CoreWeave CEO Brannin McBee on record Q2, GPU scarcity, and why demand for 4-year-old chips is still growing

Speaker 1: Don't just build AI, own the data platform that powers it. Our next guest is the founder of CoreWeave. We have Brannin McBee coming back on the show after an insane q two. Congratulations. Give us the headline numbers. How'd you do in q two?

Speaker 9: Q two was phenomenal beat for us. Right? That that that couldn't have come in better. We're extremely excited with the performance of the business, and balance of the year is just gonna keep on improving from here.

Speaker 1: What's the biggest bottleneck now for you? Is anything changing based on all the data that you've collected over the first half of the year?

Speaker 9: No. Like, bottleneck remains sludge. Right? Like, that that is the hardest part of this business, and it's also what we're best at.

Speaker 3: Mhmm.

Speaker 9: Right? We have 51 data centers in operation today. We know how to navigate this supply chain. We know how to get this stuff online, deliver to clients, do so on time. It's immensely challenging. Right? Like, this is the most important commodity on the planet right now, and CoreWeave is singular in its ability to deliver the best performing infrastructure out there.

Speaker 7: Mhmm.

Speaker 2: You guys are spending a lot of time doing demand planning. Demand is obviously off the charts. What are you we we just had Igor on from from River. We were talking with him about this sort of like new skill set that that technology founders need to have around demand planning, right? You have a, let's say, have a NeoLab, you're developing products, it's very hard to gauge how much demand you're going to have for them. The right strategy over the last couple of years was just to assume that demand was near infinite and and sort of plan against that. But for smaller companies that, you know, have smaller balance sheets, it really feels like that is gonna make or break a lot of these companies, especially, you know, NeoLabs that, yeah, that, you know, their margin profiles and and all these other factors are gonna come down to how well they can predict their own, their own demand for their products.

Speaker 9: Yeah. I completely align with that scenario, but I'll probably take it a step further. Like, what happens after that demand is planned for us? How do you finance it? Right? And for us, that's been just an absolutely critical skill set that we've assembled, team wise over the last six years. And the the latest financing that we did, DDTL five was a term loan b offering. I thought it a fantastic example of that ability to work with demand planning and get the right financing in place for that demand. That was the first facility that we've done where the contract duration is actually shorter than the amortization period. Mhmm. Right? In other words, it asks the investors in that facility to take on renewal risk on the compute versus all of our prior facilities. Investors, were fully covered by the original contract value. Right? If it was a $5,000,000,000 loan, there was $7,000,000,000 worth of revenue sitting behind it. Right now, it's opposite. Like, it it flipped. And what that enables us to do is to spend more time in the, shorter duration contract market because we just proved that it's financeable. And for us, that type of client is predominantly enterprise. Right? The AI lab cohort, the hyperscale cloud cohort, they like to sit in the five to six year range because they know that they need that compute. They need that scale. They need it for that long duration. Enterprise is, at the shorter end of that curve. And as you guys know, historically, we've been really focused on the longer duration contracts, but having this proof point in the market now that we can go finance these shorter duration contracts is is really important to us. So that I I think that goes hand in hand with the demand planning aspect.

Speaker 1: There's a ton of hyperscalers, I mean, that have been building data centers for a long time. There's a ton of neo clouds. How are you positioning differentiation? I imagine that demand is so strong that it's not the biggest thorn in your side by any means explaining the value, but feels like it always has to be in the back of your mind as if demand ever softens, we want to be differentiated. We wanna be differentiated even in a market that's tight on demand. So how are you positioning CoreWeave specifically?

Speaker 9: Look. I I think it's widely recognized by our clients, by third party analysts, by our suppliers even that we are the best representation of this technology on the planet. Mhmm. So that demonstration of value will continue to be through our technology product. It'll be through our timeliness and deliveries, our ability to scale across all different types of workloads, whether it's training, fine tuning, inference. It'll be in delivering the best performance adjusted flops and token tokens out there.

Speaker 1: Mhmm. Jensen was on CNBC recently talking about a $500,000,000,000 deal with a lot of big banks. What was your interpretation of what that deal means for the industry overall, where that project is going, and how Core Revis fits into that story?

Speaker 9: I think it's wonderful for the space.

