Nvidia-backed CoreWeave to spend up to US$23 billion this year to tap AI demand boom

COREWEAVE is looking to spend US$20 billion to US$23 billion this year on AI infrastructure and data centre capacity, the Nvidia-backed company said on Wednesday, as it aims to meet the booming demand from clients, including Microsoft.

The heavy spending plan weighed on its shares, which fell 5 per cent after surging as much as 11 per cent on better-than-expected revenue in its first results as a public company after debuting on the Nasdaq in March.

The company’s projected capital expenditure of between US$3 billion and US$3.5 billion for the second quarter was way above its revenue expectation of US$1.06 billion to US$1.1 billion.

The demand for data centres and high-powered servers have surged as businesses are locked in a race to develop more sophisticated generative AI technology.

Despite its strong market position, CoreWeave’s main business is highly capital intensive that requires heavy upfront investments into advanced processors and systems.

“While the revenue from Microsoft is likely secure for the next three years, CoreWeave represents overflow capacity for Microsoft, which may not need that capacity in the future,” D.A. Davidson analyst Gil Luria said.

The company’s revenue backlog was US$25.9 billion as of March 31, with its five-year deal with OpenAI adding US$11.2 billion to the pile up.

As part of the deal signed in March, CoreWeave will provide AI infrastructure to OpenAI, while the ChatGPT maker will get a stake.

CoreWeave expects annual revenue of US$4.9 billion to US$5.1 billion, above analysts’ expectation of US$4.61 billion, according to data compiled by LSEG.

It reported revenue of US$981.6 million for the first quarter, beating the estimate of US$852.9 million. REUTERS