The Scoop
Microsoft chose not to exercise a nearly $12 billion option to buy more data-center capacity from CoreWeave, people familiar with the matter said, a sign that big tech companies are starting to right-size and tailor their AI budgets.
CoreWeave, which is readying for the year’s most closely watched IPO, quickly found another buyer — OpenAI snapped up the contract last week — and Microsoft has reiterated its plan to spend $80 billion on AI. Nvidia CEO Jensen Huang told thousands of eager fans at the company’s annual conference on Tuesday that the appetite for AI is only growing, and the limiting factor is the raw power needed to run increasingly gargantuan data centers.
Coreweave and Microsoft declined to comment.
The Financial Times reported earlier this month that Microsoft had “walked away from some of its commitments,” a characterization that CoreWeave disputed.
CoreWeave’s IPO, which is seeking to raise up to $2.7 billion, is seen as a litmus test for the broader AI space. It’s the first big public offering for a pureplay artificial intelligence company since ChatGPT released its software in 2022.
Investors panicked in February when an analyst note, strongly refuted by Microsoft, suggested that the company was pulling out of datacenter leases. The market has become hyper-sensitive to any signs that AI spending could fall.
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Rohan’s view
This isn’t a sign that Microsoft is pulling back on AI — “We’re good for our $80 billion,” Satya Nadella said on CNBC — but an indication that the company is being more tactical about exactly when and where it spends. At the same time, OpenAI’s biggest backer is Microsoft, meaning that OpenAI is paying CoreWeave with money that is largely Microsoft’s to begin with.
And there’s the rub: The AI economy is currently a closed loop and will stay that way until a broader swath of economic actors like big and medium-sized companies start spending real dollars on AI software and services. Until then, nearly all the money is coming from a few companies — chiefly Nvidia and Microsoft — which themselves depend on the goodwill of their public shareholders to keep underwriting it all.
The View From Sam Altman
“CoreWeave has been one of our earliest and largest compute partners,” OpenAI chief Sam Altman said in CoreWeave’s roadshow video, adding that CoreWeave’s computing power “led to the creation of some of the models that we’re best known for.”
“Coreweave figured out how to innovate on hardware, to innovate on data center construction, and to deliver results very, very quickly.”
Notable
- Jeffrey Emanuel, the skeptic who sounded the alarm on DeepSeek and sent tech stocks tumbling, compared CoreWeave to WeWork: “Just as WeWork ran into debt payment problems when it rented long-term leases and lost its short-term lease holders during COVID, CoreWeave’s business may not be able to continue to grow its revenue as rapidly.”
- European darling Mistral AI isn’t interested in an IPO right now, CEO Arthur Mensch told Fortune.