OpenAI with a $6.5 billion contract to support the training of OpenAI's most advanced next-generation models.
This is the third contract the two companies have signed this year.
CoreWeave previously announced a strategic agreement with OpenAI worth $11.9 billion in March, followed by another contract for about $4 billion in May.
As part of the initial deal in March, OpenAI became an investor in CoreWeave, taking a stake in the company through an issuance of $350 million in CoreWeave stock.
The total value of the deal between the two AI giants is now worth roughly $22.4 billion.
“We are proud to expand our relationship with OpenAI, a company consistently at the forefront of advancing artificial intelligence,” Michael Intrator, co-founder and CEO of CoreWeave, said in a statement. “This milestone affirms the trust that world-leading innovators have in CoreWeave’s ability to power the most demanding inference and training workloads at an unmatched pace.”
Shares of CoreWeave closed down 5.1% on news of the deal on Thursday, but its stock has soared 224.8% since going public in April.
While investors may have shrugged off the latest agreement between the two companies, the expansion of its partnership with OpenAI can help address one of the primary risks Wall Street has signaled with CoreWeave – namely its heavily concentrated customer base.
In fact, Microsoft (MSFT) accounts for about 71% of CoreWeave's revenue, while its core business model involves renting out Nvidia (NVDA)-powered servers for AI workloads.
Hyperscalers are hungry for GPUs
But Citizens JPM analysts, led by Greg Miller, expect there to be further deals on the horizon for CoreWeave specifically because of its Nvidia-backed business model, especially as hyperscalers seek out companies that provide GPU as a Service (GPUaaS).
“We believe we will continue to see new contracts being signed as we believe hyperscalers are increasingly outsourcing GPU cluster buildouts to GPUaaS providers which are willing to accept balance sheet and technology risk while improving hyperscalers’ time to market,” Miller wrote in a client note on Thursday.
Citizens JPM is projecting the GPUaaS market to eventually grow from its current $3-to-$4 billion size to about $300 billion, “reflecting the rapid acceleration in demand and infrastructure outsourcing by hyperscalers.”
The firm maintained its Market Outperform rating on CoreWeave, while reiterating its $180 price target.
The company has been making strides to diversify its business, announcing earlier this month its newly launched CoreWeave Ventures, which will allow it to invest in founders and their companies that are on the frontlines of building out the AI ecosystem.
CoreWeave also recently disclosed in an SEC filing an order from Nvidia that will be worth at least $6.3-billion as part of an agreement that’s centered around all those GPUs that CoreWeave rents out.
The agreement guarantees that Nvidia will purchase any remaining cloud capacity that CoreWeave has not sold to customers, essentially protecting it from any scenario where there becomes lessening demand for AI computing capacity.
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