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Cisco (CSCO.US) is close to investing in CoreWeave, Nvidia's "crown jewel" at a valuation of $23bn

AInvestThursday, Oct 3, 2024 10:30 pm ET
1min read

Zhitong Finance learned that Cisco Systems, Inc. (CSCO.US) has agreed to invest in CoreWeave, one of the hottest startups in the artificial intelligence field, as part of a deal that values the company at $23 billion. CoreWeave, which is led by CEO Michael Intrator, has been discussing a so-called secondary transaction that would allow existing shareholders, including employees, to bid for up to $400 million to $500 million worth of shares, according to a report last month. The New Jersey-based company is considering an initial public offering as early as next year.

CoreWeave's investors include Nvidia Corp. (NVDA.US), Magnetar Capital, Coatue Management, Jane Street and Fidelity. The company is an early adopter of Nvidia's data center graphics chips, ahead of a wave of demand for powerful processors to run artificial intelligence applications. It is building data centers based on Nvidia chips to provide AI-related computing.

Cisco's leadership is working to ensure its technology has a place in the rapid construction of data centers, which the networking equipment provider believes is creating growing demand for its products as data flows increase.

As context, CoreWeave started as a cryptocurrency "mining" company that later shifted to cloud platform services. Both things essentially do the same thing - buy a lot of Nvidia's graphics cards. Given that CoreWeave still took care of Nvidia's business when the crypto market was bad, the two sides have been connected for many years. Therefore, in the eyes of the capital market, one of CoreWeave's core competencies is "good relationship with Nvidia", which can get a large amount of H100 graphics cards in the serious shortage of graphics cards.

For Nvidia, the core value of supporting CoreWeave lies in breaking the pattern of the cloud computing market. Like Nvidia, whose market value is $2 trillion, the three major US cloud computing companies (Amazon AWS, Microsoft Azure and Google Cloud) are all businesses of super factories.

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