Why Cisco is considering investing in CoreWeave, a popular AI startup

Therese Poletti

CoreWeave offers cloud services designed specifically for artificial intelligence and machine learning

According to reports, Cisco Systems Inc. is considering making a big investment in CoreWeave, one of the most popular artificial intelligence startup companies, as the networking giant seeks to gain a stronger foothold in the AI data center.

Officials from Cisco (CSCO) and CoreWeave did not immediately respond to a request for comment. On Friday, Bloomberg reported that Cisco had agreed to invest in CoreWeave, a cloud services provider based in Roseland, New Jersey, in a deal that would 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 one of the most valued startups in the AI and machine learning sector. In its first quarter valuation report, PitchBook noted that valuations of both early- and late-stage AI startups are currently outpacing all other sectors.

Founded in 2017, CoreWeave offers cloud services designed specifically for AI and machine learning, with a wide range of capabilities and features based on customer needs and workloads. It operates a growing number of data centers across the United States

For its part, Cisco has been slower to see big revenues from the artificial intelligence boom. Its customers are mainly enterprises and governments, while cloud service providers – called hyperscalers – have been the biggest creators of AI data centers so far.

Additionally, Infiniband is the networking standard for high-performance data centers, but Nvidia Corp. (NVDA) has partnered with Cisco to work with the Ethernet networking standard that is currently used by most large companies.

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

It’s also unclear how much Cisco will invest or whether other investors will be included in the next round. Like most AI companies building systems, CoreWeave needs huge amounts of cash. As of May 2024, CoreWeave has raised a total of $9.09 billion, according to PitchBook

It’s unclear whether Cisco hopes to influence CoreWeave AI data center technologies or cash in on CoreWeave’s expected IPO next year. It’s probably a bit of both, but until companies confirm the reports, everything remains speculation for now.

-Teresa Poletti

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10/05/24 0513ET