Microsoft signs multi-billion dollar deal with CoreWeave for AI compute capacity.

Microsoft has agreed to spend potentially billions of dollars over multiple years on cloud computing infrastructure from startup CoreWeave, which announced a $200 million funding round on Wednesday, bringing its valuation to $2 billion. The company, which sells simplified access to Nvidia's graphics processing units—considered the best available for running AI models—signed the deal with Microsoft earlier this year to ensure that OpenAI, which operates the viral ChatGPT chatbot, will have adequate computing power going forward. OpenAI relies on Microsoft's Azure cloud infrastructure for its compute needs. Both Microsoft and CoreWeave declined to comment on the arrangement.

The investment reflects the intense demand driving the generative AI rush that began after OpenAI introduced ChatGPT to the public, demonstrating that AI can produce sophisticated responses to human input. Many companies, including Google, have since rushed to add generative AI to their products, while Microsoft has released chatbots for services such as Bing and Windows. With such surging demand for infrastructure, Microsoft needs additional ways to access Nvidia's GPUs. Nvidia's stock price is up 170% this year, and the company's market cap briefly topped $1 trillion after it issued a forecast for the July quarter that was over 50% higher than Wall Street estimates. Nvidia's finance chief Colette Kress attributed the growth to "data center, reflecting a steep increase in demand related to generative AI and large language models."

CoreWeave's funding came from hedge fund Magnetar Capital as an extension of a $221 million round in April, when Nvidia invested $100 million. Founded in 2017, CoreWeave now has 160 employees and claims it can deliver computing power that's "80% less expensive than legacy cloud providers." The company offers Nvidia's A100 GPUs, which target AI, data analytics and high-performance computing, as well as less expensive A40 GPUs marketed for visual computing. CEO Michael Intrator reported that revenue has "gone up by many multiples from 2022 to 2023." Some CoreWeave clients have struggled to obtain sufficient GPU power through major cloud providers, and prospects seeking A100 or newer H100 GPUs have sometimes been recommended the A40 alternative, which Intrator said "will do an excellent job at a very cost-effective price." Nvidia CEO Jensen Huang mentioned CoreWeave by name at Nvidia's GTC conference in March, and Nvidia's finance chief Kress referred to the company by name on the company's earnings call.