Podcast Summary: Better Offline – "Monologue: We Need To Talk About CoreWeave"

Episode Information

• Title: Monologue: We Need To Talk About CoreWeave
• Host: Ed Zitron, Tech Industry Veteran
• Release Date: March 21, 2025
• Podcast: Better Offline by Cool Zone Media and iHeartPodcasts

Introduction

In this episode of Better Offline, host Ed Zitron delves deep into the precarious financial and operational state of CoreWeave, an AI cloud provider. Zitron critically examines CoreWeave's business model, financial health, and its strategic relationships within the generative AI industry. This monologue serves as an incisive analysis of CoreWeave's viability and its broader implications for the AI infrastructure sector.

CoreWeave's Business Model and Financial Health

Ed Zitron begins by outlining CoreWeave's position in the AI cloud market, highlighting its focus on providing GPU compute resources to AI companies for running and training models. Despite its strategic role, CoreWeave's financial fundamentals appear shaky.

• Revenue and Losses: Zitron points out that in 2024, CoreWeave generated just under $2 billion in revenue but incurred a staggering loss of $863 million. He emphasizes the unsustainable nature of this financial trajectory, stating, "If this company was in any other industry, it would be seen as a big pile of shit" ([04:15]).

• Debt Burden: CoreWeave is heavily indebted, carrying approximately $8 billion in debt with high-interest rates. This debt structure forces the company to allocate upwards of $1.5 billion annually in loan payments, severely limiting its financial flexibility and growth potential.

Dependency on Major Clients: Microsoft and Nvidia

A significant concern Zitron raises is CoreWeave’s heavy reliance on a single client, Microsoft, which accounts for 62% of its revenue.

• Microsoft's Pullback: Recent reports indicate that Microsoft is retracting from expanding its data center capacity and has reduced some contracts with CoreWeave. Although CoreWeave has denied these allegations, the uncertainty remains palpable. Zitron remarks, "62% of that revenue is from Microsoft, which has materially pulled back on datacenter buildouts and may have dropped some CoreWeave contracts" ([07:45]).

• Nvidia’s Role: Additionally, Nvidia constitutes 15% of CoreWeave’s revenue. Nvidia not only invests in CoreWeave but also provides it with priority access to crucial GPU chips. Zitron muses, "With CoreWeave getting some products before even Amazon or Microsoft, it's bonkers" ([06:30]).

CoreWeave’s Expansion Plans and Partnership with Core Scientific

CoreWeave has ambitious plans to expand its compute capacity by 1.3 gigawatts, aiming to support future growth and service increasing demand from generative AI applications.

• Partnership with Core Scientific: To achieve this expansion, CoreWeave has partnered with Core Scientific, a company infamous for its failed SPAC merger and subsequent bankruptcy in 2022. Core Scientific's expertise lies in Bitcoin mining, utilizing specialized ASIC chips that are fundamentally different from the GPUs required for AI compute. Zitron criticizes this partnership, noting, "Core Scientific... their data centers are not just a plug and play thing. You basically have to demolish them" ([08:50]).

• Feasibility Concerns: The partnership raises red flags about the feasibility of CoreWeave’s expansion. Core Scientific has minimal experience in AI infrastructure, having generated only $24 million in 2024 from AI compute-related services, which is just 5% of their total revenue. Zitron underscores the improbability of successfully scaling AI compute capabilities through a partner with such limited relevant expertise.

Implications for the Generative AI Industry

CoreWeave's struggles are emblematic of broader challenges within the generative AI infrastructure sector.

• Viability of Generative AI Businesses: Zitron argues that CoreWeave’s financial instability casts doubt on the profitability and sustainability of companies within the generative AI space. "CoreWeave makes its money by renting out GPUs to companies looking to run or train their models, which means that it's incredibly indicative of whether there's a real business in Generative AI. And you'll be shocked to hear that there isn't" ([05:20]).

• Market Reality Distortion: Despite the high demand for generative AI, CoreWeave's financial woes suggest a discrepancy between market hype and actual business viability. Zitron states, "CoreWeave... exists within its own reality distortion field" ([05:50]).

IPO and Future Prospects

CoreWeave recently filed to go public with an anticipated valuation between $25 to $30 billion, marking it as one of the largest IPOs in the current generative AI boom. However, Zitron remains skeptical about the company's prospects.

• IPO Challenges: The IPO is unlikely to provide sufficient capital to address CoreWeave’s extensive debt and funding needs. Zitron estimates that the company requires at least $30 billion to fund its expansion, far exceeding what the IPO can secure. He highlights, "CoreWeave... needs to invest tens of billion dollars that CoreWeave does not have" ([09:00]).

• Sustainability Concerns: Given the company's financial deficits and dependency on a dwindling client base, Zitron questions whether CoreWeave can sustain its operations post-IPO. "CoreWeave had intended to go public a week ago... this is the big IPO. This is the big ai IPO. I am going insane every time I read about these goddamn companies" ([08:10]).

Conclusion

Ed Zitron wraps up his monologue with a stark assessment of CoreWeave’s future, suggesting that the company's financial mismanagement and strategic missteps could spell disaster, not only for itself but also for the broader generative AI industry. He emphasizes the need for investors and industry stakeholders to critically evaluate the sustainability of AI infrastructure companies like CoreWeave before getting swept up in the hype.

• Final Thoughts: "If Generative AI had this incredible demand... CoreWeave would be making fat stacks of cash and have a far more diverse customer base... But it is what it is, I guess" ([09:50]).

Zitron concludes with a cautionary note, urging listeners to remain vigilant about the financial health and strategic direction of companies pivotal to the AI ecosystem.

Key Takeaways

• CoreWeave faces significant financial instability, with high debt and heavy reliance on a single major client.
• The partnership with Core Scientific raises serious doubts about the feasibility of CoreWeave’s expansion plans.
• CoreWeave’s struggles reflect deeper issues within the generative AI infrastructure market, questioning the sector’s overall viability.
• The impending IPO may not provide the necessary capital to stabilize CoreWeave, potentially leading to broader repercussions in the AI industry.

Notable Quotes

• "If this company was in any other industry, it would be seen as a big pile of shit." — Ed Zitron ([04:15])
• "With CoreWeave getting some products before even Amazon or Microsoft, it's bonkers." — Ed Zitron ([06:30])
• "CoreWeave... exists within its own reality distortion field." — Ed Zitron ([05:50])
• "CoreWeave would be making fat stacks of cash and have a far more diverse customer base... But it is what it is, I guess." — Ed Zitron ([09:50])

This comprehensive analysis by Ed Zitron provides listeners with a critical lens through which to view CoreWeave's role in the generative AI boom, highlighting the potential pitfalls of rapid expansion in a volatile market.