An emerging challenger to cloud computing giants Amazon and Microsoft is using its alliance with Nvidia to show artificial intelligence chips right into a “latest asset class” and lift billions of dollars.
New Jersey-based CoreWeave, founded in 2017 by former energy traders as a cryptocurrency miner, raised $8.6 billion in debt and equity last month, boosting its valuation to $19 billion. A 12 months ago, Nvidia bought a $100 million stake that valued the corporate at $2 billion.
The price jump shows that CoreWeave is one other beneficiary of the booming demand for AI chips that catapulted Nvidia to a $2.8 trillion valuation and boosted shares of the chipmaker's other partners comparable to Dell and Supermicro. Now the corporate wants to make use of that capital to construct facilities within the UK and Europe.
CoreWeave leases access to its coveted supply of Nvidia chips, including the sought-after H100 and upcoming B200, running in its data centers. Its facilities were designed to satisfy the unique needs of high-performance computing, from high-speed networking between clusters of AI chips to liquid-cooled servers, said Michael Intrator, its chief executive.
CoreWeave investors, including hedge fund Magnetar Capital, Blackstone and Coatue, are betting that rising demand for specialised AI services will reshape the $500 billion cloud computing market, despite the tens of billions of dollars that major technology firms spend on their very own data centers.
“The way the cloud might be utilized in the following generation may be very different from the way in which the cloud was used when it was introduced 20 years ago,” Intrator said, calling the corporate the Tesla to Big Tech giant Ford.
According to Intrator, it was “incredibly difficult” to supply their money to the primary lenders. They needed to “develop into experts in a field they knew nothing about, to the purpose where they may lend billions of dollars and thus propose a brand new asset class to their investment committee,” comparable to using Nvidia graphics processors as collateral.
CoreWeave had long since turned away from cryptocurrencies when the discharge of ChatGPT, the Microsoft-backed OpenAI, in November 2022 sparked an enormous wave of demand for AI computing.
The company seized its opportunity and quickly expanded its financing efforts.
In the primary half of 2023, the corporate raised greater than $420 million in equity and one other $2.3 billion in debt a number of months later. Some existing shareholders sold $642 million value of shares to Fidelity and others in December. Then last month, the corporate closed two more deals to boost $7.5 billion in debt and $1.1 billion in equity.
CoreWeave needed the funding to “scale large enough that we are able to support anyone who desires to take part in the AI boom,” Intrator said, no matter what number of hundreds of chips they needed.
Now CoreWeave is aiming for rapid expansion in Europe. On Wednesday, the corporate announced that it plans to speculate $2.2 billion to construct three data centers in Norway, Sweden and Spain by the tip of next 12 months. The company recently committed $1.3 billion to 2 facilities within the UK, where it has its European headquarters.
To grow faster within the U.S., CoreWeave this week announced a partnership with Core Scientific, a bitcoin miner, to repurpose several of its data centers to accommodate its GPUs. Bloomberg reported Tuesday that CoreWeave also offered to purchase Core Scientific outright for greater than $1 billion. The firms didn’t comment on the report.
Like Amazon Web Services or Microsoft Azure, CoreWeave offers firms an alternative choice to purchasing and maintaining their very own servers and offers flexible access to computing power.
But unlike AWS, which was founded in 2006 and might host an almost infinite range of applications and data, CoreWeave's data center serves a selected area of interest of shoppers with extremely high demands on computing performance, from AI and drug researchers to media conglomerates.
Although CoreWeave relies on Nvidia's GPUs for its service, Intrator says there may be a “misunderstanding” in regards to the relationship between CoreWeave and the world's most respected chipmaker. “Nvidia isn’t giving us access to GPUs because they’ve a vested interest in us or because now we have advantageous access.”
Its competitive advantage does not only lie in having the precise chips, said Intrator. CoreWeave, for instance, has developed software that routinely manages and maintains GPU clusters.
He dismisses the query of whether potential investors can be concerned about backing an organization that had raised capital from Nvidia, only to then spend a good portion of those funds on that company's products.
“It's such a crappy story,” he said. “Nvidia invested $100 million. We took on $12 billion in debt and equity. Relative to the quantity of infrastructure we're buying, that's an insignificant amount.”
Nvidia also denies that firms it has invested in receive preferential access to its latest products. “We don't help anyone get ahead of the curve,” Mohamed Siddeek, head of Nvidia's enterprise arm NVentures, told the Financial Times last 12 months.
Still, Intrator said Nvidia's review of CoreWeave's business and the associated investment was “an incredibly powerful tool” in raising capital.
“There are a whole lot of questions I can answer since the individuals who know more about it than anyone else are willing to commit enormous amounts of capital to what we do,” he said.
He managed to persuade lenders to place up billions of dollars by leveraging a mixture of GPU assets, the worth of long-term contracts signed with customers and a “proven ability to execute,” Intrator added.
By the tip of 2024, CoreWeave can have 28 data centers within the U.S. and Europe and plans to construct a “truly global presence” over the following few years. “The company continues to grow as quickly as possible,” Intrator said.
