CoreWeave's Meteoric Rise in AI Infrastructure: $14.2B Meta Deal Highlights Booming Demand and Risks

CoreWeave Inks $14 Billion Meta Deal, Highlighting AI Demand

CoreWeave Inc. has signed a deal to supply Meta Platforms Inc. with as much as $14.2 billion worth of computing power, underscoring the massive costs of developing and running advanced AI models. "They loved our infrastructure in earlier contracts and came back for more," Chief Executive Officer Michael Intrator said in an interview. As part of the agreement, CoreWeave will provide the social media giant access to Nvidia Corp.'s latest GB300 systems, he said. Meta didn't provide comment. Bloomberg's Anurag Rana reports. (Source: Bloomberg)

Meta strikes expanded $14.2B AI infrastructure deal with CoreWeave - SiliconANGLE

Meta strikes expanded $14.2B AI infrastructure deal with CoreWeave Shares of the cloud data center company CoreWeave Inc. jumped more than 11% in regular trading today after it announced it has signed a new multibillion-dollar agreement with Meta Platforms Inc. to provide it with much-needed artificial intelligence compute infrastructure. The contract requires Meta to pay CoreWeave $14.2 billion for its AI infrastructure services over the next six years, with an option to extend the deal by an additional year, until December 14, 2032, the company said in a filing with the U.S. Securities and Exchange Commission today. It's a significant bounty for CoreWeave, and it comes at a time when big technology firms like Meta are scrambling to lock in access to the infrastructure they need to power their AI initiatives, boosting the value of companies that can provide it. CoreWeave is perfectly positioned to do just that. The company was virtually unheard of a year ago, but its rise has been astonishing. It has emerged as a key mover and shaker in the AI industry because it operates numerous data center facilities around the world that provide companies with access to the most treasured resource: graphics processing units, which power the majority of the world's AI workloads today. Through CoreWeave's cloud infrastructure, companies can access some of Nvidia Corp.'s most powerful new GPUs, which are designed to provide accelerated computing power for large language models. CoreWeave, which went public earlier this year, has spent billions of dollars on building up a network of data centers spanning North America and Europe. As of last year, it had 28 facilities up and running, with plans to complete 10 more by the end of this year. CoreWeave is rivalled by a number of other cloud infrastructure providers that are laser-focused on AI, including Nebius Group N.V., Lambda Inc., Crusoe Energy Systems LLC and Nscale Global Holdings Ltd., but it has emerged as the biggest name among that group. The expanded deal with Meta is crucial for CoreWeave because it's reliant on only a handful of customers. At present, the bulk of its revenue is thought to come from Microsoft Corp., although last week it announced it had expanded an existing deal with OpenAI to train its new models by $6.5 billion, bringing the total value of its contracts with the ChatGPT maker to $22.4 billion. CoreWeave also serves AI developers such as Cohere Inc. and Mistral, though its contracts with those companies are much smaller. In an interview with Bloomberg, CoreWeave Chief Executive Michael Intrator said today's deal will see it provide Meta with access to Nvidia's latest GB300 GPU systems. Those advanced chips are critical for the social media giant, which hopes to leverage AI to enhance the capabilities of new consumer products such as its newly launched Ray-ban smart glasses. Meta has spent tens of billions of dollars on expanding its access to data center infrastructure over the last few years. In April, it said it will increase its capital expenditure to $72 billion this year, with the majority of that being spent on AI data centers. The company is spending through the nose to try and remain at the forefront of AI model development, and not just on infrastructure. In addition, it has been spending millions in order to entice some of the world's top AI engineers to join its development teams.

