CoreWeave counters a key bear case on the AI trade. What it means for our data center stocks

Here is a story making headlines in the economy: CoreWeave has delivered a shot in the arm for Club name Nvidia and other data center stocks, offering evidence that AI chips may be an even better investment than previously thought. The AI compute provider's commentary on the longevity of Nvidia's chips — first on Tuesday night's earnings call and again Wednesday morning on CNBC — lends support to the artificial intelligence infrastructure trade in a couple of ways. It starts with giving the data center builders, like Amazon and Microsoft , more confidence in the return on their current spending, likely increasing the sustainability of the capital expenditure cycle.

The added sustainability is a good thing for the future revenues of data center suppliers, from chipmakers to electrical and power companies. It also offers validation for Nvidia's splashy, $500 billion financing initiative announced Monday night in partnership with Wall Street's biggest firms. These implications are reflected in Wednesday's trading, with Nvidia shares up 3%, networking cable provider Corning up 5.

Economic Details

2%, turbine maker GE Vernova up 2. 7%, and memory supplier Micron , our newest position, jumping 4. For its part, CoreWeave's own stock is surging nearly 20%, thanks to what Jim Cramer called "a true breakout quarter.

" Revenue topped expectations, losses were narrower than expected, and the company increased its top-line outlook for the year. One of the biggest bear cases around the AI trade has been technological obsolescence — the idea that Nvidia's graphics processing units (GPUs) and other AI chips may have much shorter useful lives than operators assume. As a result, the argument goes, today's spending is irrational because the hardware would need to be replaced too frequently to generate an attractive return on investment, known as ROI.

CoreWeave suggests the opposite may be true. "Older generations of GPUs are going to have a longer useful life than anyone anticipated," CEO Mike Intrator told Jim and his "Squawk on the Street" co-hosts Wednesday morning. "They are going to contract for a longer term, and they are going to contract at a higher price.

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" Finance chief Nitin Agrawal got into the specifics on Tuesday's earnings call, saying the company "recently signed an A100 contract that extends into 2029 at an attractive price. As a reminder, this SKU was introduced in 2020. " That's the same year CoreWeave started renting GPUs in the cloud.

The A100 belongs to Nvidia's Ampere generation of hardware — it's the chip that OpenAI used to train the first iteration of ChatGPT , which launched in late 2022 and kicked off this historic AI boom. Nvidia has since followed up Ampere with its Hopper family of GPUs, the Blackwell lineup, and now the Rubin generation, which entered full production earlier this year. CoreWeave was the first cloud computing provider to have a Rubin system online, according to a June 1 announcement .

Economists are analysing what the news means for the markets.