The Financial Times has reported a significant surge in lending, amounting to $11 billion, driven by the growing demand for Nvidia (NVDA) chips in the artificial intelligence (AI) market. This boom has given rise to a new sector known as “new cloud” companies, which provide high-performance cloud computing services tailored for AI startups. Prominent lenders such as Blackstone, PIMCO, Carlyle, and BlackRock have spearheaded this emerging debt market, offering substantial loans secured by Nvidia chips—key resources for the AI industry.
Key Players
CoreWeave, a New Jersey-based company, stands out as one of the leading entities in the “new cloud” sector. Over the past 12 months, the company secured over $10 billion in loans, including:
- $1 billion from Blackstone
- $500 million from Magnetar Capital
- Additional funding from major banks such as JPMorgan, Goldman Sachs, and Morgan Stanley.
With these funds, CoreWeave has purchased tens of thousands of Nvidia chips, amassing around 45,000 GPUs, making it the largest Nvidia chip operator in North America. This aggressive expansion has skyrocketed its valuation from $2 billion to $19 billion within 18 months. The company plans to go public in the first half of 2025.
Strategic Shift and Emerging Opportunities
One of CoreWeave’s key investors attributed its success to securing Nvidia’s computing power precisely as AI applications began experiencing explosive growth. He emphasized that the company’s well-timed shift to AI has been instrumental in driving its rapid valuation increase.
Risks of Nvidia Dependency
Despite this growth, the Financial Times warned about the risks of over-reliance on Nvidia chips, often used as loan collateral. Any decline in chip values could destabilize the financial foundation of these companies. For instance, GPU computing costs have dropped in some markets, from $8 per hour to around $2, due to increased supply.
Nvidia, however, denied claims of preferential treatment for specific clients. Mohamed Sadiq, an executive at the company, told the Financial Times: “We do not prioritize any customer over others; everything is handled systematically on the supply side.”
The Role of Major Contracts
CoreWeave’s ability to secure massive loans was bolstered by contracts with companies like Microsoft, the largest backer of OpenAI. The company’s multi-year contract with Microsoft, valued at over $1 billion, encouraged lenders to provide an additional $2 billion in funding for GPU purchases.
Other Players in the Sector
In addition to CoreWeave, other companies have also secured significant financing:
- Lambda Labs obtained $500 million from Macquarie.
- Crusoe Energy raised $200 million from the New York Upper 90 fund and signed a $3.4 billion deal with Blue Owl Capital to build a new data center in Texas, serving Oracle and OpenAI.
Future Challenges and Opportunities
While investors are optimistic, the heavy reliance on Nvidia chips poses potential challenges. As chips naturally depreciate over time, they may not retain their value as reliable collateral. Nat Kopikar of Orso Partners cautioned, “Chips are not investment assets that appreciate over time; they are depreciating assets.”
Despite these concerns, industry leaders like Eric Folke, Chief Strategy Officer at Magnetar, remain confident in the growing demand for AI. Folke stated: “While predicting future demand is difficult, history shows that projections often underestimate the true scale of future growth.”
