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Limited seats available, first come first served. Let us embark on this sustainable journey together! [Click to Register] As an AI cloud service provider backed by NVIDIA (NASDAW: NVDA), CoreWeave, Inc. (NASDAQ: CRWV) is actively courting the massive capital pools of the insurance industry, seeking lower-cost financing channels to support its tens of billions of dollars in spending on chips and AI infrastructure.
Amid the current AI boom, data center construction and the procurement of NVIDIA (NASDAQ: NVDA) AI chips increasingly rely on debt financing. Life insurance companies, which manage trillions of dollars in assets, have become the primary target for borrowers seeking low-cost capital. CoreWeave, Inc. (NASDAQ: CRWV) co-founder and head of financing Brannin McBee stated that the company plans to have more chip-asset-backed debt, and eventually the corporate entity itself, obtain investment-grade credit ratings, thereby enabling borrowing from insurance institutions. Insurance industry capital is "nearly infinite — it's as if the insurance capital pool gathers the world's massive capital."
CoreWeave, Inc. (NASDAQ: CRWV) is the leader among a new generation of cloud providers. These emerging cloud companies build large-scale NVIDIA (NASDAQ: NVDA) GPU clusters and rent computing power to AI labs and major tech companies. The company was the first to adopt a high-debt financing model to purchase hardware; critics argue this model would be very fragile if AI demand declines.
Earlier this year, CoreWeave, Inc. (NASDAQ: CRWV) secured an $8.5 billion loan backed by chip assets plus a long-term computing procurement agreement with Meta. This was the company's first chip-collateralized loan to receive full investment-grade ratings. McBee said in an interview: "Being able to execute in this market is hugely significant and critically important to us."
Next, CoreWeave, Inc. (NASDAQ: CRWV) hopes to encourage insurance capital to purchase loans backed by orders from lower-rated customers such as AI labs. "Currently, our offtake orders from non-investment-grade customers cannot yet enter the investment universe of insurance capital, but we expect this to become possible in the future," he added, noting that upcoming IPOs from leading AI labs will help accelerate this process.
Over the past four years, McBee and two other co-founders, Michael Intrator and Brian Venturo, transformed CoreWeave, Inc. (NASDAQ: CRWV) from a small crypto mining company into an AI cloud service provider. Its current active computing power capacity is 1.5 GW, with plans to increase it to 8 GW by the end of 2030. To support the procurement of hundreds of thousands of NVIDIA (NASDAQ: NVDA) AI chips for its platform, CoreWeave, Inc. (NASDAQ: CRWV) has become a massive financing machine.
This year alone, the company raised over $35 billion through chip-collateralized loans, high-yield bonds, convertible bonds, and equity sales combined. As of the end of June, its debt plus lease liabilities stood at approximately $52 billion. McBee, who previously worked in natural gas and power trading, completed his first major financing in 2023: a $2.3 billion loan led by Blackstone, collateralized by NVIDIA (NASDAQ: NVDA) GPUs and a Microsoft computing offtake contract.
The effective interest rate on that financing was approximately 15%, far higher than typical junk bond yields, but it opened up an entirely new market for chip-collateralized debt. McBee explained that chip assets are placed in subsidiaries, with cash flows generated by those assets first covering interest, principal, and operating costs, with only the remaining 20% of returns going to the parent company. Since then, CoreWeave, Inc. (NASDAQ: CRWV) has completed five more similar loans, with interest rates steadily declining, raising approximately $27 billion in total.
McBee compared this financing model to power plant financing logic: "First secure the project, then pre-sell long-term computing contracts, and use the contracts plus asset collateral to obtain financing." "We will continue to arrange more delayed draw term loans, without question. I don't think this is frightening debt — this is high-quality debt that accelerates business expansion."
Credit research firm Credit Sights analyst Jordan Chalfin commented that CoreWeave, Inc. (NASDAQ: CRWV)'s financing approach is highly innovative, but as other cloud providers and major tech companies begin attempting similar chip-collateralized financing, the company's future borrowing costs may rise. He also noted that the company's unsecured bond yields have already approached 15%; investors are concerned about duration mismatch risk between long-term data center lease contracts and shorter customer computing contracts. "Once the industry faces a computing surplus, why would customers renew with CoreWeave, Inc. (NASDAQ: CRWV)?"
McBee stated that even though analysts unanimously project the company's free cash flow gap at approximately $25 billion this year, $28 billion next year, and $18 billion by 2028, the company as a whole is still expected to achieve an investment-grade rating within a few years. "If we stopped expanding now, the company would generate massive positive cash flow. But in today's industry, you have to be enormous to be a top player."
Large-scale borrowing has driven up interest expenses: second-quarter interest costs doubled year-over-year to $640 million. CoreWeave, Inc. (NASDAQ: CRWV)'s debt level is approximately 5.8 times its annualized second-quarter EBITDA, and S&P assesses its financial risk level as "aggressive."
Continuous expansion plans drive CoreWeave, Inc. (NASDAQ: CRWV) to constantly seek new capital and lower financing costs. McBee said the company is actively evaluating the $500 billion financing initiative launched by NVIDIA (NASDAQ: NVDA) in August in partnership with Goldman Sachs and other institutions. NVIDIA (NASDAQ: NVDA) CEO Jensen Huang "has assembled a group of powerful capital partners," and McBee expects CoreWeave, Inc. (NASDAQ: CRWV) to participate in shaping that financing program.
This partnership further deepens the relationship between the two companies: CoreWeave, Inc. (NASDAQ: CRWV) is one of the earliest emerging cloud providers that NVIDIA (NASDAQ: NVDA) invested in and supported. NVIDIA (NASDAQ: NVDA) has invested over $2 billion in CoreWeave, Inc. (NASDAQ: CRWV), signed a $6.3 billion agreement to purchase its idle computing capacity, and provided support for its IPO. As of May, Jensen Huang's personal foundation separately purchased $108 million worth of CoreWeave, Inc. (NASDAQ: CRWV) computing time for donation purposes.
However, McBee denied allegations of circular financing, emphasizing that of CoreWeave, Inc. (NASDAQ: CRWV)'s tens of billions in financing, NVIDIA (NASDAQ: NVDA) provided only a few billion dollars. He also pushed back against the view that "CoreWeave, Inc. (NASDAQ: CRWV) is just renting out NVIDIA (NASDAQ: NVDA) chips," stating that hardware is merely the entry-level foundation, and proprietary cloud software is the core source of value — it is this software that helped the company win new customers such as Caterpillar and CapitalOne.
S&P Capital IQ data shows that the three founders collectively sold approximately $200 million worth of company shares this year. McBee explained that the founders were diversifying their personal wealth, with the majority of their assets still held in CoreWeave, Inc. (NASDAQ: CRWV) stock. "We could have bought a farm and retired, but you can see we're still fully committed to running the business every day."
McBee said AI cloud computing demand far exceeds supply. CoreWeave, Inc. (NASDAQ: CRWV)'s 2027 computing capacity is almost entirely sold out, and the company is already signing computing orders for 2028 and beyond. Data center server rooms with ready power infrastructure are especially scarce. "If you gave me 100 megawatts of powered server rooms right now, I could sell them all in 18 seconds. I'd post one message on Slack and it would be gone immediately."
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