Gather around, children. We are about to discuss some financial innovation: using computer chips as collateral for loans.
CoreWeave, a cloud computing startup backed by Nvidia and Magnetar Capital, has secured a $2.3 billion debt facility using Nvidia’s sought-after H100 GPUs as collateral. The company intends to use that money to purchase more high-end chips, among other things.
If your head hurts, let me try to sum this up: Nvidia invested in CoreWeave, which is reliant on Nvidia products, and now those Nvidia products are being used as collateral to buy… what is most likely more Nvidia products. Fantastic.
CoreWeave is a company that came from basically “nowhere”
I find this striking! First of all, these are chips that are collateral, not the actual computers. Second, I’m generally interested in novel startup financial strategies, and this seems novel, alright. Third, I am extremely curious about the risk management here. I repeatedly emailed CoreWeave for comment but didn’t receive a response.
CoreWeave is a company that came from basically “nowhere” — this is the characterization of its co-founder, by the way — to build a data center in Texas and work extensively with Nvidia. Though the company was originally founded to mine Ethereum, it pivoted in 2019 to cloud infrastructure.
Isn’t that funny? Nvidia, historically, has been pretty hostile to its use of GPUs for Ethereum mining, even going so far as to nerf some of its chips to discourage it. Nvidia has also paid the SEC $5.5 million to settle charges, without admitting wrongdoing, that it unlawfully hid how much of its sales relied on the crypto mining market. And yet here it is, deeply entangled with a company that buys a lot of its chips and used to mine Ethereum.
CoreWeave absolutely nailed the timing on its pivot from crypto, so as the AI hype wave began to crest, it caught the attention of clients and investors. There was a shortage of GPUs because of the crypto boom— and though that’s busted, at least temporarily, the AI boom has meant that “who’s getting how many H100s and when is top gossip of [Silicon] Valley,” wrote Andrej Karpathy, who’s at OpenAI and was previously the director of AI at Tesla.
