In a significant development that is set to reshape the artificial intelligence (AI) cloud landscape, OpenAI has entered into a five-year, $11.9 billion agreement with CoreWeave, a GPU-heavy cloud service provider. According to Reuters, the deal involves OpenAI acquiring $350 million worth of equity in CoreWeave, which is separate from CoreWeave's planned initial public offering (IPO).

This massive agreement is noteworthy not only because of its sheer size but also due to the complex dynamics at play. CoreWeave's largest customer prior to this deal was Microsoft, which accounted for a staggering 62% of CoreWeave's revenue in 2024. This dependence on a single customer could have raised concerns among IPO investors, but the deal with OpenAI is likely to alleviate some of those worries.

CoreWeave's AI-specific cloud service boasts an impressive network of 32 data centers, powered by over 250,000 Nvidia GPUs as of the end of 2024. The company has continued to expand its GPU capacity, including the addition of Nvidia's latest product, Blackwell, which supports AI reasoning. This infrastructure will now be leveraged by OpenAI, providing a significant boost to its AI capabilities.

The deal also adds another layer of complexity to the already intricate relationship between OpenAI and Microsoft. Microsoft is a major backer of OpenAI, with a deal that entitles it to a portion of OpenAI's revenues. However, tensions have been rising between the two companies as OpenAI's fortunes have grown. OpenAI competes with Microsoft for enterprise customers and is reportedly working on rolling out pricey AI agents.

In recent months, OpenAI has been seeking to diversify its cloud infrastructure, and this deal with CoreWeave is a significant step in that direction. In January, OpenAI ceased to rely solely on Microsoft as its cloud provider, instead partnering with SoftBank, Oracle, and others as part of the Stargate AI infrastructure deal. This shift is likely driven by OpenAI's need for more compute resources, as CEO Sam Altman recently complained that the company is "out of GPUs."

The deal is also interesting in light of Microsoft's own AI ambitions. The company is working on its own AI "reasoning" models, comparable to OpenAI's o1 and o3-mini, and has hired Mustafa Suleyman, a rival of Altman, to lead its AI efforts. This sets the stage for an intense competition between OpenAI and Microsoft in the AI space.

CoreWeave, founded by former hedge fund executives, has had a remarkable journey from its origins as a crypto mining operation. The company's three co-founders have already cashed out $488 million worth of shares, with plans to use some of the proceeds from its IPO to pay down its staggering $7.9 billion debt.

As the AI landscape continues to evolve, this deal is likely to have significant implications for the industry. With OpenAI gaining access to CoreWeave's substantial GPU capacity, the company is well-positioned to accelerate its AI research and development efforts. Meanwhile, Microsoft will need to navigate its complex relationship with OpenAI, even as it pursues its own AI ambitions.

Neither OpenAI nor CoreWeave responded to requests for comment on the deal.