In a significant strategic move, OpenAI has entered into a substantial five-year agreement with CoreWeave, a cloud service provider known for its heavy use of GPUs, valued at $11.9 billion, as reported by Reuters, citing sources familiar with the deal.

This agreement includes OpenAI acquiring $350 million in equity from CoreWeave, according to the sources who spoke to Reuters. Notably, this private placement is independent of CoreWeave’s planned initial public offering (IPO).

CoreWeave recently filed for its IPO but has yet to announce its pricing or listing date.

The deal is mutually beneficial for both parties. What’s particularly striking about this agreement, aside from its substantial value, is that CoreWeave’s largest customer prior to this deal was Microsoft. In 2024, Microsoft accounted for 62% of CoreWeave’s revenue, which significantly increased to $1.9 billion, representing a nearly eightfold rise from $228.9 million in 2023.

Backed by Nvidia, with a 6% stake, CoreWeave operates an AI-specific cloud service utilizing a network of 32 data centers. As of the end of 2024, these data centers were operating over 250,000 Nvidia GPUs, according to the company. CoreWeave has continued to expand its GPU capabilities, including the integration of Nvidia’s latest product, Blackwell, which supports AI reasoning.

Such a high dependency on a single customer typically raises concerns among IPO investors and could potentially complicate CoreWeave’s aim to raise $4 billion or more in its IPO. Securing OpenAI as a direct customer through this multi-billion-dollar deal should help alleviate these concerns for CoreWeave.

Microsoft and OpenAI’s Relationship

This move is equally intriguing due to its implications on the complex, evolving relationship between Microsoft and OpenAI, characterized by a mix of collaboration and competition.

It appears that OpenAI CEO Sam Altman has made a strategic play, leveraging Microsoft’s usage of CoreWeave to OpenAI’s advantage, essentially gaining access to the same cloud infrastructure while also obtaining an ownership stake in the company operating it.

Microsoft is a significant backer of OpenAI, with an agreement that entitles Microsoft to a portion of OpenAI’s revenue. However, tensions between the two companies have been escalating as OpenAI’s success grows, with OpenAI competing with Microsoft for enterprise customers and reportedly developing high-priced AI agents.

In January, as part of a large AI infrastructure deal with SoftBank, Oracle, and others, Microsoft ceased being OpenAI’s exclusive cloud provider. OpenAI’s need for additional compute resources is pressing, as highlighted by Altman’s recent comment that the company is “out of GPUs.”

Meanwhile, Microsoft is developing its own AI “reasoning” models comparable to OpenAI’s models, such as o1 and o3-mini, and is working on a family of models called MAI that are competitive with OpenAI. Microsoft also hired Mustafa Suleyman, a rival of Altman, to lead its AI efforts.

CoreWeave, with its origins in crypto mining and founded by former hedge fund professionals, presents a surprising yet significant element in this strategic landscape. The company’s co-founders have already realized $488 million from their shares, with each founder cashing out over $150 million.

CoreWeave carries a substantial debt of $7.9 billion, which the company plans to address with the capital generated from its IPO, aiming to pay down a portion of this debt.

The success of CoreWeave and OpenAI in this venture underscores their ability to generate significant value, figuratively “minting money” through their strategic partnership and technological advancements.

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