"All the Money in the World": Nebius's Competitor Aims to Attract Insurers' Capital for AI

CoreWeave, a cloud provider for artificial intelligence backed by Nvidia, is seeking access to the vast capital reserves of insurance companies to finance the enormous costs of deploying AI infrastructure, according to the Financial Times. CoreWeave co-founder Brennin McBee told the publication that insurers’ capital is “unlimited”: “It’s, so to speak, all the money in the world concentrated in the insurance sector.”

CoreWeave is one of the leading neo-cloud providers and a competitor to Nebius. These companies build large clusters of Nvidia chips and lease computing power to AI labs and other tech giants. CoreWeave is looking for cheaper ways to finance the costs of chips and other AI infrastructure, which already amount to tens of billions of dollars. Insurance companies, which manage trillions of dollars, could be one potential source, according to the FT.

The AI boom is increasingly relying on debt financing to build data centers and purchase Nvidia semiconductors. CoreWeave was the first to adopt such financing schemes, which, according to critics, leaves the company vulnerable in the event of a decline in AI demand. Earlier this year, the company secured an $8.5 billion loan backed by chips and a long-term contract with Meta—the first loan of its kind to receive a full investment-grade rating.

“Demonstrating that we can operate in this market segment is a huge step for us,” McBee said in an interview with the FT. The next goal, he said, is to convince insurers to purchase loans under contracts with less creditworthy clients, such as AI labs. “I don’t think our non-investment-grade loans are ready to enter the insurance tranche yet. But I believe we’ll get there,” McBee said, adding that the upcoming IPOs of major AI players will help make that happen.

In four years, McBee and his co-founders have transformed CoreWeave from a small cryptocurrency mining operation into an AI provider with more than 1.5 gigawatts of active capacity and plans to expand that to 8 gigawatts by the end of 2030. The cost of the hundreds of thousands of Nvidia AI chips that power the CoreWeave platform has turned the company into a fundraising powerhouse: this year, it raised more than $35 billion through chip-backed loans, high-yield bonds, convertible securities, and stock sales. As a result, its debt and lease obligations had risen to approximately $52 billion by the end of June, according to the FT.

McBee, a former trader in the gas and electricity markets, closed his first such deal in 2023. The $2.3 billion loan, managed by Blackstone, was secured by Nvidia graphics processing units and a contract with Microsoft at an effective rate of about 15%—significantly higher than the typical yield on junk bonds. According to McBee, the chips are on the balance sheets of subsidiaries, and for every dollar earned, interest, principal, and operating expenses are paid first, with the remaining 20 cents going to the parent company. Since then, CoreWeave has secured five more similar loans at lower interest rates, totaling approximately $27 billion.

McBee compared this approach to financing power plants: “You sell the idea, then sell the contracts associated with it in advance—and use those contracts as collateral for financing,” he explained, adding that the company will continue to secure similar deferred-drawdown loans: “To me, this isn’t a scary debt. It’s debt that accelerates growth, and it’s very good debt.”

CreditSights credit analyst Jordan Chalfine called CoreWeave’s approach “very creative,” but warned that as the number of competitors and hyperscalers exploring similar models grows, the company’s borrowing costs could rise. CoreWeave’s unsecured bonds have already been trading at yields of nearly 15 percent: investors are concerned about the mismatch between long-term data center lease agreements and shorter-term contracts with customers. “If there is an oversupply of capacity, why would customers renew their contracts with CoreWeave?” Chalfin noted.

McBee believes that the entire company could receive an investment-grade rating within “a few years”—although analysts, according to Visible Alpha’s consensus forecast, expect CoreWeave’s negative free cash flow to total about $25 billion this year, and next year it will reach $28 billion. “If we stopped building today, our cash flow would be enormous,” said the co-founder of the neo-cloud company. But, he added, “right now is a time when you need to be one of the biggest players.”

CoreWeave’s interest expense more than doubled year-over-year in the second quarter, reaching $640 million, and its debt was approximately 5.8 times its annualized second-quarter EBITDA. S&P rates the company’s financial risk as “aggressive.”

McBee stated that CoreWeave is “actively” exploring the $500 billion funding program that Nvidia unveiled in August in collaboration with Wall Street giants. NeoCloud hopes to participate in the development of this program.

Nvidia has invested more than $2 billion in CoreWeave, entered into a $6.3 billion agreement to purchase unused capacity, and served as an anchor investor during the IPO. However, McBee does not believe this constitutes “circular financing,” since Nvidia provided only a few billion dollars out of the tens of billions that CoreWeave raised. He also rejected the notion that CoreWeave merely leases Nvidia chips, calling the hardware a “bare minimum” and identifying the company’s proprietary cloud software—which helped attract clients such as Caterpillar and Capital One—as its true value.

According to McBee, the surge in demand for AI computing continues to outpace supply: CoreWeave has sold nearly all of its capacity for 2027 and is already signing contracts for 2028 and beyond. At the same time, there is a particularly acute shortage of ready-to-use data center facilities with connected power supplies.

This article was AI-translated and verified by a human editor