The CoreWeave $26B valuation is scaled back from initial expectations. (0:15) Existing home sales surprise. (2:47) Accenture warns about DOGE contract impact. (3:45) Show NotesNearly all the AI valuation premium is goneEpisode transcripts: seekingalpha.com/wsb Sign up for our daily newsletter here and for full access to analyst ratings, stock quant scores, dividend grades, subscribe to Seeking Alpha Premium at seekingalpha.com/subscriptions.
Chapter 1: What is CoreWeave's IPO target and valuation?
Welcome to Seeking Alpha's Wall Street Lunch, our afternoon update on today's market action, news, and analysis. Good afternoon. Today is Thursday, March 20th, and I'm your host, Kim Kahn. Our top story so far. CoreWeave, a hyperscaler startup backed by NVIDIA, is targeting a valuation of around $26 billion with its IPO.
Chapter 2: How many shares is CoreWeave offering and at what price?
The company will sell 49 million shares, with 47,178,660 shares of Class A common stock being offered by CoreWeave and the balance by existing stockholders. The initial price range is between $47 and $55 per share. The deal would raise $2.7 billion at the top end. Corweave has applied to list its Class A common stock on the Nasdaq Global Select Market under the ticker symbol CRWV.
Chapter 3: What factors are affecting CoreWeave's valuation?
Including options and shares that will become available after the IPO, the valuation could rise to $32 billion, according to the FT. That's a scaling back of earlier expectations for a valuation of around $35 billion and a deal that would raise about $4 billion. Morgan Stanley, JP Morgan, and Goldman Sachs are acting as joint lead book runners.
Chapter 4: Who are CoreWeave's major clients and how do they contribute to revenue?
The cloud services provider incurred a net loss of $863 million on $1.9 billion in revenue last year. Its platform powers top AI labs and enterprises like Cohere, IBM, Meta, Microsoft, Mistral AI, and Nvidia. Microsoft accounted for 62% of its revenue in 2024, up from 35% the year prior.
Chapter 5: What recent contracts and developments are influencing CoreWeave's growth?
Earlier this month, CoreWeave signed an $11.9 billion five-year contract to deliver AI infrastructure with OpenAI. Also on the NVIDIA front, Morgan Stanley said it was more positive on the company's trajectory after it held an analyst question-and-answer session at its GTC event.
Chapter 6: What insights did Morgan Stanley provide about NVIDIA's market position?
Morgan Stanley analyst Joseph Morris said management's enthusiasm at this stage of Blackwell was notable, given that it comes at a time when the market appears to be losing confidence.
NVIDIA CEO Jensen Huang said during the keynote address that four major cloud service providers, Amazon Web Services, Azure, Google Cloud Platform, and Oracle Cloud, have already purchased 3.6 million Blackwell GPUs in 2025 compared to 1.3 million Hopper GPUs in 2024.
Moore said, during the Q&A session, it was clear that the reason the company made the decision to give that data was to refocus the narrative on the strength of the demand profile, as they continue to feel questions related to OpenAI-related spending shifting from one of the four to another of the four, or the pressure of ASICs which come from the four customers.
Chapter 7: How are economic indicators and existing home sales performing?
Looking to the economy, the Conference Board's U.S. Leading Indicator Index dipped 0.3% to 101.1 in February, slightly steeper than the 0.2% consensus and 0.2% decline prior, revised from down 0.3%. And existing home sales rose 4.2% month-on-month to a 4.26 million seasonally adjusted annual rate in February, compared with the 3.95 million consensus and 4.09 million in the prior.
The unexpected increase came in the wake of lower mortgage rates and more homes put up for sale during the month. From a year earlier, sales dipped 1.2%, snapping a trend of five consecutive annual gains. Pantheon macroeconomist Samuel Toombs says the recent recovery looks unsustainable.
The recent fall in mortgage rates has triggered only a modest pickup in mortgage applications, and the latest survey of consumers' confidence showed clear decline in the proportion of people who intend to move home over the next six months due to heightened uncertainty about the economic outlook, he said.
Transactions will recover meaningfully only when new mortgage rates get much closer to the average rate of the stock, currently just above 4%. The Fed's wait-and-see approach to resuming its easing cycle suggests housing market activity will remain very subdued throughout 2025.
Among active stocks, Accenture is among the biggest S&P decliners, despite fiscal second quarter results that beat estimates. New bookings for the second quarter declined year over year, and the company narrowed its revenue growth outlook for fiscal 2025. CEO Julie Sweet said the company's revenue was being affected due to the impact being felt in Accenture Federal Services. She said,
Jabil's second quarter results easily topped consensus estimates, and the company also increased its 2025 outlook. Jabil's third quarter revenue forecast ranges from $6.7 billion to $7.3 billion, with a midpoint of $7 billion, which is well above the $6.77 billion estimate. EPS is expected to range from $2.08 to $2.48, with a midpoint of $2.28, more than the $2.22 consensus.
And Microsoft snagged its sector outperform rating with a $4.70 price target as Scotiabank initiated coverage. Analyst Patrick Colville said, Based on our fieldwork, 2025 will be a paradigm-shifting year during which customer investments accelerate in AI on Azure and Microsoft's 365 co-pilot.
And in the Wall Street Research corner, looking at the tech having NASDAQ 100, Societe Generale notes that the recent sell-off has wiped out nearly all of the AI valuation premium given to stocks in the index. Valuation premiums the mountain investor will pay for a security above the fundamental value.
The fundamental value in this case being measured as the 12 months forward earnings per share for the NASDAQ 100 as a whole. Strategists said another drop of about 5% in the NASDAQ 100 over the next month would eliminate the AI-driven valuation premium since the launch of ChatGPT in November 2022.
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