CoreWeave, an artificial intelligence hyperscaler startup, is in advanced stages of preparing its S-1 filing, according to two sources familiar with the situation.

Morgan Stanley and Goldman Sachs are expected to serve as global coordinators, with additional banks in discussions for bookrunner roles, according to the sources.

The initial public offering is expected to take place during 1H25, said the two sources.

The first source noted that the company is projected to generate USD 2bn in revenue this year, translating into hundreds of millions of dollars in cash flow. This revenue will be driven by long-term, take-or-pay contracts with major customers, that source said. Take-or-pay contracts are agreements commonly used in industries such as energy, utilities and commodities whereby the buyer agrees to either take the product or service at a specified price or pay a penalty if they do not take the agreed-upon quantity within a certain timeframe.

In preparation for the listing, CoreWeave is planning a new debt raise and is currently in talks with banks for a pre-IPO debt round that could raise several billion dollars, as reported.

Capex spending by hyperscalers is anticipated to increase dramatically, the first source noted, which justifies the amount of fundraising undertaken by the company in the past year.

CoreWeave secured in May USD 1.1bn in a Series C led by Coatue.

Valuation considerations

As it advances in its IPO process, CoreWeave is expected to be compared with listed peers, including cloud provider DigitalOcean [NYSE:DOCN], according to the first source and a sector banker.

However, it is also likely to be benchmarked against hyperscaler players such as Amazon Web Services, Google Cloud Platform and Azure, those sources said.

The first source added that wider comparisons could include AI enablers like Super Micro Computer [NYSE:SMCI] and Taiwan Semiconductor Manufacturing [NYSE:TSM].

The sector banker also mentioned that data center companies like Arista Networks [NYSE:ANET], Equinix [NASDAQ:EQIX] and NextDC [ASX:NXT] could be considered, along with AI software firms such as Hugging Face, C3.AI [NYSE:AI] and ServiceNow [NYSE:NOW].

Depending on the specific comparisons, the multiples will vary widely, generally ranging from 20x to 25x on its projected 2025 EBIT, which has yet to be disclosed, said the first source.

If viewed as a disruptive hyperscaler, multiples could exceed 25x, but if seen as a purely commodity player, mid-teens or slightly higher EBIT multiples will be taken into consideration, the same source added.

One investor who expects the company to also be comped to NVIDIA [NASDAQ:NVDA] said they were concerned that the current USD 19bn valuation might be a stretch for late-stage investors.

“For this company to align with NVIDIA’s valuation, we’d need public market sentiment around AI to remain exceptionally high,” the investor said.

Despite this, the investor said the company’s equity story is promising, citing its business model and positioning, contracts signed and growth outlook.

CoreWeave plans to open two UK-based data centers in 2024 with further expansion planned in 2025, according to the announcement.

CoreWeave declined to comment. Morgan Stanley and Goldman Sachs did not respond to requests for comment.