Lates News

According to sources, the artificial intelligence cloud computing company Coreweave (CRWV.O) is exploring the use of financial derivatives as potential hedging mechanisms against future drops in memory and storage chip prices. This unusual move highlights how the AI boom is deeply tying cloud service providers to the volatile chip market. To secure supply, including CoreWeave, cloud operators have signed long-term agreements with memory and storage chip manufacturers such as Micron and SanDisk. Many of these agreements provide suppliers with price floor guarantees for DRAM and storage chips. However, this arrangement is a double-edged sword as it can protect chip manufacturers from market downturns but also poses risks for cloud service companies like CoreWeave. If prices drop, they will be forced to continue purchasing at prices well above market rates. Therefore, CoreWeave executives have been discussing how to hedge against the risk of inventory devaluation of memory chips due to potential future price drops. The discussions are still in the early stages and the company has not yet executed any hedging operations. Potential solutions being considered include put options and other derivative instruments.