AI cloud computing company CoreWeave is considering the use of financial derivatives to shield itself from a possible future decline in memory and storage chip prices, according to a source with knowledge of the situation.
The unconventional strategy highlights just how closely cloud computing companies have become tied to the unpredictable chip market. To secure a steady supply of chips during a period of surging demand — driven largely by a massive wave of AI infrastructure investment — cloud operators including CoreWeave have entered into long-term contracts with memory and storage chip manufacturers such as Micron and SanDisk.
Many of those agreements guarantee chipmakers a minimum price for dynamic random access memory, known as DRAM, as well as storage chips.
While that setup offers protection for the chip suppliers, it creates a risk for cloud companies like CoreWeave. If chip prices fall in the future, CoreWeave could find itself locked into contracts that require it to pay significantly more than the current market rate.
Because of that risk, CoreWeave executives have been discussing ways to hedge against a drop in memory chip stocks that could follow a decline in prices, the source said.
Those conversations are still in the early stages, and the company has not yet taken any action, the source added. Options being considered include put options — financial contracts that give the holder the right, but not the requirement, to sell an asset at a set price at a future date — along with potentially other types of financial instruments.
Memory and flash storage chip prices have climbed sharply in recent months. The memory chip industry has historically gone through boom-and-bust cycles, and prices often fall once new manufacturing capacity comes online.
Major memory chip producers SK Hynix and Micron have both signaled they expect new manufacturing facilities to be fully operational by early 2028.
Hedging against price swings is not a new concept in business. Industries like energy and airlines have long used similar strategies to limit the impact of oil price volatility. However, U.S. airlines have at times suffered losses from such hedging efforts. Many businesses also use derivatives to protect against fluctuations in currency exchange rates.
