CoreWeave secures $6.3B Nvidia deal with guaranteed cloud capacity buyback

CoreWeave has signed a $6.3 billion initial order with Nvidia, securing a deal where the AI chipmaker guarantees to purchase any cloud capacity not sold to customers. The agreement provides CoreWeave with crucial financial protection against potential declines in AI computing demand while cementing its position as a key Nvidia cloud partner.

What you should know: The deal extends through April 2032 and builds on CoreWeave’s existing partnership with Nvidia from April 2023.
• CoreWeave operates AI data centers in the U.S. and Europe, offering access to Nvidia’s highly sought-after GPUs used for training and running large AI models.
• Shares of CoreWeave rose 8% following the announcement, reflecting investor confidence in the guaranteed revenue stream.

Why this matters: The agreement serves as a financial backstop for CoreWeave, addressing investor concerns about the company’s ability to fill data center capacity beyond its largest customers.
• Analysts at Barclays view this as “a positive for CoreWeave given concerns from investors around the company’s ability to fill data center capacity beyond its two largest customers (Microsoft and OpenAI).”
• The deal represents healthy diversification for Nvidia away from its largest customers through incremental spending commitments.

Key partnerships: CoreWeave has secured major long-term contracts with leading AI companies, totaling billions in committed revenue.
• In March, CoreWeave and OpenAI agreed on a five-year contract worth $11.9 billion, providing the ChatGPT maker with cloud computing capacity.
• The company signed an additional agreement with OpenAI worth up to $4 billion through April 2029.

Financial performance: CoreWeave reported surging demand for cloud services in Q2 amid rapid AI adoption, though growth comes with significant operational costs.
• Operating expenses jumped nearly fourfold to $1.19 billion, highlighting the financial strain that rapid revenue growth is placing on the company’s finances.
• The guaranteed Nvidia purchases help mitigate risks associated with this aggressive expansion strategy.

The big picture: This arrangement reflects the broader dynamics of the AI infrastructure market, where cloud providers are seeking guaranteed revenue streams while chip manufacturers diversify their customer relationships to reduce concentration risk.