CoreWeave (CRWV), a prominent cloud-based GPU-as-a-Service provider, has made waves recently by acquiring crypto miner Core Scientific in an all-stock deal. While this acquisition signals growth and vertical integration for CoreWeave, its depreciation policy has raised some eyebrows. Specifically, the company depreciates its GPUs over a 6-year period, which contrasts with competitor Nebius’ 4-year depreciation approach. 
This discrepancy could have significant implications for CoreWeave’s financials and raises some important questions about its strategy.
For context, CoreWeave rents out NVIDIA GPUs on the cloud, specifically designed to cater to AI workloads. Thanks to a partnership with NVIDIA, CoreWeave can offer the latest-generation GPUs at scale, an advantage that sets it apart in the cloud computing sector. Furthermore, CoreWeave’s business model relies on a take-or-pay structure, ensuring a predictable cash flow from customers regardless of the actual usage of compute resources. This provides CoreWeave with a steady revenue stream, but it also requires customers to make significant upfront payments for infrastructure build-out.
The crux of the issue lies in CoreWeave’s choice to depreciate its GPUs over 6 years, which differs from Nebius’ 4-year policy. This extended depreciation period artificially suppresses CoreWeave’s operating expenses, boosting its operating income in the short term. Additionally, this strategy allows CoreWeave to use its NVIDIA GPUs as collateral to secure debt financing, benefiting from a higher book value of these assets. However, with 96% of CoreWeave’s revenue coming from committed contracts, many argue that its customers are already shouldering much of the depreciation costs. This raises the question: why not adopt a more conservative 4-year depreciation period, aligning with Nebius and more accurately reflecting the lifespan of these assets?
Adding complexity to the situation, CoreWeave’s recent buyout of Core Scientific, valued at around $9 billion, will significantly reduce its leasing overheads. This acquisition also expands CoreWeave’s power capacity, adding nearly 1.3 GW of gross power to its network, including 840 MW for HPC contracts and 500 MW allocated to crypto mining. These additions bolster CoreWeave’s capabilities and position it for further expansion, with analysts noting that the deal brings significant savings in the long term.
Ultimately, CoreWeave’s depreciation policy raises important considerations about its financial health and long-term strategy. While the company’s recent acquisitions and strategic moves may seem bullish, the question of whether its current approach to asset depreciation is sustainable remains unanswered.