Bruin AI Current Events
CoreWeave’s IPO & AI Copyright Clash | Investor Doubts Meet Legal Heat
Good morning!
This week, we explore how CoreWeave’s underwhelming IPO performance signals investor caution amid economic turbulence and track the escalating legal battle between The New York Times and OpenAI/Microsoft—a case that could redefine the rules of AI training data.
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CoreWeave Disapoints
This week saw economic turmoil across sectors; stocks were sold off on Friday amid inflation and trade policy uncertainty, culminating in a 2% dip in the S&P and a 2.7% dip for the Nasdaq.
Despite the turmoil, CoreWeave pressed ahead with its initial public offering (IPO). This data center operator, which rents computing power to major AI developers, was seen as the first real test of the AI sector’s public debut. As a result, expectations were high. Unfortunately, even with a syndicate of 18 banks underwriting the IPO and strong support from Nvidia, CoreWeave’s market debut fell short of expectations.
Even with rising revenues and a recently signed five-year contract worth $11.9 billion with OpenAI, “CoreWeave's shares closed flat after opening nearly 3% below their offer price in its Nasdaq debut on Friday.” Given prior expectations of a $47 to $55 range for share price, the roughly $40 per share ending price disappointed investors. As a result, the company was only able to raise $1.5 billion after initial expectations of $4 billion with 23% fewer shares sold than expected.
In the context of uncertain macroeconomic conditions, many investors are increasingly risk-averse. Unfortunately for CoreWeave, its financials are no beacon of hope for these investors. Last year, the company’s revenue rose $229 million to $1.9 billion, but it still “lost $863 million after spending nearly $1 billion to finance its debt.”
CoreWeave’s performance seems to demonstrate the slump in investor demand for stocks based so heavily on massive capital expenditures without clear chances of success. With many firms failing to turn a profit and low-cost alternatives such as DeepSeek coming into the mix, CoreWeave may be one example of the effect declining investor confidence has. While CoreWeave is not necessarily doomed, its success would require that “demand for AI continues to grow exponentially.” Without strong macroeconomic conditions to bolster confidence in such companies, it may be necessary to brace for a tightening in the IPO market for AI companies.
While admitting that the macroeconomic conditions presented some trouble for CoreWeave’s IPO, the CEO stated that “we take a really long-term view of where this space is going,” and he claims that “our customers are telling us, universally, to continue to build.” Such a statement seems implausible, however, given that CoreWeave’s largest customer, Microsoft, recently cancelled plans to build data centers.
Nevertheless, many remain skeptical that CoreWeave can set a reliable benchmark for other stocks, especially those more focused on developing large language models (LLMs) rather than building the infrastructure for AI.
-Tobin
Lawsuit Against OpenAI/Microsoft Continues
AI progress has continued at a breakneck pace, and developers have shown no signs of slowing down soon. While development occurs, however, the legal battles over how copyright protections interact with training data for AI remain unresolved.
The key thrust of the argument against AI has come from news organizations who feel their content is being unfairly used to train AI in a manner that may be substitutional, meaning that people would rely on secondary information from AI rather than going to a news organization’s website. Some companies, such as The Atlantic and Vox Media, have opted to sign deals with AI developers to legally license journalistic work for use as training data. The New York Times, on the other hand, announced its lawsuit against OpenAI and Microsoft in December of 2023.
As the legal battle progresses onward, the New York Times has already “invested $7.6 million into legal expenses related to the case.” This week, U.S. District Judge Sidney Stein of New York dismissed some of the claims made by the New York Times but “allowed the bulk of the case to continue, possibly to a jury trial.”
In response to the dismissal of some claims, the New York Times still believes that the main thrust of its case against OpenAI and Microsoft remains salient. New York Times attorney Ian Crosby stated that “as the order indicates, all of our copyright claims will continue against Microsoft and OpenAI for their widespread theft of millions of The Times‘ works, and we look forward to continuing to pursue them.”
OpenAI and Microsoft have continued to argue that the training of its AI models is protected under fair use, a doctrine that allows limited use of copyrighted material without permission for what are considered transformative uses. An OpenAI spokesperson stated in response to the judge’s ruling today that they “look forward to making it clear that we build our AI models using publicly available data, in a manner grounded in fair use, and supportive of innovation.”
Depending on the ruling, the environment for training AI could significantly change. If Microsoft and OpenAI fend off the suit, “it could become de facto legal permission to use copyrighted sources across the world to enhance chatbots.” However, if the New York Times succeeds, the high costs imposed on OpenAI and Microsoft would significantly hinder AI development. Statutory damages could be imposed for up to $150k per infringement, which would add up quickly in the context of an AI model that is trained on thousands of articles from the New York Times.
While Judge Stein has not yet released an opinion explaining the dismissal, the contents of such an opinion, which is likely to come this week, may be helpful for those looking to understand how Stein is thinking about the case and may provide indicators for what the future will look like.
-Tobin
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All the best,
Tobin Wilson, Editorial Intern
Karen Harrison, Newsletter Manager
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"The future belongs to those who prepare for it today." — Malcolm X