CoreWeave may use financial derivatives to hedge against a decline in storage chip prices

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ME AI news, July 15, according to an insider, AI cloud computing company Coreweave (CRWV.O) is exploring the use of financial derivatives as a potential hedge against future declines in the prices of memory and storage chips. This unusual move highlights how the AI boom is tightly binding cloud service providers to a highly volatile chip market. 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 guaranteed price floors for DRAM and storage chips. But this arrangement is a double-edged sword: it protects chip makers from market downturns, while also putting cloud service companies such as CoreWeave at risk. If prices fall, they will be forced to keep purchasing at prices far higher than market rates. As a result, CoreWeave executives have been discussing the risk of inventory depreciation for memory chips that could be caused by future price declines. The discussions are still in the early stages, and the company has not executed any hedging actions yet. The options being discussed include put options and other possible derivative instruments. (Source: MLion)
CRWV-4.05%
SNDK5.05%
DRAM1.74%
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