CoreWeave Launches $2 Billion Convertible Note Offering Amid AI Infrastructure Push
CoreWeave, an AI infrastructure company that started out as a cryptocurrency mining company and grew into a key player in AI computing
Quick overview
- CoreWeave announced a $2 billion convertible senior notes offering to support its expansion in the AI infrastructure market.
- Despite the funding, investor concerns about the company's $14 billion debt led to a 2.3% drop in shares.
- The company justifies its debt strategy by stating it borrows to build computing power that customers have already committed to purchasing.
- CoreWeave's attempt to acquire Core Scientific for $9 billion failed, but the company remains focused on growing its AI capabilities.
CoreWeave, an AI infrastructure company that started out as a cryptocurrency mining company and grew into a key player in AI computing, announced on Monday that it would raise $2 billion in convertible senior notes due in 2031. The company is still aggressively expanding in the quickly rising AI infrastructure market, but investors were apprehensive and shares fell 2.3% to $86.24.
The convertible notes offering gives the first buyers the chance to buy an extra $300 million in securities. The money from the offering will be used for general business activities and capped-call transactions that are meant to protect shareholders from losing value if the notes are converted to equity.
These capped-call contracts are a strategic hedge that raises the conversion price of the notes. This protects existing shareholders while keeping the company’s finances flexible. CoreWeave can choose to settle the notes in cash, shares, or a combination of both. The precise terms, such as interest rates and initial conversion rates, will be defined at pricing.
Heavy Debt Load Under Scrutiny
The announcement has made people more interested in CoreWeave’s debt situation, which was $14 billion at the end of September. Bloomberg data shows that the company’s five-year credit default swap spreads had risen to 642.965 at the end of Friday, up a lot from 368.395 on October 6. This suggests that investors are becoming more worried about the danger of default.
The company’s latest unsecured senior notes have a 9% interest rate, which adds a lot to its operational expenditures. CoreWeave’s shares has dropped 17% in the last month as worries about the company’s debt have grown.
CoreWeave, on the other hand, has always justified its debt strategy, saying that it borrows money to build computer power that consumers have already agreed to buy at set pricing. This “neocloud” business model, which requires a lot of debt, puts the company in a good position to take advantage of the growing demand for AI computation that outstrips existing capacity.
From Crypto Mining to AI Powerhouse
CoreWeave started off as Atlantic Crypto in 2017 and used GPUs to mine Ethereum. As the cryptocurrency markets fell, the company changed its focus in 2019 to cloud and high-performance computing services. It finally redirected its GPU infrastructure to AI workloads.
The change has worked. CoreWeave now runs a network of more than 33 data centers that were designed just for AI applications. However, the business has not said if the money raised in its most recent round of funding will be used to build further facilities.
Failed Core Scientific Acquisition
CoreWeave reportedly tried to buy Core Scientific, one of the biggest Bitcoin mining companies, for $9 billion. This was after they stopped mining cryptocurrencies. The year-long effort, which started with an offer in June 2024, fell apart when shareholders of Core Scientific voted against the plan.
CoreWeave said that the attempted acquisition was not a return to crypto but a power capacity move. It said it wanted access to about 1.3 gigawatts of power capacity across Core Scientific’s facilities for possible usage in AI, cloud computing, or other GPU-intensive tasks. The cost of the acquisition went up as Core Scientific’s stock price went up during negotiations, which led to the deal’s failure.
The most recent convertible note offering shows that CoreWeave is committed to growing its AI infrastructure footprint through other types of funding, even as investors are weighing the company’s growth potential against its large debt obligations.
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