Nvidia-Backed Cloud Provider Hires Morgan Stanley to Sell $500 Million of Employee Shares
CoreWeave, a fast-growing cloud computing startup that rents specialized servers for developing artificial intelligence, has hired Morgan Stanley to sell employee stock to investors at a valuation of at least $6 billion, three times higher than its valuation in an equity financing in May, according to someone with direct knowledge.
The deal involves selling about $500 million worth of existing common shares, which would represent about 8% or CoreWeave’s stock, depending on the final valuation. CoreWeave’s three co-founders, along with some employees, are expected to take part in the sale, this person said. The deal terms CoreWeave is seeking mean prospective buyers of the stock would likely need to value the company at more than 12 times its projected 2023 revenue—roughly double the average forward revenue multiple among publicly traded cloud firms, according to Koyfin.
THE TAKEAWAY
• Nvidia has propped up CoreWeave as an alternative to big cloud providers
• CoreWeave is also considering raising equity financing as part of the sale
• The company is aiming for a future IPO
The total value of the shares CoreWeave’s management hopes to sell is unusually large for an employee share sale. The move comes as venture investors are still smarting from their decisions to let the founders of several crypto, enterprise software and other companies each sell hundreds of millions of dollars’ worth of shares at the peak of the startup funding boom in 2020 and 2021. The value of some of those firms has since plummeted. To be sure, CoreWeave is in a much stronger financial position than many of the firms whose founders cashed out. And it has raised $2.7 billion in debt and equity this year alone as it races to build data centers across the country.
The sale of shares is also notable given that CoreWeave, which started as an ethereum-mining business in 2017, only began to take off earlier this year. That’s when Nvidia selected it as one of the few recipients of its most advanced server chips for AI—precisely at a moment when demand for the chips went through the roof.
Anyone buying CoreWeave shares would have to believe the company will remain close to Nvidia. The chipmaker’s main customers for server chips are major cloud providers like Amazon Web Services, but it also views them as competitors because the cloud firms make their own AI chips.
While proceeds from the sale will go to the CoreWeave employees selling shares, the company would consider selling new shares if demand pushes the company’s valuation near $8 billion, said the person with direct knowledge of the process. Morgan Stanley is expected to set the valuation in mid-September, this person said. CoreWeave’s founders have told shareholders the share sale is intended to diversify its investor base as the company aims for a future initial public offering, this person said.
A spokesperson for CoreWeave did not immediately respond to a request for comment. A spokesperson for Morgan Stanley declined to comment.
Bloomberg reported earlier that CoreWeave hired an adviser to help it sell a minority stake in the company, but did not specify the nature of the deal.
CoreWeave rents access to Nvidia’s hard-to-get graphics processing units, which AI and machine-learning developers need to develop software such as the large-language model that powers OpenAI’s ChatGPT. Nvidia invested $100 million in CoreWeave earlier this year and granted it preferential access to its most advanced GPU, the H100, which even major cloud providers including AWS and Microsoft Azure have struggled to get enough of, The Information previously reported.
CoreWeave’s quick ascent has come with growing pains. In recent months, the company has lowered its revenue and capital expenditure expectations for the year, The Information previously reported. Still, its lowered projected revenue of $500 million would be a roughly 20-fold increase from the $25 million it generated in revenue last year.
Formerly called Atlantic Crypto, CoreWeave was founded in 2017 by CEO Michael Intrator, Chief Strategy Officer Brannin McBee and Chief Technology Officer Brian Venturo, all of whom previously worked in finance. Intrator, who started a natural gas hedge fund before starting CoreWeave, made The Information’s list of the 30 Most Powerful People in Enterprise Software this year.
CoreWeave’s backers include hedge fund Magnetar Capital, which led the recent debt financing, and prominent AI investors Nat Friedman and Daniel Gross.