CoreWeave's $6.3 Billion Backstop Deal With Nvidia: What It Means for Each Company | The Motley Fool

A $6.3 billion agreement between red-hot CoreWeave (CRWV -2.30%) and the company at the very heart of the AI boom, Nvidia (NVDA -0.77%), sent both stocks higher. So what exactly is a backstop, and what does this latest announcement mean for both CoreWeave and Nvidia? A backstop agreement is a safety net -- a guarantee that a company will step in as a buyer of last resort if things don't go according to plan. Many of these deals have involved the guarantee of a lease. If, say, Microsoft agreed to provide a $1 billion backstop for a lease between a data center operator and a cloud provider, the data center operator will be made whole if the cloud provider fails to pay its lease (up to a maximum of $1 billion). Much like a cosigner on a loan, these backstops from large, successful companies allow smaller companies to access significantly more credit at better rates than they could otherwise. In CoreWeave's deal, Nvidia is obligated to pay the company up to $6.3 billion through 2032 if the cloud provider has unsold capacity. The agreement was actually signed in 2023, but was only publicly revealed in an SEC filing this month. The benefit to CoreWeave is pretty straightforward. Building AI data centers is extraordinarily expensive. There are few companies that have cash flows large enough to pay for substantial data center capacity outright. CoreWeave is using debt -- a lot of it -- to build its data centers and acquire capacity from existing infrastructure providers. CoreWeave needs money, and Nvidia's backstop allows it to access the capital it needs. Lenders are much more likely to agree to favorable terms -- or extend credit at all -- when they know one of the most successful companies on the planet is on the hook for billions of dollars. Since the agreement is not new, its public revelation won't really change anything for CoreWeave's ability to access financing. However, it does help quell growing concerns from investors over the sustainability of its business model. That's great for its stock price. While CoreWeave's benefits are more readily apparent, Nvidia wins as well. CoreWeave serves an important role in Nvidia's ecosystem -- a role that extends well beyond being just another customer. CoreWeave lowers the friction for companies that can't afford or justify massive, upfront graphics processing unit (GPU) purchases. Wider access means more sustainable demand. It means more AI workloads inside the CUDA software ecosystem -- a key element of Nvidia's moat -- reinforcing developer lock-in. It also gives Nvidia a buffer and offloads risk. Nvidia gets to reap the benefits of supplying the AI data center build-out without directly spending its own money to build capacity and drive demand. It lets CoreWeave do so instead. That means it's CoreWeave that is spending enormous amounts of its cash -- and the cash it has borrowed -- to build capacity. If AI demand drops sharply, obviously, it would be bad for Nvidia, but it could be disastrous for CoreWeave. Nvidia's obligation to creditors is capped at $6.3 billion. It's CoreWeave that's on the hook for the full amount of its debt. Critically, the deal is structured so that Nvidia gets to use the unsold capacity it is paying for. In the short term, both companies get what they need. Over the long term, however, Nvidia is the clear winner. If AI demand continues at the levels we are seeing today, both companies win. If AI demand cools, however, CoreWeave is in a tight spot. CoreWeave is walking a tightrope, and its success requires AI demand to stay hot. I'm not sure that will happen. It's entirely possible that even if AI succeeds over the long term, there will be a period of retraction. This could prove fatal to CoreWeave given its enormous -- and expensive -- debt load.

Why Did CoreWeave Stock Soar 14.7% This Week? | The Motley Fool

The artificial intelligence (AI) cloud provider announced on Tuesday that it has signed a major deal with Meta Platforms. The deal will be worth up to $14.2 billion and lasts roughly six years, ending Dec. 14, 2031. Meta does, however, have the option to "materially expand" its commitment through 2032 if it so chooses. CoreWeave shares are also getting a lift from Microsoft's chief technical officer (CTO), who told CNBC at a conference this week that regarding the lack of AI computing capacity, a "massive crunch is probably an understatement." Demand remaining white-hot is critical for CoreWeave's growth. The opportunity for CoreWeave and other AI infrastructure providers is enormous, but so are the risks. The company already carries a significant debt load and will continually have to borrow more at high rates or dilute its shareholders through stock sales for the foreseeable future. If AI demand lags -- and that is a real possibility that investors need to consider -- CoreWeave will be in serious trouble.

