Introduction to the Deal

OpenAI, the artificial intelligence company behind ChatGPT, has made a significant investment in CoreWeave, a cloud service provider specializing in GPU-heavy computing. The five-year agreement is valued at $11.9 billion, with OpenAI receiving $350 million worth of equity in CoreWeave.

This move is seen as a strategic chess play by OpenAI, as it reduces its dependence on Microsoft, which was previously CoreWeave's largest customer. In 2024, Microsoft accounted for 62% of CoreWeave's revenue, which grew to $1.9 billion, nearly an eightfold increase from 2023.

CoreWeave's Background and Operations

CoreWeave was founded by former hedge fund executives and initially operated as a crypto mining operation. The company has since shifted its focus to providing cloud services, particularly for artificial intelligence workloads. CoreWeave's network consists of 32 data centers operating over 250,000 Nvidia GPUs, with plans to expand its infrastructure.

CoreWeave has also added Nvidia's latest Blackwell GPU, which supports AI reasoning, to its network. The company's dependence on Microsoft as a major customer had raised concerns among potential investors, as CoreWeave prepares for its initial public offering (IPO).

Implications of the Deal

The investment from OpenAI is expected to alleviate these concerns, as it demonstrates CoreWeave's ability to attract significant customers beyond Microsoft. This deal will also provide CoreWeave with the necessary capital to pay down its $7.9 billion debt and invest in further expansion.

For OpenAI, this investment secures access to the compute resources it needs to continue developing its AI models. The company has been facing increasing competition from Microsoft, which is developing its own AI models, including the MAI family of models.

The deal also highlights the growing tensions between OpenAI and Microsoft, as the two companies compete for enterprise customers and AI talent. OpenAI's CEO, Sam Altman, has expressed concerns about the company's reliance on Microsoft, and this investment is seen as a move to reduce that dependence.