- NVDA is an early investor, structural client, and strategic supplier of advanced GPUs for CoreWeave’s rapidly growing AI-specialized data center network.
- CoreWeave completed its long-anticipated IPO last week, but it downsized both its offering size and price. The market seems less enchanted by the AI super-cycle compared to 6–12 months ago.
- NVDA remains a fundamentally strong company—near 50% net margin and 64%+ ROE in aggregate over the past five years—with multiple growth avenues, including AI, but also expanding into gaming, robotics, automation, and autonomous vehicles. However, the stock’s valuation may still carry some of the excesses created by the AI-driven investment boom of 1H 2024.
Why is CoreWeave a Key Proxy for NVDA’s AI Strategy?
CoreWeave is an interesting case of next-generation tech infrastructure. In short, it began operations in 2017 as a cryptocurrency mining infrastructure provider but pivoted in 2019 to serving cloud computing providers. Over time, this cloud-computing focus evolved into AI-specialized infrastructure, and today, CoreWeave operates 32 data centers across the U.S. and Europe, exclusively using NVIDIA’s most advanced GPUs to support AI developers.
NVDA played a cornerstone role in CoreWeave’s growth. In 2023, NVDA invested $100 million in CoreWeave and signed a $320 million computing capacity agreement. More notably, CoreWeave developed a private-credit financing structure to raise $7.6 billion in infrastructure funding, collateralized by NVIDIA GPUs—a highly creative approach to expanding its asset base, with Blackstone and Magnetar leading the lending group.
In essence, CoreWeave is a microcosm of NVDA’s AI strategy. Over the past 12–18 months, the blue-sky scenario for NVDA’s AI dominance has been that mega-tech players (Microsoft, Google, Meta, Amazon, etc.) will invest hundreds of billions of dollars annually over the next decade to build AI models that demand massive computing capacity—all powered by NVIDIA GPUs. CoreWeave plays a pivotal role in this ecosystem, as its data centers host 100% NVIDIA GPUs, serving as the hardware backbone for AI scaling.
The Market Gave the IPO a Cold Shoulder
CoreWeave’s IPO had been anticipated for years, and speculation intensified in 2024 following the AI investment boom. The company filed on March 3, launched on March 20, and priced on March 27 at $40 per share.
Initially, CoreWeave planned to sell 49 million shares at $47–$55 each (13.8% of shares outstanding), targeting a $2.7 billion raise. However, demand was weaker than expected. Despite the modest total offering size, the market didn’t bid in size, forcing the company to reduce the offering to 37.5 million shares at $40 per share—ultimately raising $1.5 billion (10.6% of shares outstanding).
Investor skepticism around AI growth rates likely tempered demand, and NVDA felt the ripple effects. The CoreWeave story is straightforward: it provides capacity to AI developers exclusively using NVIDIA GPUs. If the AI hyper-scaling thesis materializes, CoreWeave is arguably the purest way to gain exposure to the AI cycle. But if AI demand grows at a more moderate pace, CoreWeave’s business case weakens—likely explaining the market’s hesitancy.
CoreWeave’s IPO is yet another bearish signal for AI-related stocks in the equity market. This negative trend may have begun with DeepSeek’s low-cost, high-performance AI model announcement in January 2025, which triggered an NVDA-led AI sell-off. More recently, after Alphabet and Amazon announced plans to invest $75 billion and $100 billion, respectively, in AI infrastructure in 2025, both stocks saw sharp declines, suggesting that investors are reassessing AI spending expectations.
NVDA is Profitable, but the Stock Needs to Shake Off AI Froth
NVDA is an exceptionally profitable company with multiple avenues for growth, but the stock may continue to de-rate as it works through the excess valuation built up during the AI boom.
From a valuation perspective, NVDA is approaching GARP (Growth at a Reasonable Price) territory. It's not a pure growth stock, as its incumbent businesses generate ~$60 billion in revenue and ~$30 billion in net income annually. However, it's also not a pure value play, given that consensus estimates project revenue at ~$130 billion in 2025 and ~$190 billion in 2026.
What Are We Watching?
Despite NVDA being down 19% year-to-date, it's still up 22% over the past 12 months, indicating room for further correction. However, looking at conditions that would make the stock attractive we are waiting for:
- Estimate cuts to stabilize forecasts;
- A PEG (Price/Earnings-to-Growth) ratio below 0.75x.
- A rebound in traded volumes.
For GARP names, we consider 1x PEG fair value and 0.75x an attractive entry point. Given 2026 EPS estimates of $4.50 and a 30% growth rate, this implies a valuation of ~$101 per share as a compelling long-term entry.