Speaker 5: Mhmm.

Speaker 9: Right? It just continues to show the amount of capital that's willing to underwrite the build out of intelligence.

Speaker 1: Yeah.

Speaker 9: As you guys know, we've been at the forefront of financing, this market for years. I I think having more capital in here is just great for the sector.

Speaker 1: Mhmm. How have you been coaching people through there's some folks that are like, I'm worried this is like.com. There's other people that I'm worried about this being like the mortgage, you know, boom. What pieces are different this time? What pieces are, okay, we are actually borrowing from this particular build out. A lot of people go to railroads. There was, you know, a huge amount of value created. There were booms and busts in various times. What, how how are you dealing with the various, critics of the build out?

Speaker 9: So one of those points, feel like we talked about this last time I was on, I believe, was depreciation or useful life of compute.

Speaker 7: Yep.

Speaker 9: And, you know, the the variable that we were able to introduce and highlight in our earnings is the eight one hundred SKU. Yeah. Right? This is a twenty twenty SKU.

Speaker 7: Yeah.

Speaker 9: And we still have clients coming in asking specifically for that SKU. Right? It's not like they're asking for Hopper and, like, oh, we only have Ampere, or they're asking for a Blackwell, and we only have Ampere. Right? Like, they are saying, no. We want Ampere for workloads because that is the most performing platform for their workload. And we signed a contract in the quarter that goes out through 2029. Right? That that is now an implicit

Speaker 2: So it'll be a nine year old chip View at the by the end.

Speaker 9: Nine year nine year chip. Right? And this is a take or pay fixed term, fixed price contract, and pricing on a 1 hundreds for us have held, solid since early twenty twenty five.

Speaker 1: Yep.

Speaker 9: Right. So it's like I I I think one of those big criticisms was, well, this is two or three year computes, and it's useless after that. We've been very consistent that six year depreciable life is accurate for this infrastructure, and I I think that there is really strong opportunity for it to have material useful life beyond that, and we we see it every day. Right? And it it's it's just in the way that AI workloads are being optimized across different SKUs. And it's this concept like there isn't one AI model to roll them all. There isn't one GPU to roll them all. It's just this matrix of different sizes of workloads relative to different sizes of GPUs where it's filling in across.

Speaker 1: Yeah. My thesis has been that there are AI workloads that get that get built out, maybe a recommender system, a basic text transformation system, a translation system. And then those will stay in place for a really long time and those will be used by more intelligent models. But then there is the question of just will the chips burn out? Has any thought changed there or is that pretty well understood? Yeah. Right?

Speaker 9: Like this stuff is meant to run the data center. Yeah. It's meant to run for a long duration. We're not seeing any acceleration of burnout or like unexpected rates of errors. The the infrastructure is doing great.

Speaker 2: Yeah. That makes sense. What what is going on on the on the power side? I imagine there's a lot of people over the last year that have realized that how how important power is to this to this whole build out and are trying to front run, you know, players like yourself and get access to that power in hopes that they can resell it. I imagine the utilities are like somewhat sophisticated and at at at this point and and hopefully for a while we'll just call around and try to go directly to the operators, but like what is actually what can you share about like the current dynamics around that that hunt for power?

Speaker 9: I would say the power market is very competitive, but there is power out there. Right? And the bottleneck is less electrons. For us, it's more of powered shell, right, or, like, delivered data center capacity. And that goes all the way down to the components that are in the data center. Right? Like, think of the backup battery supplies, transformers, etcetera. But it's also the people. Right? Like, electricians, is a skilled trade that is a significant bottleneck for the industry. It has been for some time, will continue to be for some time because that's a trade that takes years to develop the skill sets necessary to be able to work in a data center site. So I believe that that is gonna remain more the bottleneck than power is right now. You're look. Absolutely correct. I I can't cap the number of emails I get a day from people I've never met before trying to offer us powered land and all across The US, but I that is less of the bottleneck, and it's more on delivered, powered shell capacity.

Speaker 1: Are you hiring electricians directly, or does this go through subcontractors for specific projects?

Speaker 9: This predominantly goes through subcontractors.

Speaker 7: Okay.

