CoreWeave (NASDAQ:CRWV) and Nebius (NASDAQ:NBIS) are two large providers of GPU cloud infrastructure designed to feed AI’s growing demand for computing power. Both stocks have seen their prices skyrocket in the last 12 months, with CRWV rising more than 230 percent and Nebius rising more than 500 percent.
Coming off of these astronomical gains, which of these two up-and-coming cloud giants could be the better buy in today’s market?
CoreWeave
CoreWeave’s most significant feature as a business at the moment is the enormous amount of revenue growth it has been able to generate as it has scaled up. In Q2, for instance, CoreWeave reported revenues of $1.2 billion, up from just $395.4 million in the year-ago quarter. The business’s revenue backlog also totaled over $30 billion.
While this revenue growth hasn’t translated to profitability, CoreWeave’s net loss margins have improved considerably over the last 12 months. In Q2, the business lost $290.5 million, a respectable move in the right direction from the $323.0 million it lost a year earlier. Even more meaningful was the narrowing of the net loss margin, which fell from 82 percent to 24 percent.
Perhaps the most compelling argument in CoreWeave’s favor, however, is the massive investment NVIDIA has made in the business. NVIDIA owns about 7 percent of Coreweave and, more importantly, has committed to purchase any unsold cloud computing capacity through 2032.
As a result, CoreWeave not only has the backing of the world’s largest GPU maker but also a guaranteed market for its cloud computing into the next decade. This arrangement recently resulted in a $6.3 billion order from NVIDIA, equaling more than one-fifth of the revenue backlog it had at the end of its already impressive Q2.
Nebius
Nebius is also generating outsized revenue growth, though it’s worth noting that the business is starting from a much lower baseline. Q2’s earnings report detailed revenue growth of 625 percent year-over-year to $101.5 million. Annualized run-rate revenue is expected to reach the much higher range of $900 million to $1.1 billion by the end of this year. Adjusted EBITDA also turned positive earlier than management had previously expected, providing an additional boost to bullish shareholders.
Soaring share prices have, however, brought Nebius stock to trade at an even larger premium than CoreWeave. NBIS is currently trading at over 120 times trailing 12-month sales, and its market cap of $32.2 billion is more than 30 times the midpoint of management’s ARR guidance. Though CoreWeave shares certainly don’t appear cheap when compared to trailing 12-month sales, they do trade at the much more reasonable multiple of 18.8 times sales.
Like CoreWeave, Nebius has attracted investment from NVIDIA, albeit a much smaller amount. Last month, Nebius also landed a $17.4 billion deal with Microsoft, an amount that was greater than its total market cap at the time. This deal was the catalyst for much of Nebius’ recent share price gain. Working with a massive partner like Microsoft is also likely to insulate Nebius from some of the potential volatility in the AI market in a similar way to NVIDIA’s partnership with CoreWeave.
Nebius has also taken a somewhat unique approach to its AI business, preferring a vertically integrated model. Nebius uses proprietary hardware and software throughout most of its technology stack, giving it a high degree of engineering control and making its offerings uniquely suited to AI workflows. Over time, this could help set Nebius apart as a leading AI computing provider.
Nebius’ greatest asset, however, may be its technical expertise and experience in building and scaling large tech businesses. Nebius is the non-Russian successor to Yandex, Russia’s largest search engine business. As a spinoff from a major international tech firm, Nebius could have an edge when it comes to scaling its GPU clusters and building itself into a major AI service provider for other large businesses.
Which Stock Is Better?
Right now, Wall Street is expecting respectable returns from both CoreWeave and Nebius, though it seems unlikely that either will deliver the kind of triple-digit returns investors have seen in the past year. The median target price for CoreWeave is currently $157.00, a 17.1 percent increase from the most recent price of $134.06. Nebius has a somewhat higher projected upside of 22.1 percent, as the stock is expected to rise from $128.15 to a consensus price target of $156.40.
It’s also worth noting that both businesses are likely to benefit from very similar tailwinds as demand grows for AI infrastructure. The computational requirements of the AI industry are currently growing at more than double the pace of Moore’s Law, the basic principle of computer science that predicts the exponential growth of computing power over time. That being the case, demand for ever-larger GPU clusters to power AI is likely to remain extremely strong for the foreseeable future.
The edge, however, likely goes to CoreWeave at the moment. The business is starting from a much higher revenue baseline and appears to be making rapid progress in the direction of profitability. Moreover, NVIDIA’s larger investment in CoreWeave and commitment to purchase any excess capacity it can’t sell will provide significant support for the business over the next seven years.
On top of this advantage, CoreWeave’s valuation is also significantly less difficult to justify than Nebius’. While both Nebius and CoreWeave have potential as good long-term AI plays, CoreWeave is likely a slightly better choice in today’s market due to these characteristics.
On the downside of both CoreWeave and Nebius, it’s important to acknowledge that both stocks are trading at very high valuations and could be at risk for significant downward volatility in the event of an AI stock selloff. Worries of an AI bubble are growing increasingly more pronounced, a fact that could lead to a correction among highly valued AI stocks. In such an event, both CoreWeave and Nebius would likely give up a considerable amount of the ground they’ve gained. In the long run, however, both businesses could prove to be quite valuable as demand for GPU capacity grows.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.