Nvidia Doubles Down on CoreWeave: Strategic Lifeline or House of Cards?

In a move that underscores the escalating arms race for AI computing power, Nvidia invested an additional $2 billion in cloud operator CoreWeave this January, purchasing Class A shares at $87.20 each. The chipmaker now holds the second-largest stake in the company, nearly doubling its position as CoreWeave races to build over 5 gigawatts of data-center capacity by 2030. CoreWeave went public last year at a $23 billion valuation after scaling back its IPO ambitions, and has since secured tens of billions in customer commitments from Meta and OpenAI. But the company carries heavy debt, and some analysts question whether Nvidia’s backing masks deeper financial vulnerabilities.

The relationship dates to 2023, when Nvidia initially invested $100 million and signed a $1.3 billion rental agreement for its own GPUs. By early 2026, CoreWeave was deploying Nvidia’s Vera Rubin platform and Vera CPUs, with the latest cash infusion arriving amid aggressive expansion. CoreWeave CEO Michael Intrator dismissed financing concerns as 'ridiculous,' noting the company has raised $25 billion in total capital.

CoreWeave’s public debut in March 2025 was rocky—shares priced at $40, below the $47–$55 range, raising $1.5 billion instead of $4 billion. Nvidia anchored the offering with a $250 million order. Since then, shares have climbed; Bank of America raised its target to $120 in April, citing a $21 billion Meta expansion through 2032 (totaling $35 billion) and a deal with Anthropic. Stock was up 54% year-to-date at the time.

Jane Street joined the fray last month, investing $1 billion at $109 per share and committing $6 billion for cloud services, becoming the fifth-largest shareholder. Anthropic followed with a multi-year pact. Yet revenue concentration remains a worry: Microsoft accounted for 62% of CoreWeave’s business in 2024, with Nvidia at 15%, according to a Kerrisdale Capital short report. Microsoft passed on a $12 billion option in 2025, handing it to OpenAI.

Debt is the engine—and the risk. CoreWeave secured an $8.5 billion GPU-collateralized loan in March, rated investment-grade and backed by Meta’s contract. Earlier, a Blackstone loan breach triggered defaults before the IPO. Capital expenditures are projected at $20–23 billion for 2025 alone. Revenue hit $981 million in Q1 2025, up 420%, but adjusted losses widened to $150 million.

Nvidia CEO Jensen Huang dismissed circularity claims as 'ridiculous,' arguing the investments are small relative to CoreWeave’s needs and the broader ecosystem. Nvidia rents back capacity, signed a $6.3 billion order in 2025 with redirect options, and holds stakes in other neoclouds like Nebius. 'If we didn’t support CoreWeave, they wouldn’t exist,' Huang told reporters.

Risks persist. Kerrisdale is shorting CoreWeave, flagging a cycle where debt-funded GPU purchases are rented back to Nvidia. A Poolside data-center deal fell through in April. Power constraints slow builds; a U.K. expansion with Nscale targets 120,000 Blackwell GPUs. Analysts forecast 2026 revenue between $10.9 billion and $14.9 billion, with a backlog over $67 billion. Shares trade around $110, up from IPO but volatile.

CoreWeave operates 250,000+ GPUs across 32 centers and was first to deploy Nvidia’s GB200 NVL72. OpenAI’s $22.4 billion pact—up from $11.9 billion—signals demand. But execution is everything. Can CoreWeave diversify beyond its whale customers? Can it scale without endless borrowing? Nvidia’s bet says yes. The market will decide if that bet pays off—or blows up.

Source: Webpronews