Welcome to the podcast.
I'm your host, Jaden Schaefer.
Today on the podcast, we're talking about the massive investment deal that Nvidia has just made.
2 billion is going to go towards CoreWeave, who has a ton of debt, and it's going to help them add 5G five gigawatts of AI compute.
This is an absolutely massive deal.
And this is also a kind of an interesting story, considering the situation that CoreWeave has found themselves in and how they got here.
So we'll be covering all of that on the podcast today.
But before we do, I wanted to tell you about the newest feature that we have just added to AI box that I am so excited about.
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All right, Let's get into the episode today.
So what was really impressive to me is NVIDIA, of course, just like the price tag on this is 2 billion for CoreWeave.
And I think they already had quite a close relationship, because CoreWeave is a data center operator and they're trying to very quickly grow a lot of their AI infrastructure footprint over the next decade.
10 years, really.
So this investment is now going to value CoreWeave's Class A shares at $87.20 a piece.
And it is intended to basically speed up their plan to deploy more than five gigawatts of AI compute capacity by 2030.
So that level of power capacity is going to basically place CoreWeave among the top, you know, the most energy intensive AI infrastructure operators in the world.
It's going to be on par with the same scale that you see.
You know some of these hyperscalers like Google and OpenAI and all of these other people that are, you know, building their own infrastructure.
CoreEve is going to be right there with them.
So As part of this deal, NVIDIA and CoreWeave say that they're going to kind of jointly develop what they're calling AI factories.
These are large scale data centers and they have a very specific purpose, which is for training and running AI models.
And that's all of it is, of course, going to be using NVIDIA's hardware.
So NVIDIA, this is a smart move for them.
They are finding one of the bigger players in data centers and they're saying look, we'll invest in you, but you're going to lock in with our hardware and, of course, also their software stack.
So CoreWeave is also going to standardize on NVIDIA technologies across its platform.
So that includes the upcoming Rubin GPU architecture, which is expected to come after the Blackwell, along with Bluefield networking and storage systems, and NVIDIA's They kind of have this new CPU line that they just announced, which is called Vera.
So CoreWeave is going to be integrating with all of that.
I think it's also a really interesting investment because it's basically a vote of confidence when CoreWeave has been under a lot of scrutiny for its basically the structure of its capital structure right.
So they've leaned really heavily on debt to finance their expansion.
Which of like?
Let's be honest, this company is growing at an absolutely impressive rate, but they're using their own inventory of GPUs as collateral for all of the debt that they've taken on.
So, according to, if you look at PitchBook and you kind of look at some of the data over there, CoreWeave has about 1881 billion in debt.
And as of September last year.
And so at the same time, they also have about $1.36 billion in revenue in the third quarter.
So I think you can see there's also, you know, a lot of demand for their services, but also eat like almost 19 billion in debt.
And let's say they're making like 5 billion a year.
You know they have to go service all of that debt.
So there is a lot of pressure there while they're building a lot of this AI infrastructure.
Their CEO is Michael Intrader, and he has repeatedly defended their model.
I mean, to be fair, $15 billion in revenue.
I mean, like, let's just say their most recent was 1.36.
And so probably a lot lower in the past, but he's probably projecting growth into the future.
So let's just say like five or six billion dollars on six, you know, on 18 billion dollars.
It doesn't take that many years for them to pay that off.
But you also have to know that they are growing rapidly.
They're scaling.
They're taking in, you know, like two billion dollars from video and they're going to probably go spend all of that or spend a big chunk of it on on servicing the debt and all of that.
So.
Their CEO has said that AI has forced companies to rethink traditional financing and also partnership structures.
He basically said, you know, there's no concerns about circular investment in the AI ecosystem.
He's pointed to what basically describes, as a quote, violent change in supply chain demand, one that he said requires a lot of collaboration between chip makers, infrastructure providers and a lot of these AI labs.
And so he's basically saying if you want to remove the bottlenecks, this is the only way that you're going to be able to do it.
Their trajectory over the last few years, I think, just shows how quickly the AI market is reshaping itself.
CoreWeave.
And for those that forget right, CoreWeave actually originally was like a crypto mining company.
So they started really aggressively pivoting to AI infrastructure when the demand for GPU-based compute was just going through the roof.
