This Nvidia-Backed Artificial Intelligence (AI) Unicorn Is About to Go Public. Here Are 2 Reasons I Won't Be Investing.

Adam Spatacco, The Motley Fool

Sun, Mar 23, 2025, 7:00 AM 5 min read

For many people, investing in the stock market is the most effective way to build wealth. Unless you're an accredited investor, accessing opportunities in private companies is rare. That said, every now and again, a private company becomes large enough that investors consider the potential of an initial public offering (IPO).

Private companies that have eclipsed a valuation of $1 billion or more are often referred to as unicorns in the financial world. CoreWeave, an artificial intelligence (AI) start-up with the financial backing of none other than Nvidia (NASDAQ: NVDA) , recently filed its S-1 with an expected valuation of approximately $24 billion.

While the combination of AI, support from Nvidia, and a highly anticipated IPO might sound like a recipe for making a fortune, here are two reasons why I won't be chasing CoreWeave's IPO.

The table below breaks down CoreWeave's revenue over the last few years. While these figures are undoubtedly impressive, there's more than meets the eye here.

Data source: CoreWeave S-1 Filing. YOY = year over year.

When analyzing financial statements, investors can sometimes become enamored by a company's revenue growth to the point that they ignore some important underlying details. Sure, growing revenue over 700% and eclipsing $1 billion in annual sales are terrific milestones, but where is this growth actually coming from?

According to notes in CoreWeave's S-1, 41% and 73% of revenue in 2022 and 2023, respectively, was concentrated in three customers. Furthermore, 77% of revenue in 2024 came from only two customers.

CoreWeave goes on to disclose that its largest customer (Microsoft) accounted for 16%, 35%, and 62% of sales between 2022 and 2024. These trends not only suggest some extreme levels of customer concentration, but CoreWeave's largest client is effectively driving the bulk its growth. In other words, if Microsoft churns as a customer or decides to downgrade its contract, then CoreWeave's growth would protract in a meaningful way.

Another important part of financial analysis is looking past revenue and studying the rest of the income statement. The three major financial statements -- income statement, balance sheet, and statement of cash flows -- are intertwined. Below, I've outlined some key details that stuck out to me in CoreWeave's financial profile.