GMI Cloud calls CoreWeave’s 15% yield ‘insane’

The founder of a cloud computing company with a similar business model to CoreWeave Inc said the 15 percent yield on the latter’s bonds is “insane,” compared with the roughly 3.45 percent rate his company secured on a recent New Taiwan dollar loan.

“This is an advantage,” GMI Cloud chief executive officer Alex Yeh (葉威延) said in an interview on Thursday.

He said that cheaper capital and faster execution — helped by proximity to Asian supply chains — give artificial intelligence (AI) infrastructure companies that operate in the region an edge as investor jitters raise funding costs for their Western rivals.

The CoreWeave logo is displayed on a screen on July 20.

Photo: Reuters

CoreWeave bonds last week were trading at deeply distressed levels, sparked by wariness of its plans to take on even more debt after already borrowing tens of billions to finance an unprecedented buildout of AI computing capacity. Meanwhile, companies such as GMI Cloud benefit from being able to borrow in local currencies, which significantly lowers their costs compared with raising debt in US dollars.

CoreWeave and GMI Cloud are so-called neoclouds, which sell computing power generated from advanced computer chips that are used to train AI. Their success is contingent on their graphics processing units (GPUs) coming online on schedule, because the companies have borrowed large sums of money against customer contracts that can only generate revenue once the projects are up and running.

“You have to continue to pay that interest without having revenue come in — that’s one of the biggest issues,” Yeh said.

These types of deals have grown rapidly in the US, but are only beginning to take off in Asia, where GMI Cloud is among the few companies borrowing money to purchase GPUs. Last month, it secured a NT$13.9 billion (US$429.8 million) five-year loan from 14 banks for a data center in Taiwan. The company was also seeking another US$300 million for a facility in Thailand, people familiar with the matter said earlier.

CoreWeave and GMI Cloud have agreements with their supplier Nvidia Corp to purchase unsold computing power, but the deals are structured differently. Such arrangements have raised concerns about circular financing that creates false demand. On Thursday, Nvidia chief executive officer Jensen Huang (黃仁勳) said that his company did not need to backstop CoreWeave and that its cost of capital “is actually decreasing.”

“From my end, the demand is off the charts,” Yeh said.

GMI Cloud is headquartered in Mountain View, California, and operates in the US, Taiwan, Japan, Indonesia and Thailand. CoreWeave has also begun to move into Asia, with three projects under way in Indonesia.

Yeh said his family’s four-decade-old business in Taiwan’s semiconductor industry has helped GMI Cloud find reliable Taiwanese contractors for construction, electrical equipment and servers. He added that partnerships with conglomerates and prominent families in Asia have also enabled his firm to move more quickly.

“Am I worried?” Yeh asked about the turmoil in markets around AI companies. “Not a single bit, especially [since] our interest rates and customers support us.”