And I think there's a lot of people that were in crypto mining and then you know the kind of the crypto bear market happened the winter, crypto winter, whatever you want to call it.
It kind of all started with FTX collapsing and the price of a lot of cryptocurrencies was crashing.
And a lot of these miners were not profitable.
But at the exact same time, we had AI, which was starting to scale rapidly.
A lot of people needed this GPU.
And so Corweave was one of those big companies that had all of this infrastructure.
And they're like, okay, guys, we're moving to training AI.
So since going public in March last year they've moved really quickly to expand beyond just kind of raw compute.
They're kind of building a broader AI development stack.
And they're doing this through a lot of acquisitions.
So they're actually going and buying a lot of companies.
I think those deals include a lot of high profile companies.
One of those is Weights and Biases, which is like a really widely used platform for tracking and managing machine learning experiments.
They also had the acquisition of the reinforcement learning startup, which is called Open Pipe.
And then in October, they agreed to acquired Marimo, which is an open source alternative to Jaipur Notebooks, as well as Monolith, another AI focused company.
So I think all of these companies that they're buying shows that they have like it's a very ambitious company and they're trying to give developers a really vertical kind of integrated environment, rather than just renting GPUs as kind of their only revenue source.
They also are kind of continuing to make a lot of relationships with some of the big AI players.
They have a whole bunch of hyperscalers that are using them and a bunch of AI labs.
So that includes OpenAI, Meta, Microsoft.
They also recently expanded their cloud partnership with OpenAI in particular.
So I think all of those relationships have helped to really set CoreWeave as a it's like it's a really good alternative.
Uh, if you're looking for a compute provider um, and there's obviously all of the loud, like all of the largest cloud platforms out there there's aws and google and microsoft but sometimes those companies don't want to use their competitors cloud platforms, and so coreweave seems to be kind of this good alternative um, where they have, you know, tons of scale, but You know people are able to use them.
So I think, beyond just the equity investment, NVIDIA also said that they're going to work really closely with CoreWeave on securing land, which is kind of interesting right.
And then power and grid access for future data center sites.
NVIDIA, obviously a massive company, and it seems like they have a lot of connections, whether that's in the government or other places.
So honestly, this might be a good deal for CoreWeave to work with NVIDIA, who can go and get them land and power and grid access contracts that are like very bureaucratic and hard to get.
So this is definitely a challenge that a lot of AI companies companies are having, like this kind of regional energy infrastructure issue.
And I think NVIDIA is also planning to incorporate some of CoreWeave's AI software and systems, designing them and putting all of those into some of their own reference architectures, which are then going to be used by other companies and cloud providers as blueprints for deploying AI at scale.
So this is really a win-win for NVIDIA and for CoreWeave.
The markets after all of this, after this $2 billion investment reacted very positively to the news.
CoreWeave shares jumped more than 15% after it was all announced.
For NVIDIA, this kind of fits into their broader strategy, right?
They're trying to reinforce the entire AI supply chain.
And I think the primary beneficiary and enabler of the current AI boom is NVIDIA.
And so because of this, they have made dozens of really strategic investments over the past year.
And that's, you know, cloud providers.
That's AI startups.
I mean open AI, like basically all of the big AI startups are getting NVIDIA money.
And I think a lot of the infrastructure partners are also getting a lot of this NVIDIA money, which NVIDIA is now one of.
The is the most valuable company in the world.
And I mean these things fluctuate a bit, but NVIDIA is definitely definitely, is definitely getting a lot of benefit from all of these investments, but the whole ecosystem is also benefiting.
I think Nvidia knows they need to make sure everything is stable.
These companies aren't going to go bankrupt or have any major issues, or that affects the entire market.
So I think if they're backing a lot of these companies like CoreWeave, they're not only just making sure that there is sustained demand for their chips, right?
Because CoreWeave is going to buy more of their chips, but they're also helping remove any sort of practical constraints around power land development.
They could otherwise slow the growth of AI adoption.
They're like, look, we have connections.
We understand the system.
We can get you all of these contracts and help you with everything you need to build out your data center.
So NVIDIA is a really good partner, but also NVIDIA is benefiting a lot from these relationships.
Seems like a win-win and it seems like the markets have kind of agreed that this is something that's going to be beneficial for both of these companies.
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