Zone Media burd Up. I'm at Zetron and this is your weekly better offline monologue. So last week I put out a newsletter about core Weave, an a cloud provider that sells GPU compute to AI companies looking to run or train their models, and they recently filed the paperwork to go public. Now, the newsletter explained the shaky fundamentals of the business, which is putting it mildly and ask the question how the fuck does core Weave survive. This is a company that's drowning in debt and relying on one company for more than half of its revenue. And said company, Microsoft is actively pulling away from building new data center capacity and has reportedly pulled back from some contracts with core Weave, though it's not clear what those contracts are. Now, this is an important story and one that raises questions not just about the viability of core Weave, but the generative AI industry. At that said, the subject matter is a little dense to turn into a hulking two part episode, so I decided to condense it into a shorter monologue for you. Now, Core We've had intended to go public a week ago. They might go public and a week from now, and they're apparently going with like a twenty five to thirty billion dollar valuation. While it's hardly a recognizable name like say open AI or Microsoft or in Vidia, this company is definitely worth taking a look at, if not for the fact that it's arguably the first major IPO that we've seen from the current generative AI hYP bubble, and it's undoubtedly the biggest. Moreover, corwave is a company that deals in the infrastructure aspect of AI, where one would naturally assume is where all the money really is putting up service for hyperscals to run their hallucination pro and nonprofitable models. If in Vidia, the company that makes the GPUs for generative AI, is selling the pick axes for the current gold rush, cor we've well, they own the land, or maybe they're the shovels. I'm not going to get too far into that metaphors side up. Until a few years ago, Corweave was a different company, a cryptocurrency mining data center company to be specific. Now twenty tens were turbulent for crypto and the company then pivoted to providing high performance computing for third parties that didn't want to run their own infrastructure for things like three D modeling. Around the time of the launch of chair GPT, cor We've pivoted again, this time towards providing compute to hyperscalers and then generative AI interest. It gambled, and it gambled successfully. You'd imagine that such a company would be a thriving, healthy business though, right they I mean they sell the surfer architecture. The demand is there, the growth is there. I mean everyone wants generative AI. Right, it wouldn't be another thing where the reality Jesus Christ. Even a cursory glance at Corwey's financial disclosure documents reveals a business that's precarious at best, and in my most uncharitable opinion, it's utterly rancid. If this company was in any other industry, be seen as a big pile of shit, except it's one of the standard bearers of the generative AI boom and so exists within its own reality distortion field. Now Callw've makes its money by renting out GPUs to companies looking to run or train their models, which means that it's incredibly indicative of whether there's a real business in generative AI and you'll be shocked to hear that there isn't call. We've made just under two billion dollars in twenty twenty four, yet somehow managed to lose eight hundred and sixty three million dollars. Worse still, seventy seven percent of its revenue comes from two companies, Microsoft sixty two percent, and, although not said explicitly, most likely in Video fifteen percent. Now the information is reported Project Gosprey, which is basically Nvidia's stake in the fact that they're finaling money and it's actually not immediately obvious what it is that in Video is paying Core week four, though Invidio is both invested in the company and provides it with priority access to its chips. With Core, we've getting some products before even Amazon or Microsoft. It's bonkers. And again, yeah, I think with all this preferential accents Core, we've just printing money right versus burning it, burning it by the hundreds of millions full. I wish I could get this much money and just I don't know, I would be doing a far weirder podcast. It would be exactly the same thing, better offline would exist. I would just have hundreds of millions of dollars we'd have just like Samuel L. Jackson coming in for some episodes. Anyway, I don't have that money. If you'd like to give it to me, please please do now. A few weeks ago, The Financial Times reported that Microsoft had pulled out some of their core Weave contracts, though Core We've denied the allegations, and mysteriously, a week later, open Ai announced that they had an eleven point nine billion dollar contract with Corewave to provide compute services. Now, I can't say for certain. Can you think of another reason Microsoft needed a whole bunch of GPU compute other than to host open AI's models. Hmm, Now, I'm just guessing here, but one has to wonder if it wasn't so much open Ai se a new deal and more at taking over the future compute than Microsoft was formally handling. And yes, you're remembering correctly. Microsoft has recently canceled more than the gigawater future compute capacity, though from what I've heard, its core Weave contracts future or otherwise weren't included in that number. Anyway, For core Weave to make that eleven point nine billion dollars in revenue from open Ai, they're going to need compute, which will cost them tens of billions of dollars to build, which will be difficult as the company has burdened with about eight billion dollars of debt with horrifying interest rates, which made lead it to pay upwards of one point five billion dollars a year in loan payments, with one of them requiring Core Weave to repay the loan with any other debt they raise in the future. Core Weave, by my estimates, needs at least thirty billion dollars to expand. It has about one point three billion dollars in the bank and just under four billion dollars left on its loans that they can draw. One of them is a term loan where you can draw more up until about June twenty twenty five. Although Core We've will raise capital in its IPO, the amount will be anywhere near any to meet its needs. And when I say its needs, I mean like the ability to service the revenue that they need to spend more money really does not make a lick of sense when you think about it, and you may wonder if things can get worse, and the answer is that they can. Coreweave