(Reuters) -CoreWeave plans to reduce the size of its U.S. initial public offering and price shares below range, a person familiar with the matter told Reuters on Thursday, dampening expectations that the listing would encourage a broader demand recovery.

The Nvidia ( NVDA )-backed cloud services provider is now looking to sell 37.5 million shares and price them below the range at $40 apiece, the source added, requesting anonymity discussing confidential information.

Nvidia ( NVDA ) will anchor the CoreWeave IPO at the price with a $250 million order, the source said. The sale would fetch about $1.5 billion and value the company at about $23 billion on a fully diluted basis, according to Reuters' calculations.

The listing was being closely watched as a test of the strength of a recovery in the U.S. IPO market and whether investor enthusiasm for AI newcomers remained strong or had started to wane.

CoreWeave and some existing investors had initially aimed to sell 49 million shares in the offering priced between $47 and $55 each to raise as much as $2.7 billion.

At the initially disclosed range, the IPO would have valued the company at up to $32 billion on a fully diluted basis.

The company did not immediately respond to Reuters' request for comment. It is expected to price the IPO later on Thursday.

Earlier this year, Venture Global also cut its targeted valuation for a U.S. IPO.

MOUNTING CONCERNS

Analysts had hoped a strong CoreWeave IPO would revive confidence in new listings and signal a broader recovery in investor appetite.

Despite the AI boom, there are growing concerns that data center spending will be uneven, with investments concentrated among a few giants while others struggle to keep pace.

DeepSeek, China's low-cost AI rival, has also emerged as a growing threat, fueling concerns about pressure on data center spending.

CoreWeave had a debt of about $8 billion as of last year. It also leases its 32 data centers and some equipment, instead of owning them, resulting in operating lease liabilities of $2.6 billion.

In its filing earlier, the company had said about $1 billion of the IPO proceeds would be used to pay down debt. The company has said it would continue to borrow.

CoreWeave is also yet to turn a profit, and IPO investors in the last few years have been wary of backing companies with no history of profitability.

Ahead of its IPO, CoreWeave secured partnerships with major AI players, including Sam Altman's OpenAI. Earlier this month, it signed an $11.9 billion infrastructure deal with the ChatGPT maker.

The cloud services provider, which offers access to data centers and high-powered Nvidia ( NVDA ) chips for AI workloads, will also issue $350 million worth of shares to OpenAI through a private placement as part of the offering.

CoreWeave, founded in 2017 as a crypto miner, had initially planned to raise over $3 billion in its share sale at a valuation topping $35 billion, sources told Reuters in November.

Morgan Stanley, J.P. Morgan and Goldman Sachs are the lead underwriters of the IPO.

CoreWeave aims to trade on the Nasdaq under the ticker symbol "CRWV."

The downsizing was first reported by Semafor on Thursday.

(Reporting by Echo Wang in New York and Manya Saini and Niket Nishant in Bengaluru; Editing by Sriraj Kalluvila)