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Editor’s Selection
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
The AI Infrastructure Boom: A Litmus Test for the Market
Imagine a new stock market listing. A transformational new technology has sparked an infrastructure spending boom. Entrepreneurs from outside the tech industry have spotted the opportunity to borrow heavily to build a new type of infrastructure company, narrowly focused on feeding the new demand. With Wall Street hungry for pure-play ways to invest in the new technology, the conditions for an IPO would seem opportune.
That could be a description of CoreWeave, the wholesaler of AI computing power. Its shares are set to start trading on Wall Street on Friday in a litmus test for the state of the AI capital spending boom.
A Lesson from the Past: Global Crossing
Global Crossing boomed as internet fervour took off, only to crash into bankruptcy four years after it launched. Internet demand was slow to pick up and telecoms companies were left with massive overcapacity. Echoes from the bubble in networks a quarter of a century ago are hard to avoid as the AI infrastructure boom continues apace. But like all comparisons, it is instructive as much for the differences as the similarities.
CoreWeave: A Different Story
CoreWeave, unlike Global Crossing, arrives on Wall Street with significant demand: its revenue leapt eight-fold last year, to $1.9bn. It has another $26.5bn in future revenue already under contract, much of it from giant tech companies which have strong balance sheets and seem unlikely to renege. Yet, like Global Crossing, it is a wholesaler, vulnerable to the spending decisions of a handful of customers.
Timing Issues
Two big timing issues loom. One is the speed at which Nvidia’s technology is advancing, potentially rendering older generations of its GPUs obsolete. The other timing issue has to do with whether generative AI can live up its hype quickly enough to justify the leap in capacity.
Conclusion
A smart trader might see the sense in taking some of their chips off the table. The three founders of CoreWeave, who come from the world of energy trading, have also sold nearly $500mn of shares between them, even before their company goes public. Plenty of investors are likely to welcome a new chance to bet on the AI boom — but at the right price.
FAQs
- Q: What is CoreWeave?
A: CoreWeave is the wholesaler of AI computing power. - Q: How much revenue did CoreWeave generate last year?
A: CoreWeave’s revenue leapt eight-fold last year, to $1.9bn. - Q: What is the company’s outlook for future revenue?
A: The company has another $26.5bn in future revenue already under contract, much of it from giant tech companies which have strong balance sheets and seem unlikely to renege. - Q: What are the timing issues for CoreWeave?
A: The company faces two big timing issues: the speed at which Nvidia’s technology is advancing, potentially rendering older generations of its GPUs obsolete, and whether generative AI can live up its hype quickly enough to justify the leap in capacity.
