CoreWeave shares jump 7% after unveiling $6.3 billion Nvidia deal

CoreWeave shares rose more than 7% on Monday after the company revealed details of a previously undisclosed contract with Nvidia worth up to $6.3 billion.The deal, originally signed in April 2023, obligates Nvidia to purchase any unsold data-center capacity through April 2032, providing CoreWeave with a critical safeguard for its capital-heavy operations.The announcement marks the first time CoreWeave has disclosed the size and scope of the arrangement, saying it is now “no longer immaterial in amount or significance.”The company went public earlier this year at $40 a share and has been under close scrutiny from investors over its spending and long-term growth trajectory.Contract provides long-term safety netThe agreement ensures Nvidia will serve as a buyer of last resort for CoreWeave’s unused computing capacity, easing worries about the company’s reliance on a handful of big customers.Nvidia already owns a 6.6% stake in CoreWeave, and the company’s AI-focused data centers are powered by Nvidia’s chips, including the Blackwell line.Analysts said the contract strengthens CoreWeave’s position in a highly competitive cloud market.“The incremental spending by Nvidia is seen as a healthy diversification away from the company’s largest customers,” Barclays analysts noted, pointing to Microsoft and OpenAI as the two firms that have so far dominated its order book.Nvidia deal offers backstop against spending strain and debtCoreWeave has faced persistent investor concerns about the scale of its capital expenditures, forecast at between $20 billion and $23 billion this year alone.The company has argued these costs are “success-based,” meaning infrastructure is being built in response to clear demand rather than speculation.Still, the heavy upfront spending has resulted in large amounts of debt on the company’s balance sheet, with critics warning that underutilized data centers could weigh on profitability.The Nvidia deal acts as a backstop, helping to mitigate those risks by ensuring revenue from otherwise unused capacity.Either Nvidia or CoreWeave can terminate the contract if one party breaches the terms or files for bankruptcy, with 30 days’ written notice required.Expanding client relationshipsThe Nvidia agreement comes alongside other significant contracts CoreWeave has struck in recent months.In March, the company announced a five-year, $11.9 billion deal with OpenAI to provide cloud computing capacity, as well as an additional commitment of up to $4 billion through April 2029.In its second-quarter results, CoreWeave reported surging demand for AI cloud services, though operating expenses rose nearly fourfold to $1.19 billion, underscoring the strain of rapid expansion.By securing Nvidia as a guaranteed buyer of capacity through 2032, CoreWeave has offered fresh reassurance to investors skeptical of its debt-heavy growth model.The deal further deepens ties with Nvidia, a key backer and supplier, while underscoring CoreWeave’s role in powering the next generation of artificial intelligence infrastructure.