has planned one point three gigawats of expansion and its partner to build it is a public company called Core Scientific. Different company, similar name, genuinely different. Here are some facts about Core Scientific. They went public in twenty twenty two in a disastrous spack merger and then filed for bankruptcy in the same year. Their entire business has been focused on mining bitcoin, which requires specialized acic computer chips that are entirely different both in their construction and their maintenance to GPUs, and they can only really be used for mining crypto. They're not easily repurposed for other tasks, and indeed their data centers are not just a plug and play thing. You basically have to demolish them. And another thing about Core Scientific they only made twenty four million dollars twenty twenty four from selling AI compute related services to their customers. That's around five percent of its total revenue, with the rest coming from mining and selling crypto. Also really dumb ass mistaken. Just make that I said customers, I meant customer. Course Scientific has one customer and that customer is it's core Weave. As of right now, Corewave has approximately three hundred and sixty megawatts of compute power. Somehow, it intends to build another one point three gigawatts worth of compute using a partner that has never built an AI data center and does not be able to have any meaningful compute right now, this is all so good. I love this. Let's fucking go. This is the big IPO, this is the big aiaper. I am going insane every time I read about these goddamn companies. But let's summarize. Core Weave is burdened by interest payments that may belloon to as much as two billion dollars a year, and lost eight hundred and sixty three million dollars on two billion dollars of revenue in twenty twenty four. Sixty two percent of that revenue is from Microsoft, which has materially pulled back on data center buildouts and may have dropped some core Weave contracts, though core We've denies this is the case. Of course, Corby's expansion, which is critical to servicing future revenue and growth, requires it to invest tens of billion dollars the core Weave does not have. Corwy's data center expansion is dependent on what is primarily a bitcoin mining company called Core Scientific. It appears to have no AI capacity building, and they're meant to build over a gigawak capacity a time where they do not appear to have done so. And as a reminder, converting cryptocurrency mining data centers to HPC data centers is effectively starting from scratch. It's not good. It's not good at all. Corby should have been a positive signal for generative AI, or at least the way for generative AI to kind of go further than where it is today, or at least a way for AI boosters to shut me up. If GENERATIVEAI had this incredible demand, both from companies looking to integrate it and us looking to use it, Corweve would be making fat stacks of cash. I have a far more diverse customer base and if I'm honest, not have to take up more than five times its revenue and burdens and loans with loan shark level interest rates just to survive. But it is what it is, I guess. And another note Jim Kramer of CNBC. He said that Corweve was going to be one of the biggest IPOs of the year. That should tell you about everything

Zone Media burd Up. I'm at Zetron and this is your weekly better offline monologue. So last week I put out a newsletter about core Weave, an a cloud provider that sells GPU compute to AI companies looking to run or train their models, and they recently filed the paperwork to go public. Now, the newsletter explained the shaky fundamentals of the business, which is putting it mildly and ask the question how the fuck does core Weave survive. This is a company that's drowning in debt and relying on one company for more than half of its revenue. And said company, Microsoft is actively pulling away from building new data center capacity and has reportedly pulled back from some contracts with core Weave, though it's not clear what those contracts are. Now, this is an important story and one that raises questions not just about the viability of core Weave, but the generative AI industry. At that said, the subject matter is a little dense to turn into a hulking two part episode, so I decided to condense it into a shorter monologue for you. Now, Core We've had intended to go public a week ago. They might go public and a week from now, and they're apparently going with like a twenty five to thirty billion dollar valuation. While it's hardly a recognizable name like say open AI or Microsoft or in Vidia, this company is definitely worth taking a look at, if not for the fact that it's arguably the first major IPO that we've seen from the current generative AI hYP bubble, and it's undoubtedly the biggest. Moreover, corwave is a company that deals in the infrastructure aspect of AI, where one would naturally assume is where all the money really is putting up service for hyperscals to run their hallucination pro and nonprofitable models. If in Vidia, the company that makes the GPUs for generative AI, is selling the pick axes for the current gold rush, cor we've well, they own the land, or maybe they're the shovels. I'm not going to get too far into that metaphors side up. Until a few years ago, Corweave was a different company, a cryptocurrency mining data center company to be specific. Now twenty tens were turbulent for crypto and the company then pivoted to providing high performance computing for third parties that didn't want to run their own infrastructure for things like three D modeling. Around the time of the launch of chair GPT, cor We've pivoted again, this time towards providing compute to hyperscalers and then generative AI interest. It gambled, and it gambled successfully. You'd imagine that such a company would be a thriving, healthy business though, right they I mean they sell the surfer architecture. The demand is there, the growth is there. I mean everyone wants generative AI. Right, it wouldn't be another thing where the reality Jesus Christ. Even a cursory glance at Corwey's financial disclosure documents reveals a business that's precarious at best, and in my most uncharitable opinion, it's utterly rancid. If this company was in any other industry, be seen as a big pile of shit, except it's one of the standard bearers of the generative AI boom and so exists within its own reality distortion field. Now Callw've makes its money by renting out GPUs to companies looking to run or train their models, which means that it's incredibly indicative of whether there's a real business in