There will prove to be many winners as artificial intelligence (AI) infrastructure continues to grow and AI end-uses expand. Nvidia (NVDA 3.17%) has been the Wall Street darling surrounding everything AI for the past two years.
CoreWeave (CRWV +0.85%) has been getting the love most recently, though. Shares of the AI hyperscaler providing cloud services have soared about 185% in just the past month as of this writing. Nvidia stock has increased 24% in that time. CoreWeave just went public in late March, and the shares have jumped about 270% since that initial public offering (IPO). Investors may wonder if Nvidia's shine is fading, and it's time to buy CoreWeave instead. I'd argue that is flawed thinking, however.
Image source: Getty Images.
The growth isn't over for Nvidia
Investors may be taking a breather after the early exponential gains in Nvidia stock. Growth in the business itself has also slowed, though that was inevitable. Sales of its advanced chips in the data center segment had been growing like a weed. Revenue in that segment has been increasing in each consecutive quarter for the last two years. In the most recent fiscal quarter, that growth rate slowed to 10%, though, as seen below.
Data source: Nvidia. Chart by author.
Despite that trend, it's clear AI demand hasn't yet peaked. Remember, these are still sequential quarterly increases in data center sales. For perspective, that fiscal first-quarter revenue was a 73% jump compared to the prior year period. Management also guided investors to expect further revenue growth in the current quarter. So, while an unsustainable growth rate slows, the company is still solidly in growth mode.
Nvidia is more ubiquitous than you might think
That's because it's not just Nvidia's advanced GPU and CPU chips driving sales and expanding AI infrastructure. Its AI ecosystem includes interconnect technologies, the CUDA (compute unified device architecture) software platform, and artificial intelligence processors that are part of many different types of architectures.
CEO Jensen Huang recently touted Nintendo's new Switch 2 gaming console, for example. The unit includes Nvidia's AI processors that Huang claims "sharpen, animate, and enhance gameplay in real time."
NASDAQ: NVDA
Key Data Points
Nvidia has a broad array of customers. As AI factories and data centers are built, it will continue to be a major supplier and one that investors should benefit from owning. Nvidia also invests in the AI sector. It makes sense to look at where the AI leader itself sees future gains.
Nvidia thinks CoreWeave is a good investment
One of the AI companies in which Nvidia holds a stake is CoreWeave. Nvidia should know CoreWeave well, too, as an important customer. CoreWeave leases data center space to companies needing the scalable, on-demand compute power it has control of from the 250,000 Nvidia chips it has purchased.
It's a desirable option for enterprises that require significant computational power to process large amounts of data efficiently. There appears to be plenty of demand. But there is plenty of risk for investors, too. It just announced a new lease agreement to further increase capacity.
Applied Digital, a builder and operator of purpose-built data centers, has agreed to deliver CoreWeave 250 megawatts (MW) of power load on a 15-year term lease at its recently built North Dakota data center campus. CoreWeave has the option to expand the load by an additional 150 MW in the future.
Demand is quickly driving growth for CoreWeave. That's led investors to jump in and drive the stock higher in recent months. Valuation is just one major risk with CoreWeave. Customer concentration is another. Last year, Microsoft accounted for nearly two-thirds of revenue. CoreWeave also disclosed that 77% of 2024 revenue came from just its top two customers.
CoreWeave is also spending massive amounts of capital to grow AI cloud capacity. It had about $5.4 billion of liquidity available as of March 31 and raised another $2 billion from a late May debt offering. That's approximately its level of capital expenditure in just the first quarter alone, though.
NASDAQ: CRWV
Key Data Points
CoreWeave has the risk, Nvidia has the profits
That spending may pay off. But there are risks there as well. Customers could develop their own AI infrastructure or could redesign systems that don't require its services. CoreWeave stock also trades at a high valuation after the stock has soared. It recently had a price-to-sales (P/S) ratio of about 30.
That could be cut in half this year with its strong sales growth, but it isn't earning any money yet. At the same time, Nvidia sports a price-to-earnings (P/E) ratio of about 30 based on this year's expected profits.
Remember, too, that as CoreWeave grows, so do Nvidia's profits. Applied Digital CEO Wes Cummins said that its leased North Dakota data center campus will be full of Nvidia Blackwell class servers. I think the risk profile, financial picture, and massive potential for Nvidia make it the better AI stock to buy now.
