Hardik Shah@AIStockSavvy
$NVDA $CRWV | Needham on CoreWeave: 'NVIDIA Partnership Includes Likelihood of Backstop on Future Leases'.
"We attended CRWV's sell-side analyst call to discuss its recent partnership and equity investment from NVIDIA. We are positive on the partnership as it should materially help CRWV develop more than 5GW of capacity longer term and more deeply integrate the company's software stack & capabilities with the leading AI compute infra provider. Our three biggest takeaways are 1) Includes NVIDIA backstopping to help CRWV sign future leases/co-lo deals and be more competitive with IG hyperscalers in leasing market; 2) reinforces CRWV as the dominant platform from a software stack standpoint; and 3) pushes back against bears that GPU asset life is shortening (renewed H100 cluster; 95% ASP). Full takeaways below: NVIDIA has invested $2 billion in CRWV Class A common at $87.20/share (~5% discount to Thursday's close). In our view, future leases with HPC operators were becoming more difficult to procure (on both rental rate economics and financing) for CRWV given some credit concerns and with increasing IG hyperscaler competition. On the call back, it became clear that NVIDIA would look to offer a backstop or credit guarantee on future leases to make CRWV more competitive with IG hyperscalers. CRWV will look to fund the >5GW build out with a mix of equity, debt, and prepayments in a similar strategy the company currently employs. The $2Bn raise from NVIDIA more so deepens NVIDIA's exposure to CRWV common, but is not looked at as key to financing these build-outs (5GW+ will require tens of billions in CapEx). GPU asset life: received 95% ASP renewal on large scale H100 cluster which suggests pricing remains attractive on prior gen infrastructure, which goes against a common Bear argument. Future builds will include multiple generations of NVIDA infra: including Rubin platform, and future GPU generations, BlueField storage systems. The 5GW builds will come in the form of building, owning & operating CRWV's own data centers, leasing more sites from HPC operators, and partnering in JVs for development. The capacity development will be internationally and domestically with CRWV receiving sig. demand globally; we would still expect the majority of the incremental 5GW to be in the US."