generative AI and you'll be shocked to hear that there isn't call. We've made just under two billion dollars in twenty twenty four, yet somehow managed to lose eight hundred and sixty three million dollars. Worse still, seventy seven percent of its revenue comes from two companies, Microsoft sixty two percent, and, although not said explicitly, most likely in Video fifteen percent. Now the information is reported Project Gosprey, which is basically Nvidia's stake in the fact that they're finaling money and it's actually not immediately obvious what it is that in Video is paying Core week four, though Invidio is both invested in the company and provides it with priority access to its chips. With Core, we've getting some products before even Amazon or Microsoft. It's bonkers. And again, yeah, I think with all this preferential accents Core, we've just printing money right versus burning it, burning it by the hundreds of millions full. I wish I could get this much money and just I don't know, I would be doing a far weirder podcast. It would be exactly the same thing, better offline would exist. I would just have hundreds of millions of dollars we'd have just like Samuel L. Jackson coming in for some episodes. Anyway, I don't have that money. If you'd like to give it to me, please please do now. A few weeks ago, The Financial Times reported that Microsoft had pulled out some of their core Weave contracts, though Core We've denied the allegations, and mysteriously, a week later, open Ai announced that they had an eleven point nine billion dollar contract with Corewave to provide compute services. Now, I can't say for certain. Can you think of another reason Microsoft needed a whole bunch of GPU compute other than to host open AI's models. Hmm, Now, I'm just guessing here, but one has to wonder if it wasn't so much open Ai se a new deal and more at taking over the future compute than Microsoft was formally handling. And yes, you're remembering correctly. Microsoft has recently canceled more than the gigawater future compute capacity, though from what I've heard, its core Weave contracts future or otherwise weren't included in that number. Anyway, For core Weave to make that eleven point nine billion dollars in revenue from open Ai, they're going to need compute, which will cost them tens of billions of dollars to build, which will be difficult as the company has burdened with about eight billion dollars of debt with horrifying interest rates, which made lead it to pay upwards of one point five billion dollars a year in loan payments, with one of them requiring Core Weave to repay the loan with any other debt they raise in the future. Core Weave, by my estimates, needs at least thirty billion dollars to expand. It has about one point three billion dollars in the bank and just under four billion dollars left on its loans that they can draw. One of them is a term loan where you can draw more up until about June twenty twenty five. Although Core We've will raise capital in its IPO, the amount will be anywhere near any to meet its needs. And when I say its needs, I mean like the ability to service the revenue that they need to spend more money really does not make a lick of sense when you think about it, and you may wonder if things can get worse, and the answer is that they can. Coreweave has planned one point three gigawats of expansion and its partner to build it is a public company called Core Scientific. Different company, similar name, genuinely different. Here are some facts about Core Scientific. They went public in twenty twenty two in a disastrous spack merger and then filed for bankruptcy in the same year. Their entire business has been focused on mining bitcoin, which requires specialized acic computer chips that are entirely different both in their construction and their maintenance to GPUs, and they can only really be used for mining crypto. They're not easily repurposed for other tasks, and indeed their data centers are not just a plug and play thing. You basically have to demolish them. And another thing about Core Scientific they only made twenty four million dollars twenty twenty four from selling AI compute related services to their customers. That's around five percent of its total revenue, with the rest coming from mining and selling crypto. Also really dumb ass mistaken. Just make that I said customers, I meant customer. Course Scientific has one customer and that customer is it's core Weave. As of right now, Corewave has approximately three hundred and sixty megawatts of compute power. Somehow, it intends to build another one point three gigawatts worth of compute using a partner that has never built an AI data center and does not be able to have any meaningful compute right now, this is all so good. I love this. Let's fucking go. This is the big IPO, this is the big aiaper. I am going insane every time I read about these goddamn companies. But let's summarize. Core Weave is burdened by interest payments that may belloon to as much as two billion dollars a year, and lost eight hundred and sixty three million dollars on two billion dollars of revenue in twenty twenty four. Sixty two percent of that revenue is from Microsoft, which has materially pulled back on data center buildouts and may have dropped some core Weave contracts, though core We've denies this is the case. Of course, Corby's expansion, which is critical to servicing future revenue and growth, requires it to invest tens of billion dollars the core Weave does not have. Corwy's data center expansion is dependent on what is primarily a bitcoin mining company called Core Scientific. It appears to have no AI capacity building, and they're meant to build over a gigawak capacity a time where they do not appear to have done so. And as a reminder, converting cryptocurrency mining data centers to HPC data centers is effectively starting from scratch. It's not good. It's not good at all. Corby should have been a positive signal for generative AI, or at least the way for generative AI to kind of go further than where it is today, or at least a way for AI boosters to shut me up. If GENERATIVEAI had this incredible demand, both from companies looking to integrate it and us looking to use it, Corweve would be making fat stacks of cash. I have a far more diverse customer base and if I'm honest, not have to take up more than five times its revenue and burdens and loans with loan shark level interest rates just to survive. But it is what it is, I guess. And another note Jim Kramer of CNBC. He said that Corweve was going to be one of the biggest IPOs of the year. That should tell you about everything