An upstart challenger to cloud computing giants Amazon and Microsoft is using its alliance with Nvidia to turn artificial intelligence chips into a “new asset class” and raise billions of dollars.
New Jersey-based CoreWeave, which was founded in 2017 by former energy traders as a cryptocurrency miner, raised $8.6 billion in debt and equity last month to boost its valuation to $19 billion. A year ago, Nvidia took a $100 million stake, valuing it at $2 billion.
The price increase shows how CoreWeave has once again become a beneficiary of growing demand for AI chips, which has propelled Nvidia to a $2.8 trillion valuation and driven up shares of the chipmaker’s other partners, such as Dell and Supermicro to rise. Now the company wants to use that capital by building facilities in Britain and Europe.
CoreWeave is leasing access to its coveted stock of Nvidia chips, including the in-demand H100 and the soon-to-be-released B200, running in its data centers. The facilities are designed to meet the specific demands of high-performance computing, from high-speed networking between clusters of AI chips to liquid-cooled servers, said Michael Intrator, CEO.
CoreWeave investors, including hedge fund Magnetar Capital, Blackstone and Coatue, are betting that rising demand for specialized AI services will reshape the $500 billion cloud computing market, despite the tens of billions Big Tech companies are spending on their own data centers.
“The way the cloud will be used for the next generation is very different from how the cloud was used at its inception 20 years ago,” says Intrator, who calls the company the Tesla to Ford of Big Tech.
Intrator said it was “incredibly difficult” to pitch to the first lenders, who “had to become experts in an area they knew nothing about, to the point where they could borrow billions of dollars and take it to their investment committee to build a new asset class,” such as using Nvidia’s graphics processing units as collateral.
CoreWeave had long turned away from cryptocurrencies when the release of Microsoft-backed OpenAI’s ChatGPT in November 2022 unleashed a huge wave of demand for AI computing.
The company seized the opportunity and quickly ramped up its financing efforts.
It raised more than $420 million in equity in the first half of 2023, and another $2.3 billion in debt financing a few months later. Some existing shareholders sold $642 million worth of stock to Fidelity and others in December. Last month, it closed two more deals to raise $7.5 billion in debt and $1.1 billion in equity.
CoreWeave needed the funding to “scale large enough that we could support anyone who wanted to participate in the AI boom,” Intrator said, regardless of how many thousands of chips they needed.
Now CoreWeave has set its sights on rapid expansion in Europe. Plans were unveiled on Wednesday to invest $2.2 billion to build three data centers in Norway, Sweden and Spain by the end of next year. It recently committed $1.3 billion for two facilities in Britain, where it has its European headquarters.
To expand more quickly in the US, CoreWeave this week announced a partnership with Core Scientific, a bitcoin miner, to repurpose several of its data centers to host its GPUs. Bloomberg reported Tuesday that CoreWeave had also offered to buy Core Scientific outright for more than $1 billion. The companies have not yet responded to the report.
Like Amazon Web Services or Microsoft’s Azure, CoreWeave offers an alternative for companies that purchase and maintain their own servers, providing flexible access to computing power.
But unlike AWS, which was founded in 2006 and can host a virtually endless array of applications and data, CoreWeave’s data center serves a specific niche of customers with extremely powerful computing needs, from AI and drug researchers to media groups.
Despite relying on Nvidia’s GPUs for the core of its services, Intrator argued that there was a “misunderstanding” over CoreWeave’s relationship with the world’s most valuable chipmaker. “Nvidia is not giving us access to GPUs because they have a vested interest in us or because we have access to them in a beneficial way.”
The competitive advantage was more than just having the right chips, Intrator said. For example, CoreWeave has developed software that automatically manages and maintains clusters of GPUs.
He deflected questions about whether potential investors would be concerned about backing a company that raised capital from Nvidia, only to spend a significant portion of that money on that company’s products.
“It’s such a nonsense story,” he said. “Nvidia has invested $100 million. We have [raised] $12 billion in debt and equity. It is an insignificant amount of money in the relative size of the amount of infrastructure we are buying.”
Nvidia also denied that companies it invested in were given preferential access to its new products. “We’re not helping anyone jump ahead,” Mohamed Siddeek, head of Nvidia’s venture arm NVentures, told the Financial Times last year.
Nevertheless, Intrator said it was “an incredibly powerful tool” to have Nvidia investigate CoreWeave’s business and agree to raise capital.
“There are an awful lot of questions I can answer based on the fact that the people who know more about this than anyone else are willing to put enormous amounts of capital into what we do,” he said.
He convinced lenders to raise billions of dollars by leveraging a combination of the GPU assets, the value of long-term contracts signed with customers and a “proven ability to execute,” Intrator added.
By the end of 2024, CoreWeave would have 28 data centers in the US and Europe, with plans to create a “truly global footprint” in the coming years. “The company continues to scale as quickly as possible,” Intrator said.