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CoreWeave explores derivatives to hedge future memory and storage chip price declines

The AI cloud company is weighing put options and other derivatives after signing long-term supply deals with Micron and SanDisk that expose it to downside risk if chip prices fall.

Summary

CoreWeave is in early discussions about using put options and other derivatives to protect against future declines in memory and storage chip prices. The potential hedge follows long-term supply agreements with Micron and SanDisk that include price-floor protections for suppliers, leaving CoreWeave exposed if market prices drop below those levels. The talks indicate the AI cloud company is considering financial risk-management tools to offset hardware pricing volatility tied to its supply commitments.

Terms & Concepts
  • put options: Contracts that generally increase in value when the price of an underlying asset falls, helping protect against downside risk.
  • derivatives: Financial contracts whose value is linked to an underlying asset, price or benchmark.
  • price-floor protections: Contract terms that set a minimum price level, limiting how far prices paid to suppliers can fall.