performance of the “Magnificent Seven”: Nvidia, Microsoft, Alphabet, Amazon, Meta Platforms, Apple, and Tesla.

However, the Magnificent Seven have had a difficult start to the year; as of this writing, all save Meta have had negative returns.

From a macro standpoint, I believe that some investors are apprehensive about the short-term prospects of their once-favorite stocks because of the uncertainties around tariffs and the continuous expenditure on AI infrastructure. Furthermore, some of them might just be seeking fresh chances for development since they are tired of the Magnificent Seven.

And an initial public offering (IPO) is the best place to search for growth, isn’t it? Well, perhaps.

Let’s examine CoreWeave, a data center infrastructure specialist supported by Nvidia, which is AI’s most anticipated new initial public offering (IPO) company. I hope that investors will have a clear understanding of whether or not investing in the CoreWeave offering is a wise decision at this time after examining a few well-known technology IPO stocks from recent years.

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1 Snowflake IPO Analysis

New York Stock Exchange-listed corporate software firm Snowflake went public in September 2020. I can’t think of a more hyped initial public offering (IPO) in the recent past than this one.

Snowflake appeared to be an easy choice, what with support from prominent strategic investors like Salesforce and Warren Buffett’s Berkshire Hathaway in addition to world-renowned venture capital firms like Sequoia, Altimeter, and Redpoint.

On the first day of trade, shares started at $245 and went up to $319. After only one day on the market, Snowflake had become the biggest software initial public offering (IPO) ever.

There was definitely a lot of elation when it first became a public corporation, but that excitement didn’t last. A few years ago, when artificial intelligence (AI) was the next big thing in the industry, Snowflake didn’t seem to be doing much of anything. It was unable to entice investors like some of its software competitors by promising them that artificial intelligence would be a game-changing prospect with sustained high-margin growth.

Berkshire Hathaway sold its entire stake in software firm Snowflake after its chief executive officer left a few years following the company’s first public offering.

The stock’s performance since going public is seen in the chart above. The chart clearly shows that throughout the company’s early years as a public corporation, there were several instances of unexpected price increases. Shares have fallen about 38% from their initial public offering (IPO) price due to investors’ growing distaste for the stock in recent years.

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2. Palantir IPO Analysis

Palantir Technologies, a competitor in the enterprise software space, debuted on the New York market just two weeks after Snowflake went public.

During Palantir’s first public offering (IPO), the narrative was completely different from that of Snowflake. Very few Wall Streeters fully understood its business strategy.

As a result of Palantir’s tight (and clandestine) ties to the Pentagon, many investors saw the firm more as a consulting firm or government contractor than a genuine technological platform.

Its initial trading day wasn’t particularly noteworthy. After starting the day at $10, shares ended the day at $9.50, a little lower.

Gaining the support of institutional investors was a major obstacle for the company in its early years as a public corporation. In a paradox that will last forever, Snowflake and Palantir were the ones on Wall Street that began to take notice of the rise of AI.

After launching its AI platform in April 2023, Palantir has successfully diversified its revenue streams away from government contracts. It has recently formed partnerships with numerous prominent private AI developers, such as Databricks, Oracle, Microsoft, and Amazon.

Through the discovery of new opportunities in the commercial sector, Palantir has consistently increased revenue growth, widened profit margins, and mints free cash flow. A stock that was barely visible in the tech industry three years ago suddenly rose to become one of the best-performing S&P 500 companies last year.

Actually, you would have an 838% gain if you had invested in Palantir during its initial public offering and stayed on until now.

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Conclusion

The stories about CoreWeave’s impending initial public offering (IPO) are similar to those of Snowflake. If CoreWeave’s initial public offering (IPO) goes well, it will be the first big IPO for an artificial intelligence unicorn in the past few years, and it may pave the way for other prominent private tech businesses to follow suit.

The essay makes one thing very clear: there is a lot of risk involved with buying stocks during an initial public offering.

Investors who aren’t cautious could get entangled in a bad momentum trade and wind up holding the bag if the excitement surrounding CoreWeave leads to some outsized purchasing activity.

I think it would be wise to wait for some time to pass before judging CoreWeave’s operational performance in its first few quarters as a public business. There will be plenty of opportunities for long-term investors to acquire at different price points if they so desire. But for the time being, I believe it is prudent to wait for the IPO to settle in, and smart investors would do well to keep an eye on the company’s development over the coming months.

The stock price of CoreWeave should eventually start to move in a more fundamental direction, reflecting the company’s true underlying performance.

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