• CoreWeave adopts aggressive spend strategy for remainder of this year.
• Two major clients, and an expected income of over $24 billion.

The booming demand for AI-related infrastructure is leading CoreWeave to spend big this year, the company said on Wednesday this week.

CoreWeave plans to spend between $20 and $23 billion in 2025, with a projected capital expenditure of between $3 and $3.5 billion in the second quarter of the year. That’s more than the $1 billion analysts expected, and is in response to the increased demand for AI infrastructure, the company says.

CoreWeave creates high-performance infrastructure in data centres, capacity that it sells onto AI platforms. It sources hardware from manufacturers such as Nvidia, which is among investors in CoreWeave, currently holding a 5% stake.

Time for the market to understand?

The company’s CEO Mike Intrator told Reuters that his company’s business does not conform to common models. “CoreWeave has a unique way of structuring its debt and capital spending that will take time for the market to understand,” the news agency said.

First quarter income for CoreWeave was just shy of $1 billion, with net losses of $315 million, a greater operating loss than the same period last year, which saw the company just $129 million in the red. There are reports that CoreWeave has taken loans totalling $12.9 billion in the last two years as it ploughs money into AI facilities that it hopes to sell or lease to AI platforms.

Setting up the necessary infrastructure equipped with the latest Nvidia chips doesn’t come cheap. Billions of dollars of investors’ money is effectively being bet that the AI bubble doesn’t burst. If demand for AI doesn’t materialise, or investors in big AI platforms decide to pull the plug, CoreWeave will likely be one of the casualties. Conversely, if the speed of AI adoption continues, then those funding CoreWeave’s establishment of AI infrastructure should see a decent return.

Last year, Microsoft business comprised over 60% of CoreWeave’s income, but OpenAI has now joined the CoreWeave’s client roster, signing a $12bn deal with the company to supply AI capacity over the next five years. CoreWeave says it has a revenue backlog (revenue it expects to receive from contracts signed) of $25.9 billion.

CoreWeave’s deal with Microsoft has puzzled some analysts, who claim that CoreWeave infrastructure will only be used by Redmond if Microsoft cannot satisfy demand for AI using its own infrastructure.

Cash-out before IPO

The company floated on the stock market in March of this year, raising $1.5 billion, with shares’ opening at $40. Revenues raised by the IPO were lower than the expected $2.7 billion as markets had already begun to cool for AI-related investment, although shares are currently trading at the mid $70 mark.

Notably, in the two years before the IPO, the three co-founders of CoreWeave sold significant parts of their personal holdings in the company (worth around $488 million) through private transactions.

According to the Financial Times, CoreWeave is currently hoping to raise another $1.5 billion to ‘refinance existing liabilities’ (a phrase usually meaning to acquire new debt to pay off interest or other obligations on old debt). That further loan is in addition to the $650 million credit line granted it eight months ago in October, which was funded by Goldman Sachs, JPMorgan Chase, and Morgan Stanley.

CoreWeave’s client list is comparatively short, meaning its debt-fuelled expansion is contingent on a tiny roster of AI companies, namely OpenAI and Microsoft, continuing to need facilities provided by the company. CoreWeave is subject to costs associated with its supply chain, where the majority of its GPU spend goes to Nvidia. Potential alternatives to Nvidia hardware exist and can offer similar levels of power at lower cost, but are increasingly placed under stricture by the US government.

Founded in 2017, CoreWeave’s investors include Nvidia, Cisco, Microsoft, Magnetar Capital, and Fidelity Management & Research.

(Image source: “Pawnbroker” by markhillary is licensed under CC BY 2.0.)