OpenAI has signed a five-year, $11.9 billion agreement with CoreWeave, a GPU-heavy cloud service provider, which includes a $350 million equity stake for OpenAI, as reported by Reuters.
CoreWeave’s projected IPO and revenue growth
The deal is separate from CoreWeave’s planned initial public offering (IPO), which the company filed for last week but has yet to price or schedule. CoreWeave’s revenue skyrocketed in 2024, reaching $1.9 billion, nearly an eightfold increase from $228.9 million in 2023, with Microsoft accounting for 62% of that revenue.
Backed by Nvidia, which holds a 6% ownership, CoreWeave operates an AI-specific cloud service with a network of 32 data centers housing over 250,000 Nvidia GPUs. The company has since increased its GPU count, incorporating Nvidia’s latest Blackwell product, which supports AI reasoning.
Microsoft was previously CoreWeave’s largest customer, and the dependency on a single client raised concerns among IPO investors, potentially hindering CoreWeave’s efforts to raise $4 billion or more in its IPO. The emergence of OpenAI as a direct customer through this deal may alleviate some investor apprehension.
Tensions in Microsoft’s relationship with OpenAI
This development also highlights the evolving relationship between Microsoft and OpenAI. As both companies compete for enterprise customers, tensions have been rising, particularly as OpenAI has expanded its offerings. OpenAI competes with Microsoft’s in-house AI developments, including similar models, and recently ceased being solely dependent on Microsoft for cloud services through a deal known as the Stargate AI infrastructure agreement.
CoreWeave began as a crypto mining operation and has seen its founders cash out nearly $488 million in shares, each receiving over $150 million. The company currently reports $7.9 billion in debt but plans to use proceeds from its IPO to reduce that debt if it successfully raises the anticipated capital.
CoreWeave, set to debut on Nasdaq, reported that revenue for 2024 increased by more than 700% with a customer base that includes Meta, IBM, and Cohere. The company valued itself at $19 billion in a funding round earlier this year and is aiming for a valuation exceeding $35 billion in its upcoming IPO.
CoreWeave secured a $650 million credit line in October to further expand its business operations and data center capabilities. With its expansion, the company achieved its target of 32 data centers by the end of 2024. Plans include the addition of 10 more data centers in 2025.
Featured image credit: Andrew Neel/Unsplash
