While Nvidia, Palantir Technologies, and Tesla consistently find their names in headlines regarding artificial intelligence (AI), I would argue that one company that dwarfs the attention garnered by big tech is OpenAI -- the start-up that kicked off the AI revolution in the first place.
Recently, OpenAI sent shockwaves around the AI landscape yet again. This time, however, it wasn't because the ChatGPT developer released another groundbreaking product aimed at its rivals.
Rather, investors learned that OpenAI is teaming up with ... Alphabet. Below, I'm going to detail why the partnership between OpenAI and Alphabet is such a big deal.
Moreover, I'll break down which AI data center stock I think is poised to benefit most from this deal. Let's dig in.
How are Google and OpenAI working together?
You may recall that when OpenAI emerged a few years ago, Microsoft was fast to partner with the company. More specifically, Microsoft plowed $10 billion into OpenAI as part of a strategic investment. One of the cornerstones of this deal was integrating ChatGPT into Microsoft's cloud platform, Azure. Throughout their partnership, OpenAI's compute infrastructure for training and inferencing was primarily supported by Microsoft. With Google entering the picture, however, those dynamics have changed.
OpenAI is branching out beyond Microsoft and now leveraging the Google Cloud Platform (GCP) to complement Azure for compute resources. While this is a huge win for Alphabet's cloud business -- which rivals both Azure and Amazon Web Services (AWS) -- I see an even bigger winner emerging from this partnership.
Image source: Getty Images.
What data center stock do I think is the real winner, and why?
While Nvidia, Advanced Micro Devices, and Broadcom have been critical sources of high-performance chipsets for data centers throughout the AI revolution, a new player is emerging as a key resource in the space.
CoreWeave (CRWV 18.60%) provides critical infrastructure services to AI developers through a cloud-based model. Companies that may not have the time or financial resources to acquire graphics processing units (GPU) from Nvidia and its peers can essentially rent them from CoreWeave's cloud-based infrastructure.
Image Source: CoreWeave Investor Relations.
Per the graph above, the 63% increase in CoreWeave's remaining performance obligations (RPO) suggests demand for infrastructure services is strong. However, there's a bit more to those figures above.
Back in March, CoreWeave signed an $11.2 billion deal with (wait for it!)... OpenAI. Following the news of OpenAI's partnership with Google Cloud, further reporting outlined that CoreWeave is playing a role in this deal, too. CoreWeave is reportedly supplying compute power to Alphabet, which the company will then resell to OpenAI as part of the new cloud deal structure.
NASDAQ: CRWV
Key Data Points
As I outlined in this piece here, infrastructure services represent the next big tailwind along the AI spectrum. While OpenAI may continue to make the headlines as it inks new deals and further migrates from an overreliance on Microsoft, investors should keep a keen eye on how CoreWeave might also emerge as a subtle winner from these partnerships.
Is CoreWeave stock a buy right now?
Wall Street's consensus estimates for CoreWeave suggest an incredibly bullish outlook. It's rare for a company to triple its revenue and transition to profitability in a matter of just a couple of years. Now that CoreWeave is working closely with OpenAI, I suspect the company will become increasingly scrutinized as more AI infrastructure deals come to light. For these reasons, I think there is a lot riding on CoreWeave's ability to meet or exceed the forecasts below.
CRWV Revenue Estimates for Current Fiscal Year data by YCharts
While CoreWeave is a rising star in the AI realm and the company's outlook is bright, smart investors will recall that the company went public just a few months ago. Broadly speaking, IPO stocks can exhibit pronounced levels of momentum as hype around the new stock rises. With a stock price gain of nearly 300% in just two months, I think CoreWeave stock is overbought right now.
Although I like the company as a long-term investment, I would encourage investors to exercise some patience and wait for a pullback before piling into the stock.
