Even by the mind-boggling standards of the artificial-intelligence (AI) boom, the growth of CoreWeave is striking. Two years ago the so-called neocloud, which rents out access to AI computing power, was a scrappy startup generating about $200m a year in revenue with a small fleet of data centres. Today things look rather different. Analysts expect it to make over $5bn in sales this year. As of January it operated 28 data centres, with ten more being added this year. Since it listed in March, its market value has rocketed by over 300%, to around $75bn (see chart).
In an effort to sustain that trajectory, CoreWeave announced on July 7th that it planned to acquire Core Scientific, a cryptocurrency miner, in a $9bn all-stock deal. The transaction gives it ready-built data centres and power agreements with local utilities, both of which are needed to meet ballooning demand for AI.
CoreWeave, which also started life as a crypto miner, already leases facilities from Core Scientific and other similar firms. The deal will thus lower its operating costs, saving around $10bn over the next 12 years, according to the company. CoreWeave has also said that the added scale will cut the interest rate on its borrowings by a few percentage points. That matters because the firm has piled on debt to fuel its expansion, including novel loans backed by the value of AI chips. As of March it had $10.6bn of net debt, equivalent to around six times its annualised operating profit (before depreciation and amortisation).
CoreWeave’s rapid ascent could still be derailed, however. One risk is competition. Although it is the biggest of the neoclouds, it has plenty of rivals, including Lambda, one of the first AI-focused cloud providers; Crusoe Energy, another former crypto miner; and Nebius, which was spun off from Yandex, Russia’s answer to Google. These other neoclouds are expanding. Lambda raised a fresh tranche of financing in February. Nebius recently increased its planned capital spending for 2025 by a third. Meanwhile, the cloud giants have been busily building more AI data centres of their own. Some are cutting prices, too. Last month Amazon Web Services, the e-commerce giant’s cloud arm, lowered the cost of renting its AI chips by between 25% and 45%.
That, in turn, points to a second problem for CoreWeave: its awkward relations with the tech giants. Microsoft accounted for 72% of revenue in the first quarter of this year. It leases CoreWeave’s capacity as a way to serve its own cloud-computing customers when demand outstrips what it can supply. To reduce its dependence on its biggest customer, CoreWeave has been pursuing direct relations with companies that need access to its computing power, including striking a deal worth $12bn over five years with OpenAI, a big spender with Microsoft.
CoreWeave’s relations with Nvidia, its principal supplier as well as a big investor, make matters more delicate still. The AI-chip colossus wants CoreWeave to succeed because that weakens the bargaining power of the cloud giants, which are Nvidia’s biggest customers. As a pawn in the power games of the world’s most valuable companies, CoreWeave could well be sacrificed if it is deemed to no longer serve a purpose. In the long run, simply owning AI chips won’t be a defensible “moat” for neoclouds, argues Antoine Chkaiban of New Street Research, a firm of analysts.
That will be especially true if demand for AI cools—the third, and gravest, risk for CoreWeave. Many companies, hamstrung by archaic IT systems and a lack of technical talent, are struggling to make use of the technology. Some are already quietly scaling back their ambitions. Still, if interest falters, the neoclouds could always pivot back to crypto. Bitcoin, after all, is trading at a record high. ■
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