CoreWeave or uses financial derivatives to hedge against a drop in storage chip prices

BlockBeats message, July 15, citing an insider, AI cloud computing company Coreweave (CRWV.O) is exploring the use of financial derivatives as a potential hedge against future declines in memory and storage chip prices. This unusual move highlights how the AI boom has deeply linked cloud service providers with a chip market marked by sharp volatility.

To secure supply, cloud operators including CoreWeave have signed long-term agreements with memory and storage chip makers such as Micron and SanDisk. Many of these agreements provide suppliers with price-floor protections for DRAM and storage chips. But this arrangement is a double-edged sword: it shields chip manufacturers from downturns in the market, while also exposing cloud services companies such as CoreWeave to risk.

If prices fall, they would be forced to keep purchasing at prices far higher than prevailing market rates. Therefore, CoreWeave executives have discussed how to hedge the risk that a decline in future prices could lead to write-downs in inventory of memory chips. The discussions are still in their early stages, and the company has not executed any hedging actions. Proposed approaches include put options and other potential derivative instruments.