In a landmark move, CoreWeave, a specialised cloud service provider, has secured a staggering $2.3 billion debt facility. This funding endeavour, the first of its kind, was led by industry giants like Magnetar Capital and Blackstone, with the collateral comprising Nvidia chips. The influx of funds will primarily fuel the expansion of CoreWeave to handle the surge in AI workloads, the company revealed on Thursday.
The unique aspect of this venture is the use of Nvidia H100 chips, the hot commodity that drives AI computing, as collateral. The collateral’s choice underlines the integral role of this hardware in the costly race for AI supremacy. Coatue, DigitalBridge, BlackRock, PIMCO, and Carlyle were the other lenders involved in the debt facility.
This exceptional loan arrangement is evidence of a burgeoning market for private asset-based financing. Private equity firms are increasingly embracing low-risk lending backed by tangible assets, taking up more corporate debt as banking institutions exhibit a slowdown.
Michael Intrator, the Chief Executive at CoreWeave, shed light on the process of the deal. “We had discussions about the collateral amount, the depreciation schedule compared to the payoff schedule,” he said. Intrator believes that borrowing against their asset base is a cost-effective way for them to tap into debt markets.
CoreWeave, backed by Nvidia, has been thriving due to the generative AI boom. The company owes this surge to its dedicated cloud infrastructure developed on a grand scale. Its alliances with AI startups and cloud providers, some of which are also its competitors, empower it to build clusters that can handle AI workloads.
What sets CoreWeave apart in the fierce competition with traditional cloud providers like Microsoft, Amazon, and Google is its privileged access to the most advanced Nvidia chips. These chips are scarce, giving CoreWeave an edge as its competitors grapple with supply constraints while also trying to create their own chips.
The newly procured funds will go towards the acquisition of more graphics processing units, investments in data centers, and staff recruitment, as stated by the company. CoreWeave recently announced a $1.6 billion data center in Texas and plans to increase the number to 14 across the U.S. by the end of the year.
Earlier this year, CoreWeave had also amassed $421 million in equity led by Magnetar Capital, thus establishing its valuation at over $2 billion.
This news piece is based on an article published on thestar.com.my.