Speaker 1: Subcontractors. What are

Speaker 9: We have a little bit of self build Yeah. Ourselves where, like, we're going out and sourcing GCs, contractors, etcetera. But for the most part, we lease capacity. Yeah. And that that's been the way that we've scaled business.

Speaker 1: I imagine that there's a lot of folks in the organization that are technologists. They understand the technology and the hardware and the software and how everything pieces together. What are the other areas that you're hiring if somebody wants to join the the the Core Weave organization that draws from a different pool of human capital or talent?

Speaker 9: Going back to the point originally, financing. Right? It's deeply important Yeah. To the business. You know, we've we've done a fantastic job assembling a team up in New York. We've raised, I think it's north of $40,000,000,000 in debt and equity over the last twenty four months.

Speaker 1: Yeah. Are you pulling people from Wall Street, investment banking, hedge funds, consulting

Speaker 7: Yes.

Speaker 1: Private equity, like, all of the above?

Speaker 9: Yeah. I I'd say predominantly private equity, private credit

Speaker 7: Okay.

Speaker 9: Investment banking, guys with, like, deep financial backgrounds.

Speaker 1: Yeah. Yeah. That makes sense.

Speaker 9: But look. We're we're hiring across the business. Yeah. Right? It's engineering. It's physical deployment teams.

Speaker 5: Mhmm.

Speaker 9: I think we're it it is our HR organization is doing a great job. Let's put it that way.

Speaker 1: Yeah. Busy. How how domestic is the footprint? There's a lot of nervousness about the build out in America, and my default interpretation would be if there's a lot of pushback in America, like, people don't want mind waiting five hundred milliseconds for LLM responses. So, yeah, you can put them in space, but you can also put them in, you know, another country. How are you thinking about the international opportunity?

Speaker 9: I think that's right, but I would qualify more in, like, on the county level. Right? Like, we're getting pushed back. The whole industry is getting pushed back Yeah. At the county level in some places. Yeah. But that ultimately doesn't change the fact that the demand is there. Mhmm. Right? Getting county level pushed back, state level pushed back.

Speaker 1: Yeah.

Speaker 9: It just means that it's gonna be built elsewhere Mhmm. Because the demand for AI is the strongest it has ever been. The ROI on AI is the strongest that it ever has been as well. I mean, inference, is is absolutely profitable for our client base Yeah. Which means that there's gonna keep coming back to core wheat products. We're in Canada. We're in Europe. We recently announced an expansion into APAC as well. I I expect for us to keep keep moving globally, but keep a focus on domestic deployments.

Speaker 1: How strong is the correlation between social media pushback and county level pushback at like a city council meeting? Because I feel like there's sometimes a big disconnect where something can go viral, maybe it has some misinformation, gets a 100,000 likes, but then the actual county and the residents are fine with what's going on and it's sort of this like getting mad on behalf of someone. But do you see a correlation between a story or a news article that happens in this particular area and then there is actual movement on the ground at the local politics level?

Speaker 9: Look. I I'd say it's very specific to the sites.

Speaker 1: Sure.

Speaker 9: Right? Like, we we are engaged in conversations where wherever the local communities would like to understand the the value that we're bringing to that region.

Speaker 1: Yeah. That makes sense. Jordy, anything else? Not for now. Congratulations and thank you so much for taking the time.

Speaker 2: Big one. Thanks guys. It. Great to see you.

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Speaker 2: It's very interesting. It feels like one of CoreWeave's and and some of the other Neo Cloud's advantages is to just be able to be completely out of the the politics and like the drama of AI. Mhmm. Right? Like all of the the labs Yeah. Hyperscalers and all these companies like Mhmm. They have financial relationships. Yeah. They have personal relationships. Some of them Yeah. Some of them hate each other Yeah. And want each other dead. Yeah. Can kind of sit there like Switzerland and be like, anyone need tokens?

Speaker 1: Yeah. Yeah. That's true. When a niche hit when a niche hit tweet fails to bang, James Heal shares a quote from Peter Jay. When a sub editor complained that his, that his, the Times columns were too complex, Peter Jay famously replied, I only write this for three people. The editor of The Times, the chancellor of the exchequer, and the governor of the Bank of England. True. Not quite audience of one, but audience of three mentality. I think it's a good way to stay sane if you're posting online. Probably don't wanna be too sucked into the algorithm.