Why Cisco is looking at investing in CoreWeave, a hot AI startup

By Therese Poletti

CoreWeave offers cloud services that are specifically designed for AI and machine learning

Cisco Systems Inc. is reportedly looking at making a big investment in CoreWeave, one of the hotter artificial-intelligence startup companies, as the networking giant seeks to get a stronger foothold in the AI data center.

Officials at Cisco (CSCO) and CoreWeave did not immediately respond to a request for comment. On Friday, Bloomberg reported that Cisco has agreed to invest in CoreWeave, a cloud-service provider based in Roseland, N.J., as part of a deal that will value the company at $23 billion.

According to PitchBook, CoreWeave was valued at $19 billion in May, when it raised $7.5 billion in debt financing. After OpenAI, it is among the highest-valued startups in the AI and machine-learning sector. In a first-quarter valuation report, PitchBook noted that valuations for both early stage and late stage startups in AI are outpacing all other sectors right now.

Founded in 2017, CoreWeave offers cloud services that are specifically designed for AI and machine learning, with a wide range of capabilities and functions depending on the customer's needs and workload. It operates a growing number of data centers around the U.S.

For its part, Cisco has been slower to see big revenue from the AI boom. Its customers are mostly corporate enterprises and governments, while the cloud-service providers - referred to as hyperscalers - have been the biggest builders of AI data centers so far.

In addition, the networking standard in the high-performance data centers is Infiniband, but Nvidia Corp. (NVDA) has been partnering with Cisco to work with the Ethernet networking standard that is currently used in most big companies.

Also read: Cisco could be a late bloomer in generating big AI revenue

It is also not clear how much Cisco will be investing, or if other investors will also be included in this next round. Like most AI companies building out systems, CoreWeave needs massive amounts of cash. As of May 2024, according to PitchBook, CoreWeave has raised a total of $9.09 billion

Whether Cisco hopes to influence the technologies used in CoreWeave's AI data centers or cash in on CoreWeave's expected public offering next year is not clear. It is probably a bit of both, but until the companies confirm the reports, all is speculation for now.

-Therese Poletti

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

10-05-24 0513ET

Copyright (c) 2024 Dow Jones & Company, Inc.