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Author: Li Xiaoyin, Wall Street News
CoreWeave and Circle, which ride on the express train of AI and cryptocurrency boom, soared after their listing, becoming the hottest new stock on Wall Street.
On Tuesday, the two major focus companies will usher in investor scrutiny.Since its IPO in March this year, the share price of AI infrastructure company CoreWeave has soared by nearly 250%; while the share price of stablecoin USDC issuer Circle has once increased by five times since its IPO in June.
This is the second financial report after CoreWeave’s listing and the first report card of Circle.The huge increase driven by retail investors and “raised” momentum investors have pushed market expectations to high levels.Their performance will directly affect investors’ confidence in the future IPOs of AI and cryptocurrencies, the two hot industries.
Dean Quiaambao, partner at the accounting consulting firm Armanino LLP, said that for companies in popular industries, meeting rising expectations will be key:
“These quarterly results are absolutely important because one of the reasons that prevents some companies from applying for IPOs is the lack of confidence in the predictability of their performance.”
CoreWeave: Capital is the key challenge
While CoreWeave’s growth momentum is benefiting from strong market demand for AI infrastructure, some analysts have expressed concerns about its ability to raise funds for projects.This has become the core challenge the company is currently facing.
Gil Luria, an analyst at DA Davidson & Co., said in an interview:
“The main challenge CoreWeave is now facing is to acquire capital, and they need to be able to issue stocks or raise more debt.”
In a report last quarter, the company had said its capital expenditure will be between $20 billion and $23 billion this year.
However, according to media data, the company has since announced that it has raised only $5 billion in debt funds.How to fill the huge funding gap will be the focus of investors seeking answers in their financial reports.
Circle: Interest rate path determines the future
For Circle, its future revenue will depend to a large extent on the direction of interest rates in the United States.The vast majority of the company’s revenue comes from interest arising from short-term U.S. bonds that support its USD stablecoin (1:1 pegged to the USD).
This means that the Fed’s monetary policy will be like a double-edged sword.On the one hand, loose monetary policy will lead to a drop in interest rates, thereby directly reducing Circle’s interest income.But on the other hand, lower borrowing costs may fuel market risk appetite and drive more investors into the cryptocurrency market where USDC is widely used.
John Todaro, senior analyst at Needham & Co., said:
“I expect speculation in the crypto space will increase under the monetary easing drive.”
He holds a “buy” rating for Circle with a target price of $250, which means the stock still has 55% room to rise.
IPO momentum and valuation game
Since the beginning of this year, some newly listed companies have successfully dispelled investors’ doubts about their overvalued valuations and triggered further rises in stock prices with their strong earnings reports.
For companies in the “hot” industries like CoreWeave and Circle, whether they can meet or even exceed market expectations of rising prices is key.
Daniel Polsky, co-head of syndicated syndicated director at William Blair & Co., noted that “kinetic momentum remains a very important part of the IPO and book building process.” He said that a well-established theme in the market this year is“Start with reasonable valuations and make price discovery in a way that best benefits the issuer, thereby driving subscriptions”.
The successful listing of CoreWeave and Circle is a reflection of this strategy.During the marketing process of stock issuance, they raised the issue price range and issuance scale many times, and eventually achieved great success with their hot market demand.
This upward momentum composed of institutional enthusiasm and retail investors’ pursuit helped them gain a firm foothold in the early stages of listing.
