A Startup in the New Jersey Suburbs Is Battling the Giants of Silicon Valley
It’s not just Nvidia. There is another big winner of the AI boom—and it’s now competing with some of the world’s most valuable companies.
By Ben Cohen
Wall Street Journal
Aug. 25, 2023 8:30 am ET
Michael Intrator wasn’t planning to leave his job in finance to work in the world’s hottest industry. Until the day his office nearly overheated.
He was running a natural-gas fund in 2017 when he stumbled into another market that was about to become huge. Intrator and his colleague Brian Venturo purchased their first GPU, the graphics chip they were using for cryptocurrency mining that has since become essential to a more lucrative business: artificial intelligence.
“All of a sudden it went from a GPU to a bunch of GPUs to the pool table being covered in GPUs,” Intrator said. He walked into work one morning that summer, after the air conditioning had been turned off for the weekend, only to find that the servers running their growing collection of GPUs made their Wall Street office feel more like a sauna. He freaked out. “We’re going to burn down this skyscraper,” he thought.
This suddenly terrifying hobby that started with a single chip soon became a company with tens of thousands of them. It’s based far from Silicon Valley and even farther from Taiwan, where chip-fabrication plants churn out today’s vital technology. But its office suite in the New Jersey suburbs is the global headquarters for one of the biggest winners of the AI boom.
Few companies have seen their value change as much in the past year as CoreWeave, a specialized cloud provider offering access to the advanced chips, futuristic data centers and accelerated computing that fuel generative artificial intelligence. It owns the mighty GPUs that have become engines of modern innovation, and CoreWeave sells time and space on its supercomputers to clients in desperate need of the processing power that AI requires.
It’s how a business that most people have never heard of is playing an influential supporting role in a tech revolution.
CoreWeave has quickly and improbably become one of the largest GPU providers and leaders in the arms race for AI infrastructure. It raised more than $400 million this spring from chip maker Nvidia and other investors. It secured another $2.3 billion in debt financing this summer to open data centers by essentially turning chips into financial instruments, using its stash of highly coveted Nvidia semiconductors as collateral. Now it’s racing to keep pace with the fastest software-adoption curve in history.
Infrastructure is not the first thing that comes to mind when you think about generative artificial intelligence—the tech behind chatbots, productivity tools and buzzy startups in every field. But you wouldn’t be thinking about generative artificial intelligence without solid infrastructure.
“It’s similar to electricity: Do you think of the power plant when you flip a light switch?” said Brannin McBee, CoreWeave’s chief strategy officer and third co-founder. “What we’re doing right now is building the electricity grid for the AI market. If this stuff doesn’t get built, then AI will not be able to scale.”
Building that stuff means the success of CoreWeave is by definition interwoven with the success of the entire AI economy.
GPUs that can be used for AI became the world’s most precious asset this year, six years after CoreWeave was founded by former commodities traders.
These chips have enough power to train large-language models and perform AI’s unfathomably complex tasks at ludicrous speeds. The market for this scarce resource is controlled by Nvidia, the top-performing stock in the S&P 500 index this year even before it reported another blowout quarter on Wednesday that once again smashed expectations. Nvidia’s gain in value in 2023 alone is greater than the market capitalization of almost any American company.
But the supply of AI chips isn’t nearly enough to meet the world’s demands.
Elon Musk has declared that it’s harder to buy GPUs than drugs, and there’s a whiteboard behind Venturo’s desk in CoreWeave HQ that puts it another way: “I have not been asked for more GPUs in ___ days.”
That number has been zero since last summer.
Nvidia GPUs like this one are essential for AI applications like chatbots and image generators.
PHOTO: I-HWA CHENG/BLOOMBERG NEWS
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The mad scramble across Silicon Valley sparked by the AI frenzy has created an opportunity for the Nvidia-backed startup based in Roseland, N.J.
