Microsoft stays away from some Coreweave promises ahead of $3.5 billion IPO

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Microsoft has deviated from some of its commitments through cloud computing provider Coreweave, which has dealt a major blow to a company seeking a $35 billion initial public offering next month.

CoreWeave provides Microsoft with computing power from data centers that technology giants use to scale powerful AI models, such as OpenAI’s Chatgpt. The partnership is worth billions of dollars.

However, according to those who know the matter, Microsoft withdraws some agreements on delivery issues and misses deadlines.

Although the people refused to discuss specific details about abandoned services, one of them said the issues would affect Microsoft’s confidence in Coreweave. They added that Microsoft retained many ongoing contracts with Coreweave, which remained a significant partner.

This shift in relationship will take a major blow to the New Jersey-based company, as Microsoft is by far its largest client. Earlier this week, Coreweave filed for a New York IPO in an attempt to raise $4 billion and is expected to value the group for more than $35 billion, which could be the first debut of a tech company’s largest stock market this year.

CoreWeave warned in its IPO filing: “There has been any negative change in Microsoft’s demand, Microsoft’s ability or willingness to perform contracts in laws or regulations in the broader strategic relationship with us, applicable to Microsoft or the region in which it operates, or in a broader strategic relationship with Microsoft, will have an impact on our business, financial condition, operating condition, operating condition and future business, operational and future prospects and broader.”

Microsoft has agreed to spend more than $10 billion in Coreweave services by 2030 under five contracts between the two companies. According to public disclosures, deals with Microsoft accounted for 62% of Coreweave’s total revenue last year.

Previous cryptocurrency mining operations, the core core hub could provide technology companies with cloud computing services to build and train AI models using NVIDIA’s high-performance graphics processing units (GPUs).

The group has accumulated over 250,000 NVIDIA’s AI GPUs, making it one of the chipmaker’s largest customers. Nvidia is also an investor in Coreweave, owning more than 5% of the companies.

“It has a consistent record of delivering complex AI infrastructure on a large scale to the world’s leading AI labs and businesses. Doing so allows us to earn and maintain customer confidence,” Coreweave said.

Microsoft and NVIDIA declined to comment.

As part of the IPO filing, CoreWeave also noted that the risks of “asymmetry” and “delay” in its supply chain are related to its centralized exposure to Nvidia, which supplies all its chips.

The company said it reduced control over its supply chain costs and delays, such as “recent delays associated with Nvidia’s Blackwell GPU.” In October, NVIDIA head Jensen Huang admitted that his new Blackwell chip had “design flaws” that led to delays in shipping to customers.

As part of the IPO process, public documents show that CoreWeave is growing rapidly while accumulating large amounts of debt. Its revenue in 2024 was $1,924, up from $229 million in the same period last year and $16 million in 2022. However, the company’s net loss in 2024 was $863 million, its net loss in 2023 was $594 million, and its net loss in 2022 was $594 million.

Coreweave has raised $14.5 billion in debt and equity in 12 financings, including about $11 billion in loans. It has become a pioneer in Wall Street’s series of asset-backed loans to technology companies with a large number of AI chips.

Its biggest investor is private equity firm Blackstone, which has loaned it about $5 billion in hedge fund Magnetar Capital, which owns about 20% of the company, while Fidelity manages about 8% of the funds.

CoreWeave was built under the name of Atlantic crypto by commodity traders Mike Intrator, Brian Venturo and Brannin McBee to mine cryptocurrency Ethereum, before spinning to AI in 2019.

According to the IPO filing, the three founders sold at least $150 million worth of shares in the company. Coreweave’s 10 directors and executives, including three co-founders, jointly own about 30% of the company but have more than 80% of the voting rights.

Industry observers say Microsoft’s data center strategy has changed this year after ending an exclusive agreement on rental computing power with Openai.

TD Cowen analysts issued a notice last month saying Microsoft withdraws from two data center rental agreements and cited queries with supply chain providers.

In response to the Cowen report, Microsoft said its infrastructure spending plans are still normal. But Microsoft CEO Satya Nadella said in a recent interview that there is “overbuilding” in AI infrastructure.

According to one person close to the matter, Microsoft’s decision to leave Coreweave certain businesses has nothing to do with a bigger shift in its own data center plans. In January, the company said it would spend about $80 billion in the fiscal year ending June 30 and attempt to build the infrastructure needed to train AI models and deploy applications.

On Wednesday, Coreweave announced that it had reached a deal to gain weight and bias, with the AI ​​developer platform starting-up value of $1.25 billion in 2023.