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Today on the podcast we're talking about

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a multi-billion dollar deal that is happening

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in the AI space and that involves

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Corweave and Open AI. Now this is

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a fascinating combination and partnership that Open

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AI has recently done. I'm going to

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be getting into all of that, why

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this might be fraying the relationship of

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Open AI and Microsoft and what core

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weave plans on doing with this essentially as

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they're positioning themselves for what is you know

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a lot of people are saying is a

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four billion dollar IPO coming up so we're

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gonna get into all this before we do

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I've dropped the price and if you're

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interested in locking in that $19 a

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month price now where I raise the

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price in the future, it won't be

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raised in the future. It won't be

1:09

raised on you. It won't be raised

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on the future. It won't be raised

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on you. It won't be raised in

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the future. It's getting great. 12

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billion dollars into core weave. This

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is a colossal amount. I mean

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if you remember opening I originally

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took 10 billion dollars from Microsoft

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a couple of years ago for

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like 50% of the company and

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that was like massive groundbreaking news

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and now they're putting 12 billion

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dollars into another company. So what

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exactly does core weave do? Why

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are they doing this? What's going

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on? This is actually a five-year

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11. 9 billion dollar agreement.

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just a little bit shy of

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the $12 billion, but Corweave is

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a GPU heavy cloud service

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provider, which essentially allows you

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to use GPUs on the

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cloud. opening I could, you know,

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if they're trying to train a ton

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of AI models, and they don't have

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enough GPUs, they don't have enough infrastructure,

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they could go and use something like

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Corweave to help them do this. And

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this is really interesting and strategic because

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just recently, I think like a week

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or two weeks ago, Sam Momman said,

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we are running out of GPUs, we

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don't have enough GPUs, he said in

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the past months, he's concerned that Elon

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Elon Elonus... X-A-I has access to more

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GPUs in him because I think they

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kind of relied on like sharing with

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Tesla and SpaceX and they did some

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other like clever things to get a

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whole bunch of GPUs in there to

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train and This is making open AI

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concerned like this is a you know

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a threat to their business if other

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companies are able to get larger amounts

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of G-U-U-S so they're making big partnerships

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and beyond just making a partnership. They're

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directly investing into this company So that

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you know people know or so that

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they have access, I would assume, to

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priority from Corweaves' GPU and their cloud

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service provider. Now, what's interesting here is,

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opening is not the only competitor, and

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up until now, wasn't even their biggest

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customer. So... Before this actually happened, Microsoft

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accounted for about 62% of Corweaves revenue.

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This is just last year, 2024. And

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what's incredible is that the revenue grew

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to $1.9 billion. That's about 8X, what

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it was in 2023, which was 228

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million. So this is. Obviously a massive

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deal and Corweave just filed to go

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public last week. So it hasn't priced

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or scheduled when it's going to go

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public or priced out exactly what it's

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going to go public. People are speculating.

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It's going to be a $4 billion

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IPO. This is fascinating. And now this

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isn't a company that is just kind

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of come out of obscurity. They're back

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by Invidia. And essentially this is an

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AI specific so they really focus on

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AI, cloud service provider. They have a

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network of about 32 data centers at

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this point. Now this is a company

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I've been talking about on the podcast

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for years because they keep raising these

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eye watering rounds of funding. definitely a

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massive player in the space and a

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lot of people are using them to

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help train their AI models, but they

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are currently operating over 250,000 video GPUs.

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Now if I remember correctly, this is

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similar to what you know Grocki has

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under management. I'm trying to remember if

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they have well I think they have

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200,000 and so For one company get

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their hands on this many is very

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very impressive and this is as of

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the end of this year And then

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they the thing that Corwebs doing is

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they're kind of just like renting them

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out so people need them to use

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them And it's just like usage base

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so Since then, Invidia has added a

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bunch more GPUs since the end of

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last year, 2024 at 250. So I'm

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not sure the exact number now, but

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they've also added, invidious, the latest product,

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which is Blackwell. And essentially what this

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does is it's just supporting the AI

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reasoning. It's kind of the newest product.

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So the issue here that everyone has

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been talking about is, okay, fantastic, $1.9

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billion, 8X growth since like the year

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before. This is amazing. This is exactly

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what you want to see in a

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company. kind of scares investors is 62%

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of the revenue is coming from one

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customer Microsoft. So for any reason Microsoft

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said, hey look, we don't like the

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company or we found a better place

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or we're going to do this all

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in-house. That's, you know, 62% of all

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their revenue. They're down because of one

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customer walking away. So this is not

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good, right? That's there to be down

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to 38% of the revenue total and

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then, yeah, not, not great at all.

