CoreWeave's shares jump on infrastructure deal with Perplexity
CoreWeave's (CRWV) shares rose more than 8% on Wednesday after the neocloud company announced a multi-year strategic partnership with Perplexity, an AI-powered search company backed by Jeff Bezos and Nvidia (NVDA).
Under the agreement, CoreWeave will serve as a backend cloud partner for Perplexity to run its next-generation inference workloads on NVIDIA GB200 NVL72 GPU clusters.
Financial terms of the agreement were not disclosed.
In addition to powering the inference workloads on the CoreWeave Cloud, the two companies are planning to pilot new services across both organizations.
CoreWeave notes that by utilizing the Nvidia GPU clusters, it "ensures that its infrastructure keeps pace with Perplexity’s rapid growth and the sophisticated requirements of the Sonar and Search API ecosystem."
The company said that it will also roll out the AI-powered Perplexity Enterprise Max across its organization as a web search tool for its employees.
“We’re proud to partner with Perplexity as they scale their inference workloads on CoreWeave’s AI cloud,” Max Hjelm, senior vice president of revenue at CoreWeave, said in a statement. “AI applications running in production require more than just access to raw infrastructure – they require best-in-class performance and reliability as well as a cloud platform designed end-to-end for AI that simplifies compute operations.”
Perplexity has already begun running inference workloads with CoreWeave Kubernetes Service as part of the initial phase of the deployment and is leveraging W&B Models to help train, fine-tune, and manage models from experimentation to production, CoreWeave said.
The partnership with Perplexity "underscores CoreWeave’s role as a specialized AI cloud provider for companies operating advanced AI systems in high-demand production environments," the company added.
“We were impressed by the combination of CoreWeave’s technical aptitude and partner-first mindset that help AI-native companies accelerate their growth and scaling goals,” Dmitry Shevelenko, chief business officer at Perplexity, said in a statement. “CoreWeave is an essential partner in our efforts to optimize our infrastructure and the models we use to provide Perplexity users across industries with the strongest AI tools and agents on the market.”
As CoreWeave has built up a $14 billion debt load, its business model has come under increased scrutiny, especially as the debate over a potential AI bubble continues to create volatility in the markets.
The business model utilized by CoreWeave is essentially centered around taking out large amounts of debt to buy Nvidia chips and then renting out computing capacity to customers.
But with profits still years away, the debt load is becoming more of a concern for Wall Street.
CoreWeave last week reported a loss of 89 cents per share for the fourth quarter, much higher than the consensus expectation for a loss of 68 cents a share. However, its revenue of $1.57 billion did narrowly beat Wall Street's expectation of $1.53 billion.
In a client note on Monday, Citizens analyst Greg Miller reiterated a Market Outperform rating on CRWV shares, while noting that investor "expectations need to reset away from software-like economics toward a digital infrastructure framework for the stock to more accurately reflect the underlying demand for the company's services."
Miller points to contracted backlog growth that supports a strong demand outlook for the company. But he added that earnings variability and margin volatility is to be expected.
“We continue to believe the opportunity for CoreWeave is driven by accelerating compute outsourcing, but that the market is still adjusting to the capital intensity and margin volatility inherent in the company's model,” he said. “While unit economics at the MW (marginal wealth) level remain attractive, deploying GPU capacity requires substantial upfront investment, limiting near-term profitability and introducing earnings variability.”