Nvidia (NVDA +1.16%) is best known as the artificial intelligence (AI) chip king at the center of the hottest sector in the stock market over the last few years. Given that the semiconductor chips Nvidia makes help power AI applications, which could radically change the world as we know it, Nvidia is one of the premier pick-and-shovel plays in the sector.
However, some may not know that Nvidia also uses its own capital to invest in publicly traded stocks or late-stage start-ups. Most of the company's investments support the AI sector or have a partnership with Nvidia. Recently, Nvidia piled into a stock that's already doubled from its initial public offering (IPO) earlier this year.
From disappointment to quick success
Even before CoreWeave (CRWV +0.69%) went public at the end of March, Nvidia had been an investor and owned about 5% of the company's total shares, according to CoreWeave's prospectus.
Image source: Getty Images.
CoreWeave operates data centers specifically set up to run artificial intelligence applications. The company purchases graphics processing units (GPUs) from Nvidia, puts them in its data centers, and then essentially rents its data centers and services to companies looking to run AI applications but don't want to invest in the necessary infrastructure.
Nvidia is also a customer of CoreWeave. While on CNBC, CoreWeave's CEO Mike Intrator described the relationship between the two companies as "symbiotic."
CoreWeave had been one of the most anticipated IPOs of the year, trying to go public at a $35 billion valuation. However, whether due to the emergence of China's DeepSeek, which seemed to slow the meteoric AI market, or other market conditions, investors didn't buy into the hype, and CoreWeave launched at a $23 billion valuation and $40 per share.
NASDAQ: CRWV
Key Data Points
It turns out that Nvidia actually stepped in to support the IPO. In Nvidia's first-quarter 13F filing with the Securities and Exchange Commission, Nvidia reported owning close to 24.2 million shares, up from the 17.9 million shares it owned previously, according to CoreWeave's prospectus.
Despite the disappointing IPO, CoreWeave more than doubled not even two months into its public life, with the stock now at $107. That includes a 19% jump on Wednesday, which appeared to be triggered by a couple of bullish actions -- Citigroup analyst Tyler Radke raised his price target from $43 to $94, and Coreweave announced it increased its private offering of senior notes by $500 million to $2 billion total.
Can CoreWeave continue its strong run?
CoreWeave is undeniably a strong company in a red-hot sector of the market, so it's going to have plenty of visibility. In its recent earnings report, the company raised its revenue guidance for this year from $4.6 billion to $5 billion.
However, the market's response was less enthusiastic than one might have expected because the company also raised its capital expenditures (capex) outlook well above what analysts have been forecasting. Other concerns about CoreWeave include the fact that 62% of the company's revenue in 2024 came from Microsoft, and the company isn't yet profitable.
Overall, I'm neutral on the stock right now. I view the company's business and ties to Nvidia as positives but think the valuation may need time to simmer after such a strong rally in just two months.
