CoreWeave Stock Surges on Multi-Billion Dollar Deal with Nvidia

Shares of CoreWeave, a cloud infrastructure provider for artificial intelligence (AI) workloads, jumped nearly 8% on Monday after the company announced an order worth at least $6.3 billion from Nvidia.

Under the agreement, Nvidia is obligated to purchase any unsold residual capacity from CoreWeave through April 2032. A full copy of the contract will be disclosed alongside the company’s third-quarter financial results.

A CoreWeave spokesperson noted: “This agreement highlights the scale, trust, and pivotal role CoreWeave plays in driving AI innovation worldwide.”

CoreWeave – Nvidia’s Strategic Partner

CoreWeave already spends heavily on hundreds of thousands of Nvidia GPUs, which it rents out to clients needing AI computing power. As of June 30, Nvidia held about 7% of CoreWeave’s Class A shares.

In its IPO filing, the company acknowledged its heavy reliance on Nvidia as a sole supplier of GPUs. This dependency mirrors broader industry trends, as major cloud providers like Amazon, Google, Microsoft, and Oracle also rely on Nvidia’s chips to meet surging AI demand.

Both Google and Microsoft have turned to CoreWeave for additional capacity when their own infrastructure falls short.

Strong Revenue Growth, Ongoing Losses

In the second quarter, CoreWeave reported $1.21 billion in revenue, up 207% year over year. However, the company remains unprofitable, posting a net loss of $290.5 million during the same period.

Earlier this year, CoreWeave also secured a major $11.9 billion, five-year contract with OpenAI, underscoring the growing demand for high-performance AI computing power.

Market Value Triples Since IPO

Thanks to its latest rally, CoreWeave’s stock has now tripled in value since its March IPO, pushing the company’s market capitalization above $58 billion.

With rapid revenue growth and long-term contracts with industry leaders, CoreWeave is increasingly positioning itself as a critical player in the global AI ecosystem.

Key Considerations for Investors

While CoreWeave shares have shown impressive gains, analysts caution investors to weigh certain risks:

Supplier Dependence: The company’s infrastructure currently relies almost entirely on Nvidia GPUs, leaving it vulnerable to supply chain disruptions.

Ongoing Losses: Despite rapid growth, CoreWeave has yet to achieve profitability, which could pressure financial stability in the long term.

Intensifying Competition: CoreWeave faces tough competition from tech giants such as Amazon, Google, and Microsoft in the cloud infrastructure market.

Investors are advised to closely monitor upcoming financial reports and the company’s strategies for diversification and profitability.

Frequently Asked Questions (FAQ)

1. What is CoreWeave?
CoreWeave is a specialized cloud infrastructure provider, offering large-scale GPU rentals designed for artificial intelligence workloads.

2. Why did CoreWeave’s stock surge?
The stock rose nearly 8% after the company disclosed a $6.3 billion order from Nvidia, reinforcing its role as a key partner in the AI supply chain.

3. Is CoreWeave profitable?
No. Despite generating $1.21 billion in revenue in Q2 2024, the company posted a net loss of $290.5 million.

4. How is Nvidia involved with CoreWeave?
Nvidia is both a major supplier and a shareholder, holding about 7% of CoreWeave’s Class A shares. Nvidia has also committed to purchasing CoreWeave’s unused capacity through 2032.

5. What should investors watch out for?
Investors should be mindful of CoreWeave’s dependency on Nvidia, its ongoing financial losses, and its ability to compete against larger cloud providers in the long term.