Weaving together a deal

CoreWeave figured out the secret to winning the AI trade: Hitching your wagon to a star.

Shares of the AI infrastructure company popped 5.73% today after Nvidia announced it invested $2 billion in CoreWeave to ramp up its AI data center capacity.

The deets: CoreWeave wants to build over 5 gigawatts of power infrastructure by 2030, which is about the annual energy consumption of 4 million US households, according to CNBC. Today’s investment will help the company pay for the buildout, and as part of the deal, CoreWeave will also get first access to integrate new Nvidia products, including a new CPU dubbed Vera.

It’s not the first time these two companies have joined forces: In September, Nvidia placed a $6.3 billion order with CoreWeave to purchase unused cloud capacity through 2032. In fact, last September was a very busy month for CoreWeave: That’s when the company announced it was going to provide Meta Platforms with $14.2 billion in AI cloud infrastructure, and it also expanded its deal with OpenAI to $22.4 billion in exchange for more computing power.

The AI deal circle is becoming a spiral

While CoreWeave investors cheered today, analysts have long been ringing the alarm bell about how circular AI financing has become—and today is just another prime example.

Nvidia has pledged tens of billions to various firms in the ecosystem to expand the hardware needed to power the AI boom, helping to keep the AI hype alive. But if the tangible payoff from this technology doesn’t meet expectations, the whole house of cards could collapse.

Yet Nvidia CEO Jensen Huang maintains that all of this deal momentum is a sign of exponential potential, not a red flag. “We’re in the beginning of the AI infrastructure build out, and the demand is just extraordinary,” Huang told CNBC in an interview today.

One pro that seems to agree is Jan van Eck, CEO of the investment firm VanEck. In fact, he argues the AI bust already happened.

“They got their teeth kicked in the fourth quarter,” he said on the podcast Excess Returns, pointing to a slew of crypto and tech companies that saw major corrections last year. He argued that the industry has already had a “healthy correction,” and that it’s primed to climb even higher this year.

Despite his optimism, the bubble trash talk is unlikely to stop anytime soon.—LB