One hand signs long-term storage agreements, the other shorts storage stocks? CoreWeave and Wall Street discuss hedging strategies

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AI cloud company CoreWeave is locking in long-term chip supplies while also contemplating how to defend against the backlash from price declines.

According to the latest report from Reuters, AI cloud computing company CoreWeave is exploring the use of financial derivatives to hedge against the risk of future memory chip price drops. Sources reveal that discussions are still in the early stages, and the company has not yet implemented any hedging operations.

Behind this move lies CoreWeave’s deep entanglement in the structural dilemma of the chip market.

Long-term contracts are a double-edged sword

The boom in AI infrastructure construction has driven a surge in demand for memory chips. Cloud computing operators such as CoreWeave have signed long-term procurement agreements with memory chip manufacturers like Micron and SanDisk to secure supply.

Such agreements usually set a price floor—ensuring suppliers receive minimum returns even when the market declines.

For chip manufacturers, this is an insurance policy. But for CoreWeave, the risk lies in: If market prices fall, the company must still purchase at the higher prices stipulated by the contract, with real costs far above market price.

Wall Street Toolbox: Put Options

To address this exposure, CoreWeave executives have begun discussing hedging plans. According to sources, options being considered include put options—that is, buying contracts granting the holder the right, but not the obligation, to sell an asset at a predetermined price in the future.

The logic is straightforward: If memory chip prices fall, the stock prices of related chip companies typically decline as well. By holding put options on these stocks, CoreWeave can profit if prices drop, which can partially offset excess costs from contract procurement.

This logic is similar to how airlines hedge fuel prices—buying crude oil put options to guard against major fuel cost fluctuations. However, Reuters also notes that US airlines have suffered losses from similar hedging operations in the past.

2028: Capacity expansion is a key milestone

The memory chip market is highly cyclical. Current prices have surged, but history shows that prices often fall after new production comes online.

SK Hynix and Micron have both stated that they expect new capacity to be fully operational by early 2028.

This means the window of downward price pressure CoreWeave faces is relatively clear. If by then market prices are significantly lower than those locked in the contract, the company will suffer substantial cost losses. This is the core reason why CoreWeave is setting up hedges in advance.

Deep linking of cloud computing and the chip market

Reuters notes that CoreWeave’s move reflects how the AI boom is deeply binding cloud computing companies to the highly volatile chip market.

Industries like energy and aviation have long incorporated derivatives hedging into routine financial management. For CoreWeave, whether this Wall Street toolbox is suitable for the chip market remains to be seen—as discussions are still preliminary and no decisions have been implemented.

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