Pretty soon we will all be talking about CoreWeave the same way we were all talking about Countrywide Financial back in 2008. https://on.ft.com/426yoOG
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Basically, Nvidia invested a bunch of money in the crypto-mining company CoreWeave so they could buy a bunch of Nvidia chips and rent them out- including to Nvidia itself, which is their second biggest customer. Most of their remaining sales are to Microsoft, which is also Nvidia’s biggest customer.
On top of the money going back and forth between these companies, they’re able to layer a lot of very high interest debt, secured by their rapidly depreciating Nvidia GPUs. They also use this to rent server space from their buddies at Core Scientific, another former crypto miner.
The same kind of circular arrangement exists with the other big investor, Magnetar. Magnetar invests in CoreWeave, and CoreWeave gets contracts to sell computing services to other Magnetar-funded companies, which are prepaid by Magnetar itself.
As the article says, structurally this looks a lot like Enron, except that at Enron they tried to hide their self-dealing. Here it’s right out in the open.
At least with the IPO they can pay off the debt, and Nvidia and the other early investors can cash out, right? Except now here’s Nvidia also promising to buy the shares.
Do you have a sense of how this fits into the overall ecosystem? The article seems to suggest this is an indication of an overall bubble with multiple overleveraged/self-dealing situations. So if the shoe drops, would we see...bkcy of multiple key players?
CoreWeave alone represents something like 6-7% of Nvidia’s sales. So they’re big enough to matter all by themselves. But I would assume these kinds of circular arrangements are common.
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Sounds pretty aligned with what’s in the FT article