SAN FRANCISCO, July 14 (Reuters) – AI cloud computing company CoreWeave is considering using financial derivatives as a potential hedge against future declines in memory and storage chip prices, according to people familiar with the matter.
The unusual move highlights how deeply the AI boom has dragged cloud providers into the volatile chip market. To ensure supply amid soaring demand due to the surge in AI infrastructure construction, cloud operators including CoreWeave have signed long-term agreements with memory and storage manufacturers such as Micron and SanDisk.
Many of these deals guarantee suppliers the lowest prices for dynamic random access memory (DRAM) and storage chips.
But this arrangement cuts both ways. That means while protecting chipmakers from a recession, cloud companies like CoreWeave are at risk if prices fall and they end up paying significantly more than current rates.
As a result, Coreweave executives discussed ways to avoid a fall in memory chip stocks if prices decline in the future, the people said.
Talks are at an early stage and the company has not yet made any hedges, the people said. Possibilities being discussed include put options (contracts that give the holder the right, but not the obligation, to sell the underlying asset at a predetermined price in the future) and potentially other derivative instruments.
Memory and flash storage prices have skyrocketed in recent months. Historically, memory has been a cyclical industry, with inflated prices often falling as new manufacturing capacity becomes active.
Memory companies such as SK Hynix and Micron have said they expect new manufacturing capacity to be fully ramped up in early 2028.
Other industries, such as energy and aviation, employ hedging strategies to ensure that rising or falling oil prices do not significantly impact their business. U.S. airlines have come under fire for such hedging efforts in the past. Many companies also hedge currency risk.
(Reporting by Max A. Charney in San Francisco; Editing by Lincoln Feast)
