Silicon Valley meets Wall Street: The Chip Boom as a Trillion-Dollar Game
Welcome to the new gold rush, this time with Nvidia graphics cards as the hottest commodity.
Led by financial giants like Blackstone, Pimco, and BlackRock, Wall Street has pumped more than $11 billion into so-called "neocloud" companies over the past twelve months. These firms — including names like CoreWeave, Crusoe, and Lambda Labs — specialize in offering AI-focused cloud services, with Nvidia chips as an essential resource.
The GPU Economy: Chips as the New Gold
CoreWeave, the largest of these neocloud companies, embodies the rise of this new economy. With more than 45,000 Nvidia chips, the company has catapulted its value from 2 to 19 billion dollars in just 18 months. Interesting? These chips now serve not only as computing tools but also as loan collaterals.
It's like a gold mine - the banks are pushing to get in now," says Nate Koppikar, a hedge fund manager who's betting on falling prices. But here's the catch: GPUs are anything but stable assets. New chip generations like Nvidia's "Blackwell" series could quickly devalue existing models as the market slowly fills with surplus units.
From the Crypto World to the AI Revolution
CoreWeave started as a crypto miner in 2017 before switching to artificial intelligence in 2019 - a bet that paid off. "They secured GPUs just as ChatGPT took the world by storm," explains an insider. A deal with Microsoft worth over a billion dollars gave CoreWeave the necessary capital to acquire thousands of Nvidia GPUs - financed through a debt avalanche that now totals 10 billion dollars.
But how stable is a business model that is based on such high debt? In August 2023, when CoreWeave secured $2.3 billion in funding from Blackstone and Co., annual revenue was just $25 million, with a loss of $8 million. Today, revenues are said to have risen to $2 billion, but the dependence on outside capital remains enormous.
A Risky Bet on the Future of AI
The rapid expansion of neoclouds is hanging by a thread: their access to Nvidia chips. Chip giants like Nvidia, AMD, and even large tech companies like Google, which are developing their own AI chips, control the market. Despite everything, financiers are betting on the AI revolution – and on inexhaustible demand.
This is the largest capital investment in human history," says Crusoe CEO Chase Lochmiller, whose company recently completed a $3.4 billion project for a new data center in Texas.
Growing Doubts and Falling Prices
But the dream of unlimited growth is faltering.
The cards are being reshuffled: Large technology companies like Amazon and Microsoft are developing their own AI chips, while Nvidia itself is criticized for its dominant position in the market. Whether the current loans against GPUs and leasing contracts are safe in the long term remains unclear.
Clash of the Titans: Risk or Revolution?
For the big Wall Street banks and Neocloud pioneers, it's clear: This is about more than just loans and chips. It's a bet on the future of technology – with all its risks.
Historically, demand has always been underestimated," says Erik Falk of Magnetar Capital. "Whether that applies here remains to be seen." One thing is certain: The next round in the Silicon Valley poker has just begun.