“You’re seeing a whole crop of new GPU-specialized cloud-service providers,” said Jensen Huang, Nvidia’s chief executive, on the company’s earnings call this week. “One of the famous ones is CoreWeave—and they’re doing incredibly well.”
CoreWeave’s rivals in AI infrastructure operations include major cloud providers like Microsoft, Google and Amazon, and it’s hard for any startup to compete with one of the richest companies on the planet, let alone several. The private company does not disclose financial details, but recent fundraising valued CoreWeave around $2 billion. So how can it avoid getting crushed by giants worth trillions?
“It’s a question I answer all the time,” said Intrator, CoreWeave’s chief executive.
He says AI presents challenges that legacy cloud platforms were not designed to handle. This kind of radical transformation in any business can turn the playing field upside down and give upstarts an edge over incumbents forced to adapt. In fact, Intrator likened CoreWeave to the unlikely leader of another market.
“GM can make an electric car,” he said, “but that doesn’t make it a Tesla. ”
CoreWeave has fewer employees (250) than clients (700), but it has deals with Inflection AI and even OpenAI backer Microsoft. The company’s executives say they offer customized systems and a wider range of chips in more configurations than servers equipped for general-purpose computing. That flexibility makes their product more efficient for a variety of applications from rendering images to discovering molecules.
This didn’t seem possible and definitely wasn’t some grand plan in 2017, when CoreWeave’s founders were mining Ethereum for themselves. “It very much started as: How do I make an extra $1,000 so that I can pay my mortgage?” said Venturo, the chief technology officer. But they became fascinated by the mechanics of crypto at the exact moment that crypto prices were going bananas. They could buy a GPU on Monday and it would pay for itself by Thursday. So they kept buying. Before long they had hundreds of GPUs and no clue where to put them.
When they decided to leave Wall Street, they did something very Silicon Valley: They moved their hardware into a garage. Except this garage was in New Jersey—and it belonged to Venturo’s grandfather.
Soon they turned a side hustle into a proper business, named the company Atlantic Crypto and renamed it CoreWeave.
“We’re not very good at naming companies,” Intrator said.
They were better at running one. When crypto prices crashed back to earth in 2018 and 2019, they diversified into other, less-volatile fields that needed lots of GPU computing. They focused on three markets where they could fill a void: media and entertainment, life sciences and, yes, artificial intelligence.
It turned out to be perfect timing. The decision to stockpile those chips positioned the company for what Nvidia is calling “a new computing era,” but even CoreWeave’s own executives admit they couldn’t have predicted the intensity of the AI fervor.
“If anyone said they thought this is what success would look like, they’re lying,” Venturo said.
CoreWeave has upgraded from consumer GPUs in a sweltering office to enterprise GPUs in sprawling data centers around the country with the cooling, power and hundreds of miles of fiber-optic cable to keep running around the clock.
Last summer, right around the release of popular AI image generators like Stable Diffusion and Midjourney, CoreWeave’s executives invested heavily in Nvidia’s latest and fastest H100 chips. Only when ChatGPT dropped last fall did they realize they hadn’t invested nearly enough.
“We had spent $100 million on H100s,” Venturo said. “But the ChatGPT moment was when I was, like: Everything we’ve thought from a scale perspective may be totally wrong. These people don’t need 5,000 GPUs. They need five million.”
Being totally wrong has rarely been so valuable.
One of the many lessons from the speculative manias that have gripped tech in recent years is that it’s wise to be skeptical of any company riding a wave of exuberance. Even if AI really is the next big thing, smaller players could get wiped out. A trillion-dollar company can afford to wait and then dominate. It’s not exactly the most comfortable position for CoreWeave.
“It feels like we are dancing between the feet of elephants,” McBee said.
But that happens to be another measure of success. CoreWeave’s founders no longer have to worry about locating the nearest fire extinguisher. Now they’re trying to not get trampled.
Write to Ben Cohen at ben.cohen@wsj.com
A Startup in the New Jersey Suburbs Is Battling the Giants of Silicon Valley - WSJ (archive.ph) |
