CoreWeave looks to insurance money to fund AI data centers

In short: CoreWeave says it wants to tap life insurers as a major source of loans to pay for more AI chips and data centers.

What's going on

CoreWeave is a cloud computing company that rents out access to large groups of Nvidia chips. These chips do the heavy lifting needed to run and train AI systems (think of them as the engines that power many AI tools).

The company is spending tens of billions of dollars on chips and data center space, and it is looking for cheaper ways to borrow money. One target is life insurers, which manage trillions of dollars and often buy lower-risk debt.

CoreWeave co-founder Brannin McBee said the goal is to get more of CoreWeave’s chip-backed loans rated “investment grade,” which is a label that suggests a borrower is more likely to pay lenders back. Earlier this year, CoreWeave secured an $8.5 billion loan backed by chips and a long-term contract with Meta to use them. That contract is sometimes called an “offtake,” which is basically a pre-booked customer agreement, like reserving a block of hotel rooms years in advance.

CoreWeave has raised more than $35 billion this year through loans, bonds, and share sales, and it had about $52 billion in debt and lease obligations at the end of June. Interest costs more than doubled year over year to $640 million in the second quarter.

What to watch

Analysts have raised concerns about whether customer demand will stay strong if too many data centers get built, and about the gap between CoreWeave’s long building leases and shorter customer contracts. The next test will be whether insurers are willing to buy CoreWeave loans that are backed by smaller, lower-rated AI labs, not just big firms like Meta.

Source: Financial Times