An upstart rival 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.
Founded in 2017 by former energy traders as a cryptocurrency miner, New Jersey-based CoreWeave has raised $8.6 billion in debt and equity over the past month to boost its valuation to $19 billion. A year ago, Nvidia acquired a $100 million stake that valued it at $2 billion.
The jump in price shows how CoreWeave has become another beneficiary of rising demand for AI chips, which has driven Nvidia to a 2.8tn valuation and boosted shares of other chipmaker partners such as Dell and Supermicro. Now the company is looking to use that capital to build facilities in the UK and Europe.
CoreWeave leases access to its coveted stash of Nvidia chips, including the coveted H100 and upcoming B200, running in its data centers. Its devices have been designed to meet the specific requirements of high-performance computing, from high-speed networking between clusters of AI chips to liquid-cooled servers, said Michael Intrator, its CEO.
CoreWeave’s investors, including hedge funds Magnetar Capital, Blackstone and Coatue, are betting that surging 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 20 years ago,” Intrator said, calling Tesla the Ford of Big Tech.
Intrator said it was “incredibly difficult” to reach out to its first lenders, who had to become “experts in an industry they knew nothing about to the point where they could lend billions of dollars and hand it over to their investment committee to design a new asset class ”, such as using Nvidia GPUs as collateral.
CoreWeave long ago moved away from cryptocurrencies when the release of Microsoft OpenAI-backed ChatGPT in November 2022 unleashed a huge wave of demand for AI computing.
The company seized its opportunity and quickly increased its financial efforts.
It raised more than $420 million in equity capital in the first half of 2023, and a few months later another $2.3 billion in debt financing. Some existing shareholders sold $642 million worth of stock to Fidelity and others in December. It then completed two more transactions last month to raise $7.5 billion in debt and $1.1 billion in equity.
CoreWeave needed the funding to “be big enough that we could support anyone who wanted to participate in the AI boom,” Intrator said, regardless of how many thousands of chips it needed.
Now CoreWeave is focusing on rapid expansion in Europe. The company on Wednesday revealed plans 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 to two facilities in the UK, where it has its European headquarters.
To accelerate growth in the US, CoreWeave this week announced a partnership with Core Scientific, a bitcoin miner, to repurpose several of its data centers to host GPUs. CoreWeave also offered to buy Core Scientific outright for more than $1 billion, Bloomberg reported Tuesday. The companies did not comment on the report.
Like Amazon Web Services or Microsoft’s Azure, CoreWeave offers an alternative to companies that buy and maintain their own servers and offers flexible access to computing power.
But unlike AWS, which was founded in 2006 and can host an almost infinite variety of applications and data, CoreWeave’s data center serves a specific niche of clients with extremely high demands on computing power, from AI and drug researchers to media groups.
Despite Intrator relying on Nvidia GPUs as the core of its services, it says there is a “misunderstanding” about CoreWeave’s relationship with the world’s most valuable chipmaker. “Nvidia doesn’t give us access to GPUs because they have some interest in us or because we have some advantageous access.”
Its competitive advantage was more than just having the right chips, Intrator said. For example, CoreWeave has developed software that automatically manages and maintains GPU clusters.
It reflects questions about whether potential investors are wary of backing a business that has raised capital from Nvidia only to spend a significant portion of those funds on the company’s products.
“It’s such a stupid story,” he said. “Nvidia invested $100 million. We have [raised] $12 billion in debt and equity. It’s an insignificant amount of money relative to the amount of infrastructure we’re buying.”
Nvidia also denies that companies it has invested in get preferential access to its new products. “We’re not helping anyone jump the queue,” Mohamed Siddeek, head of Nvidia’s venture arm NVentures, told the Financial Times last year.
Still, Intrator said having Nvidia explore the CoreWeave business and agree to invest is an “incredibly powerful tool” when it comes to raising capital.
“There’s an awful lot of questions that I’m able to answer based on the fact that people who know more about this than anyone else are willing to put a huge amount of capital into what we’re doing,” he said.
It was able to convince lenders to raise billions of dollars by leveraging a combination of its GPU assets, the value of long-term customer contracts and “proven ability to deliver,” Intrator added.
By the end of 2024, CoreWeave will have 28 data centers in the US and Europe, with plans to create a “truly global footprint” in the next few years. “The company continues to scale as fast as it can,” Intrator said.