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So what's really interesting is now we

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have. open AI coming in and actually

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paying them this multi-year deal tons and

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tons of money 12 billion dollars over

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five years so it's you know obviously

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not all at once I feel like

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we see a bunch of these deals

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you know when Amazon or AWS is

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investing in anthropic they did it over

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multiple years they want them to be

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at different benchmarks there's like a bunch

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of different things I don't just get

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it all at once and partially this

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is because I would assume for open

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AI to get approval and financing for

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a deal like this, they don't have

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$12 billion cash in the bank. And

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so they're just like essentially borrowing money

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for this IOU based off of future

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growth projections that they have. And those,

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I'm really curious what those future growth

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projections are, especially as Open AIs, has

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been recently talking about having this like

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$20,000 AI agent that they're going to

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be. pumping out at a $10,000 and

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a $2,000 AI agent a month. So

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like a $20,000 a month AI agent,

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they can do a PhD research and

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all this other stuff. So what's really

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interesting is I'd be super curious what

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their financial projections are, what they think

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they can make, and kind of what

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the terms of their debt or their

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financing they need in order to pay

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this money or what percentage they give

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in cash and etc. etc. etc. etc.

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So very, very interesting. Regardless, not only

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is Open AI now going to have

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access to the same cloud that Microsoft

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has been using, but they also are

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going to actually have some ownership in

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this. And this is, right, Open AI

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Microsoft has this sort of frame relationship.

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People are calling them frenemies. They say

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their relationship is deteriorating. And this is

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because... There's a bit of a competition

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going on and Open AI uses Microsoft

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and Microsoft is yours, their cloud provider.

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If Microsoft is going and using CoreWeve

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to get access to more GPUs presumably,

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it's like OpenAI, you could imagine, it

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might even be getting access to CoreWeve

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through Microsoft so they'll just go directly

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to it, which breaks down. Microsoft's revenue,

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blah, blah, blah. Makes a lot of

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sense, but you could imagine Microsoft isn't

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super happy about it. Microsoft, of course,

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big backer of Open AI, put a

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ton of money in, and now, yeah,

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there's some shaky grounds because they're kind

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of competing directly. Open AI competes directly

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for Microsoft's enterprise customers. And back in

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January, when they, when Open AI announced

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their big Stargate AI infrastructure deal, that

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they're doing with like SoftBank and Oracle,

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Microsoft stopped being Open AI's only cloud

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provider. working with Oracle, and now they

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need more compute resources, right? So they're

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saying they're out of GPUs, and so

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this might be a great way around

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it. But this isn't just, you know,

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Open AI getting under Microsoft skin and

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kind of cutting at their customers. Microsoft

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is, you know, developing the same things

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that Open AI has. They're developing their

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own AI models. and currently they're developing

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their own reasoning models just like Open

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A. So like they're both very much

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competing with each other. Head to Head,

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even though they're like friends and they

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have a great partnership, Open A.I. went

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and hired Sam Altman's rival, Mustafa Sulliman,

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because Microsoft Sulliman was running inflection pie,

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which was a direct competitor to ChatGPT.

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They hired him to be the head

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of Microsoft AI, ChatGPD which is going

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to compete directly with them especially with

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these new reasoning models they have coming

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up. So, Corweave is sort of a,

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you know, a chess move in all

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of this. And what's interesting about the

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company, Corweave, is this, this was founded

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by a bunch of, a bunch of

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the company, Corweave, is, this was founded

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by a bunch of hedge fund guys,

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it actually started out as a crypto

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mining operation, so it makes a lot

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of, a lot of sense. But this

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is a very costly business to get

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into. So there's three co-founders, and what's

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interesting is, of all the money they've

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raised, they have already cashed out about

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$480 million worth of share. So that's

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over $150 million each for the three

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co-founders that they've pulled out. So they

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are doing quite well right now. And

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what's really astounding is that Corwe've has

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about $7.9 billion of debt. Of course,

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this isn't just like a software company

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that needs to raise money to pay

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developers to make software or providers. This

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is a company that is building data

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centers, buying GPUs. So $8 billion of

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debt on their books isn't astounding. That's

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just what it costs for what they've

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been able to build. hoping that this

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new IPO is going to make a

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ton of money, billions of dollars in

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new capital, that essentially they're going to

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use to pay down a bunch of

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their debt, which I'm assuming with interest

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rates today is not, it's pretty painful

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I would imagine to make interest payments

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on $8 billion of debt if today's

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interest rates. So they're going to try

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to do an IPO, raise a bunch

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of money, and pay down some of

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that debt, which is really fascinating. What's

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interesting is the three founders. were at

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one point trying to use GPUs to,

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you know, create money, mine crypto, and

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now they're apparently accomplishing this, except not

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necessarily with crypto, but they're renting them

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out and making money. They're minting money

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with their GPUs. So it seems like

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they have accomplished their mission. I'll keep

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you up to date on everything going

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on with this. This is obviously a

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colossal deal, $12 billion to core. We've

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really excited to see where the IPO

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goes. I'll definitely be reporting on how

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much money they raise, what the pricing

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is, what the schedule for this thing

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to come out and once it launches

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how the company is doing. absolutely fascinating

11:03

spot and very very big company in

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the AI space. Thanks so much for

11:08

tuning in. Make sure to join the

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