Venture capitalists have a concept they call the ‘power law’ — the idea that the bulk of returns in a portfolio comes from just a few investments. CoreWeave, a US data-centre operator that has filed for an initial public offering, offers a new variation on this theme.
CoreWeave provides computing capacity for companies who want to train and use artificial intelligence. Simply put, it rents out Nvidia microchips, and lots of them. CoreWeave’s 250,000-plus processors in 32 data centres are more than double what Elon Musk’s supercomputer, Colossus, had at the end of 2024. Demand is brisk: by the end of last year, revenue was growing at an annualised 170 per cent.
When it goes public, CoreWeave will reflect the classic power law in that its original investors will have done very well indeed. Assume its ebitda more than doubles to $3bn this year. Pop that on the same 15-times multiple that AI ‘hyperscalers’ Meta Platforms and Amazon enjoy, strip out around $6.5bn of net debt, and the company’s equity — not including new money raised — could be worth close to $40bn.
The catch is that the notion of big-overshadows-small, familiar in VC portfolios, manifests at CoreWeave in less helpful ways too. There’s the outsized might of a handful of suppliers. Three of them — chiefly Nvidia, presumably — supplied three-quarters of CoreWeave’s material and product purchases in 2024. Its customer base is even more skewed: Microsoft alone accounted for 62 per cent of revenue in 2024.
Close ties to Nvidia and Microsoft are, of course, the secret sauce. But any big dependency is a valuation risk. Microsoft procures data centre space not just for itself but for ChatGPT owner OpenAI. But Sam Altman’s company is also building its own giant data centres. While CoreWeave sees a nearly-$400bn market by 2028, the eventual calculus of who needs what from whom is still up for grabs.
This isn’t a problem for now — CoreWeave reckons it has around $8bn of revenue due over the next two years, versus less than $2bn in 2024. But unless it diversifies fast, the company’s new investors will spend much time nervously watching for signs that the relationship remains intact.
This being Silicon Valley, CoreWeave’s shareholder base is lopsided too. Insiders including co-founder and CEO Michael Intrator control the company with over 80 per cent of the votes. While some trimmed their stakes in recent tender offers, they will retain stock with 10 times the voting power of other shareholders. New investors will have little say on anything that matters.
Don’t expect this to stand in the way of a roaring IPO. CoreWeave will be the only big pure-play AI data-centre company on the US market. For retail investors who have grown rich on Nvidia stock, it will be a second bite at the AI cherry. Investors just have to remember the real power law: in a company dominated by a few big customers, suppliers and shareholders, everyone else can end up an afterthought.
john.foley@ft.com
