WSJ: CoreWeave lost $33 billion in market value due to rains in Texas

CoreWeave, one of the largest providers of AI infrastructure, has lost $33 billion in market capitalization in six weeks. The company's stock price fell by 46% due to delays in the construction of data centers in Texas caused by unexpected heavy rains, and controversial comments from management. This was reported by The Wall Street Journal.

Throughout the summer, heavy rains and winds caused approximately 60 days of delay at a construction site in Denton, a small city north of Dallas. The bad weather prevented contractors from pouring concrete for a large artificial intelligence data center complex.

The completion date for the approximately 260-megawatt cluster, which CoreWeave plans to lease to OpenAI, has been pushed back by several months. Additional delays arose from revisions to the design plans for some of the data centers.

The situation was worsened by statements from the company's chief executive officer, Michael Intrator. During a quarterly earnings call on November 10, he initially claimed that the problems were limited to a single data center. However, the chief financial officer corrected him, explaining that the delays were concentrated in "one data center provider," indicating a broader issue.

The next day, during a CNBC interview, Intrator again repeated the "one data center" version before correcting himself after a prompt from the host. CoreWeave's shares fell 16.3% that day and continued to fall in December.

CoreWeave's business model involves using high-interest debt to purchase thousands of advanced AI chips from Nvidia, their installation in data centers, and providing access to the chips for rent to companies.

Critics point to the high level of debt and dependence on a few large clients – OpenAI, Microsoft and Meta. CoreWeave's sales more than doubled in the last quarter to nearly $1.4 billion, compared to $583 million a year earlier, but the company remains unprofitable and lost $110 million in the last quarter.

Gil Luria, an analyst at DA Davidson, called CoreWeave's balance sheet "the ugliest in the tech world." According to him, the company's operating margin is about 4% – less than half of what it pays in interest on its debt.

"The optimism is that they will scale, and that many companies have low initial profitability, but this is a company of scale. There is no scaling here," Luria said.

• On December 17, it became known that OpenAI introduced an updated model for image generation – GPT Image 1.5. It is four times faster than the previous version, adheres more accurately to text instructions, and is now available to all users via ChatGPT and the API.