CoreWeave faces $7.5 billion in debt repayments soon

CoreWeave, a cloud computing company, is preparing for a significant public offering to raise up to $2.7 billion and is aiming for a valuation of $32 billion. However, it faces a hefty $7.5 billion in debt repayments due soon, putting pressure on the company to prove its growth potential to attract investors. The company, based in New Jersey, provides computing power for firms developing artificial intelligence models. Its impending IPO comes amid concerns over its high debt and the interest rates it's paying. CoreWeave's recent filings show that it has debts that exceed its current cash flow, which raises questions about its financial stability moving forward. In addition to its existing debt, CoreWeave plans to borrow more to fulfill a $12 billion contract with OpenAI, necessitating upgrades to its data centers. Some investors are excited about the IPO, particularly Nvidia's CEO, who praised CoreWeave. However, others express skepticism, given the uncertainties surrounding future growth and profitability. Founded in 2017 as a cryptocurrency mining company, CoreWeave shifted its focus to AI in 2019, leveraging Nvidia chips, which have become essential for AI development. Despite its rapid revenue growth—jumping from $16 million in 2022 to $1.9 billion in 2023—the company has not yet turned a profit and has recorded significant losses. CoreWeave has accrued about $12.9 billion in debt over the past two years and needs to maintain contracts with major clients to meet its repayment obligations. Its debt structure includes loans with high-interest rates, and the company has obligations amounting to nearly $1 billion in annual interest costs. Operationally, CoreWeave relies heavily on a "take or pay" model, which means customers commit to purchasing a certain amount of computing power. However, it also has significant lease liabilities and dependence on a few large customers, including Microsoft, which has made up a large portion of its revenue. Despite recent contracts, including one with OpenAI, the company faces challenges, especially if it loses any significant clients. Investors are cautious due to the concentration of risks and the potential volatility in future earnings. CoreWeave's future hinges on its ability to grow decisively and manage its financial responsibilities effectively.