CoreWeave's Valuation Soars on Meta Partnership, But Is It Overheating? | The Motley Fool

With the AI boom in full swing, that business model has led to jaw-dropping growth. In its second quarter, its revenue jumped 206% to $1.21 billion, showing how fast demand for its services is ramping up. Now, CoreWeave just got another shot in the arm as the stock jumped 12% on Tuesday after announcing another blockbuster deal, this time with Meta Platforms (META 1.30%). Meta is committing to spend up to $14.2 billion through 2032 on cloud computing capacity from CoreWeave, with an option to expand its commitment. The deal comes at a time when Meta has been ramping up its spending on AI, seeing it as a must-win for its future. In June, Meta acquired a 49% stake in Scale AI, a data-labeling start-up, and poached its CEO, Alexandr Wang, to run its new AI lab. On the same day that the CoreWeave news came out, Meta also announced that it's buying the chip start-up Rivos, which designs chips based on RISC-V architecture, an alternative to those used by leading CPU architecture designers Arm, Intel, and AMD. Rivos is also expected to help Meta build out full-stack AI systems. For CoreWeave, the deal builds on the earlier momentum it earned when it signed an expanded $6.5 billion agreement with OpenAI in September, bringing its total contract with OpenAI to $22.4 billion. The drumbeat of positive news for AI includes rival Nebius's $17 billion deal with Microsoft, Oracle's huge cloud computing forecast, and CoreWeave's own wins, including OpenAI, Meta, and a $6.3 billion deal with Nvidia, in which it will buy any of CoreWeave's unused capacity, effectively backstopping the company's growth. Those news items, and improving sentiment around CoreWeave, sparked a recovery in the stock last month. After falling by more than 50% from its peak in June, CoreWeave jumped more than 50% off its lows early in September. CoreWeave is a challenging stock to value. The company is delivering phenomenal top-line growth, but it's also reporting huge losses. The company's business model is risky. It's borrowing billions of dollars to buy Nvidia GPUs and build out the infrastructure to provide next-generation AI computing. That high-interest debt has also led CoreWeave to pay significant interest expense, set to be above $1 billion this year, essentially preventing CoreWeave from turning a profit. For most stocks, to determine an appropriate valuation, you just look at the numbers. However, CoreWeave is in a class of its own. Given its growth rate, in which revenue is still tripling, the upside potential for the stock is tremendous, and conventional cloud computing businesses like Amazon Web Services and Microsoft Azure have shown how profitable cloud computing can be at scale. Rather than parsing the numbers for CoreWeave to determine whether the stock is overvalued, investors are better off considering the future of the AI boom. If the massive capex buildout continues, including on CoreWeave's infrastructure, the stock is a good bet to be a winner. At a market cap of $66 billion, the stock still has room to move higher. However, if the AI boom turns into a bubble and spending suddenly slows, CoreWeave is likely to plunge. While it's locked in multi-billion-dollar deals with the likes of Meta, the company will need more of those to turn profitable and justify its current valuation. Either way, expect the volatility in the stock to continue.

CoreWeave Inks $14b Meta Deal, Highlighting AI Demand

CoreWeave Inc. (CRWV) has signed a deal to supply Meta Platforms Inc. with as much as $14.2 billion worth of computing power, underscoring the massive costs of developing and running advanced AI models. CoreWeave's stock has more than tripled in value since its March initial public offering as the race among major technology companies to build the most advanced AI models sends computing demand soaring. Co-host of Bloomberg Tech Ed Ludlow joined Carol Massar and Tim Stenovec on 'Bloomberg Businessweek Daily' to break it down. Bloomberg videos, provided by MT Newswires

CoreWeave Inks $14.2 Billion Deal With Meta for AI Cloud Infrastructure

CoreWeave inked a long-term artificial-intelligence cloud infrastructure agreement with Meta Platforms worth up to $14.2 billion. "The agreement underscores that behind every AI breakthrough are the partnerships that make it possible," CoreWeave said Tuesday, noting that it continues to win customers for its purpose-built AI cloud and technical expertise. The contract will extend through 2031, according to a recent Securities and Exchange Commission filing, though Meta will have the option to extend its comment for an additional year. CoreWeave shares jump 10%, to $134.22, in premarket trading.