OpenAI Invests $12B in CoreWeave Amid Microsoft Partnership

In a strategic move that's as bold as a grandmaster's chess play, OpenAI has inked a five-year, $11.9 billion deal with CoreWeave, a cloud service provider known for its heavy use of GPUs. This deal, initially reported by Reuters and later confirmed by CoreWeave in a press release, marks a significant shift in the tech landscape.

As part of the agreement, OpenAI will receive $350 million in CoreWeave equity, separate from CoreWeave’s upcoming IPO. CoreWeave, which filed to go public last week, has yet to set a date or price for its market debut.

This partnership is a game-changer for both companies. CoreWeave, previously heavily reliant on Microsoft for 62% of its revenue in 2024, saw its earnings soar to $1.9 billion from just $228.9 million the previous year. With Nvidia backing them and holding a 6% stake, CoreWeave operates an AI-focused cloud service across 32 data centers, boasting over 250,000 Nvidia GPUs by the end of 2024. They've since expanded their GPU arsenal, including Nvidia's latest Blackwell model, designed to enhance AI reasoning capabilities.

The reliance on a single major client like Microsoft can be a red flag for IPO investors. However, securing OpenAI as a direct customer in this massive deal should help CoreWeave reassure investors and smooth the path to its IPO, where it hopes to raise over $4 billion.

Microsoft and OpenAI’s Relationship

This deal adds another twist to the evolving, somewhat strained relationship between Microsoft and OpenAI. It's like OpenAI CEO Sam Altman took a look at Microsoft's use of CoreWeave and decided to up the ante. Not only does OpenAI now have access to the same cloud infrastructure, but it also holds an ownership stake in CoreWeave.

Microsoft, a significant investor in OpenAI with a revenue-sharing agreement, has seen its relationship with OpenAI become increasingly tense as OpenAI's success has grown. OpenAI is now competing with Microsoft for enterprise clients and is reportedly developing high-cost AI agents.

The dynamic shifted further in January when Microsoft ceased being OpenAI’s sole cloud provider as part of the Stargate AI infrastructure deal with SoftBank, Oracle, and others. OpenAI's need for more computing power was evident when Altman recently lamented that OpenAI was "out of GPUs."

Meanwhile, Microsoft is not standing still. They're developing their own AI reasoning models, akin to OpenAI’s o1 and o3-mini, under the MAI family of models. They've also brought on Mustafa Suleyman, a rival to Altman, to head Microsoft AI.

CoreWeave, on the other hand, is an unexpected player in this game. Originally a crypto mining outfit founded by former hedge fund managers, its three co-founders have already pocketed $488 million from share sales. The company also carries a hefty $7.9 billion in debt, which they plan to tackle with the proceeds from their anticipated IPO.

While once they used GPUs to literally mine cryptocurrency, CoreWeave's founders are now using them to figuratively mint money through their cloud services.

OpenAI did not respond to requests for comment on this development.

Note: This story was updated to include a reference to CoreWeave’s press release announcing the deal.