Investors have been on the lookout for artificial intelligence (AI) stocks that could cash in on this market’s next phase of growth. Companies continue to train models, but now and going forward, these models are put to work. This phase of thinking and solving complex problems is known as inference and should lead to growth in later years.
As companies aim to drive training and inference, they need capacity — and according to cloud providers large and small, demand has grown. These AI customers can turn to a cloud giant such as Alphabet to run their workloads, or they might choose to work with a smaller, more specialized player, like the two I’ll talk about here: I won’t(NASDAQ: NBIS) and CoreWeave(NASDAQ: CRWV).
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What is the best buy according to Wall Street? Let’s find out.
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Customers come to Nebius for its range of services — such as managed services for Kubernetes, for example — as well as access to graphics processing units (GPUs) and central processing units (CPUs) for workloads. As Nebius himself says, “we provide every essential resource for your AI journey.”
All of these have clearly been popular with customers, as we can see from Nebius’ earnings reports. In the last quarter, the company sold all of its capacity and revenues increased by more than 300%. Nebius also signed its first major AI infrastructure deal — with microsoft, and worth up to $19.4 billion. And the company signed a second significant agreement with Meta platformsin this case for $3 billion.
The main challenge for Nebius — and for CoreWeave — is the need to invest heavily to meet demand. Nebius recently raised more than $4 billion through convertible notes and a subsequent stock offering to invest in GPUs, land and other assets to expand its infrastructure.
CoreWeave focuses on giving its customers access to its high-powered fleet Nvidia GPUs for their workloads. The company works closely with the AI chip leader and was therefore the first to make Nvidia’s Blackwell and Blackwell Ultra platforms generally available at launch. Now, we can expect the same as Nvidia prepares to launch its Rubin platform later this year.
It’s also important to note that Nvidia has more than 85% of its portfolio invested in this AI cloud specialist — given Nvidia’s understanding of the AI market, it’s well-positioned to identify future winners.
Like Nebius, CoreWeave has seen revenue grow by triple digits as customers seek capacity for their AI workloads. In the last quarter, CoreWeave’s revenue grew 133%. CoreWeave also needs to invest in infrastructure to keep up with this demand, and investors have been concerned about the company’s debt levels as it pursues this growth story.
Debt-to-asset ratios show that CoreWeave’s operations, compared to Nebius’s, are more debt-financed.
CRWV Data Debt to Assets (Quarterly) by YCharts
Now, let’s consider which stock is a better buy today, according to Wall Street. Both companies have more “buy” recommendations than “hold” or “sell” ratings. And Wall Street expects both to rise over the next 12 months. Now, here are the details: CoreWeave’s average price target implies a 43% upside over the period, while Nebius’s price target implies a 67% gain.
So while Wall Street recommends buying both stocks, if the analysts are right, Nebius could see the biggest gain next year. Also, the company may have a little less risk because its financial picture is more favorable.
What does this mean for you as an investor? Both of these actions could represent interesting investments in AI. These companies each provide services that are greatly needed today — and should continue to do so well into the future. And while analysts may be more confident in Nebius’ balance sheet, both of these stocks still carry some risk because they depend on the strength of the AI boom. So, these players might not be the best choice if you are a cautious investor. But if you’re a growth-focused investor, then you might want to consider buying some shares of Nebius — if Wall Street is right, the stock could offer the biggest reward 12 months from now.
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Adria Cimino has no position in any of the actions mentioned. The Motley Fool has positions in and recommends Alphabet, Meta Platforms, Microsoft and Nvidia. The Motley Fool has a disclosure policy.
Nebius vs CoreWeave: Which is the best buy according to Wall Street? was originally published by The Motley Fool
