CoreWeave lands $11.9bn AI deal with OpenAI amid IPO speculation

CoreWeave has bagged a $11.9 billion AI infrastructure contract with OpenAI, a move that will significantly enhance the computing power required to scale artificial intelligence applications, including the global expansion of ChatGPT. This five-year agreement is designed to provide OpenAI with high-performance cloud infrastructure, enabling it to train and deploy AI models more efficiently.

In addition to the contract, OpenAI has committed to investing $350 million in CoreWeave stock, although this investment remains independent of the cloud-computing company’s highly anticipated initial public offering (IPO). The agreement further strengthens OpenAI’s access to specialised AI computing infrastructure, ensuring it can keep up with the growing demand for advanced AI systems.

CoreWeave’s co-founder and CEO stated that the partnership underscores the company’s ability to deliver high-performance AI infrastructure and reinforces its reputation as a key provider for cutting-edge artificial intelligence research and development. The deal solidifies CoreWeave’s position in the AI infrastructure market, particularly as it prepares for its IPO, which has drawn significant interest from investors.

Why Is CoreWeave Expanding Its AI Infrastructure Network?

CoreWeave, backed by Nvidia, has been rapidly scaling its cloud services to accommodate the increasing demand for AI computing power. The company operates a cloud network of 32 data centres, housing over 250,000 Nvidia GPUs, including the newly introduced Blackwell GPUs, which are specifically designed for AI model training and inference.

This expansion comes as AI-driven cloud computing services face surging demand from companies like OpenAI, which require vast computational resources to support their AI-powered applications. The addition of OpenAI as a direct client not only strengthens CoreWeave’s market position but also addresses investor concerns regarding customer concentration risks as the company moves towards its IPO. Investors have previously raised concerns about CoreWeave’s dependence on a small number of major customers, but this agreement signals diversification in its client portfolio.

How Does This Deal Impact OpenAI’s Relationship With Microsoft?

OpenAI’s decision to expand its AI infrastructure partnerships highlights an evolving shift in its relationship with Microsoft, its largest investor and a long-time strategic partner. While Microsoft remains a key collaborator through revenue-sharing agreements, OpenAI has been broadening its cloud partnerships, previously securing deals with SoftBank and Oracle.

In January, OpenAI became part of SoftBank’s $500 billion Stargate AI infrastructure initiative, which led to Microsoft losing its status as the exclusive cloud provider for OpenAI. The shift reflects OpenAI’s strategy to secure multiple computing providers, ensuring redundancy and scalability as it continues to develop next-generation AI models.

OpenAI CEO Sam Altman has been vocal about the company’s urgent need for additional computing resources, recently stating that OpenAI is “out of GPUs” and must expand its computing capacity to support AI model training and deployment. The agreement with CoreWeave is expected to play a critical role in meeting these infrastructure demands while reducing reliance on a single provider.

Altman noted that advanced AI systems require vast computing power, and CoreWeave’s infrastructure will complement OpenAI’s existing partnerships with Microsoft, Oracle, and SoftBank, ensuring continued AI advancements.

Is Microsoft Developing Its Own AI Models to Compete With OpenAI?

While Microsoft has been a major supporter of OpenAI, it has also been actively developing its own proprietary AI models under the MAI brand, positioning itself as a direct competitor. The company has appointed a senior AI strategist to oversee its AI research and development, signalling its intent to expand its in-house AI capabilities.

Microsoft’s latest AI models, including o1 and o3-mini, are positioned as alternatives to OpenAI’s offerings. This growing competition suggests that Microsoft is working to reduce its dependence on OpenAI’s technology while expanding its own AI-driven product portfolio. The overlap in AI model development adds complexity to the Microsoft-OpenAI relationship, particularly as both companies continue to seek dominance in AI cloud computing.

How Will CoreWeave’s IPO Be Affected by Microsoft’s Alleged Contract Withdrawals?

Recent reports have raised questions about Microsoft’s long-term commitments to CoreWeave, with the Financial Times alleging that Microsoft has withdrawn from certain contractual obligations. While CoreWeave has not publicly confirmed these claims, the speculation has led to concerns about how such changes could impact the company’s expected $35 billion IPO.

Microsoft is projected to contribute 62% of CoreWeave’s 2024 revenue, which is estimated to reach $1.2 billion. Any reduction in Microsoft’s commitments could affect investor sentiment as CoreWeave moves closer to its public listing. The company has been actively expanding its customer base and securing high-value AI infrastructure contracts like the OpenAI deal to mitigate risks associated with reliance on a few major clients.

What Is CoreWeave’s Strategy for Strengthening Its AI Ecosystem?

To further solidify its position in the AI infrastructure market, CoreWeave recently announced the acquisition of Weights & Biases, a leading AI development platform. This acquisition will integrate CoreWeave’s cloud computing infrastructure with Weights & Biases’ tools for AI model training, evaluation, and monitoring.

By combining high-performance AI infrastructure with AI model development tools, CoreWeave aims to provide a more comprehensive solution for companies looking to scale their AI-driven applications. This move aligns with the company’s broader strategy of expanding its AI ecosystem, ensuring long-term growth beyond its traditional cloud computing services.

As CoreWeave prepares for its IPO, securing long-term, high-value AI partnerships will be a key factor in shaping investor confidence. The OpenAI deal strengthens its credibility as a leading AI cloud provider, but the company’s ability to navigate competition, customer concentration risks, and evolving industry dynamics will be critical to its future success.