Nvidia (NVDA 4.39%) isn’t just a top artificial intelligence (AI) stock to own; it’s also an investor in other AI companies itself. It doesn’t have a very large investment portfolio, so when it decides to take a position in a company, investors had better pay attention. There’s only one reason a company like Nvidia would invest in another: Nvidia believes the investment will result in a greater return on capital than if it had invested it in itself. That’s a major vote of confidence, so using Nvidia’s holdings as a source for investment ideas is a smart strategy.
Two companies Nvidia is a major shareholder of are CoreWeave (CRWV 6.05%) and Nebius (NBIS 0.30%). These companies operate in a similar industry, and both look like they could be great investments if they can find their way to profitability.
Image source: Getty Images.
Neocloud is a major growth sector in AI
Both CoreWeave and Nebius are known as neocloud providers. This stems from the parent cloud computing sector, which, at its core, involves a company building excess computing capacity, then renting that capacity to other clients. There are countless applications for cloud computing, including website hosting and data storage, but neocloud companies are solely focused on providing AI computing power.
Today’s Change
(-0.30%) $-0.66
Current Price
$220.49
Key Data Points
Market Cap
$55B
Day’s Range
$211.94 – $228.77
52wk Range
$34.72 – $233.73
Volume
896K
Avg Vol
17M
Gross Margin
7.48%
CoreWeave and Nebius approach this industry from two different standpoints. CoreWeave is focused on providing best-in-class GPUs from Nvidia, and its services basically act as an auxiliary training and inference bank for major AI hyperscalers. Two of CoreWeave’s largest clients are Meta Platforms and Microsoft, and both of them have announced major, multiyear deals with CoreWeave.
Nebius’ approach involves building a full-stack solution, so clients can have everything they need to train and run AI models within the Nebius ecosystem. This opens up Nebius’ product to clients of all sizes, although it also has deals with major hyperscalers (like Meta). There’s a place for both companies in the world, and their growth rates clearly show that.
During CoreWeave’s first quarter, it grew revenue at an impressive 112% pace to $2.1 billion. However, it has a ton more growth ahead, as its backlog is nearly $100 billion — stemming from major multiyear deals it has signed.
Today’s Change
(-6.05%) $-6.91
Current Price
$107.31
Key Data Points
Market Cap
$59B
Day’s Range
$106.44 – $110.26
52wk Range
$63.80 – $187.00
Volume
566K
Avg Vol
28M
Gross Margin
34.82%
Nebius is growing even faster. During Q1, its revenue reached $399 million, growing at a jaw-dropping 684% pace. That’s a growth rate that’s hard to match, and showcases the incredible demand for Nebius’ full-stack setup.
Both of these are rapidly growing, but they have one problem: input costs.
Each company is taking on heavy debt to build out its footprint
Nebius and CoreWeave don’t have a strong core business to fund their data center capital expenditures like some of the AI hyperscalers do. So, they have to take out an enormous amount of debt to build out their footprint. The balance will be ensuring their debt load doesn’t become too much, and that eventual profitability makes these investments worth it. Time will tell how it pans out, but with long-term AI demand, each company has the potential to transform into a major cash cow as they move into a more steady, long-term running pattern.
CRWV Total Long Term Debt (Quarterly) data by YCharts
Valuing each company is difficult due to their extreme growth rates and a lack of profitability. Although I’m not a huge fan of the valuation measure, the forward price-to-sales ratio is probably the best way to value these stocks.
CRWV PS Ratio (Forward) data by YCharts
From this standpoint, CoreWeave is far cheaper, but it’s also not growing nearly as fast as Nebius. If CoreWeave can turn the profitability corner and become fully mature, that 4.6 times or upward sales price tag probably isn’t too expensive to pay. The same goes with Nebius, as Wall Street projects its revenue will more than triple again in 2027.
Both businesses are incredible, and after evaluating their growth, it makes sense Nvidia is backing them as top AI stocks to own.
