Nvidia (NVDA 1.56%) is a key player in the artificial intelligence (AI) arena, as designer of the world's top-performing AI chips. These graphics processing units (GPUs) fuel some of the most critical AI tasks, and their speed and overall efficiency have helped them to dominate the market. This product, along with a whole portfolio of related tools and services, has helped Nvidia to bring in significant revenue growth quarter after quarter in recent years.
But this market giant isn't only a designer of AI products. It's also an investor in other key AI players. Nvidia held a $4.3 billion stock portfolio as of the end of the third quarter, and more than 85% of it was invested in one AI company. Should you follow Nvidia into this high-growth player? Let's find out.
Image source: Getty Images.
An AI cloud specialist
Not only does Nvidia invest in this company, but the two also work together. This player that has attracted Nvidia's attention and investment is CoreWeave (CRWV +1.57%), an AI cloud specialist. CoreWeave offers its customers the ability to rent its Nvidia GPUs to suit their needs. This means they don't have to build out their own infrastructure -- a costly and lengthy effort -- and instead can rely on CoreWeave's already existing fleet.
Customers may count on gaining access to the very latest Nvidia has to offer, as CoreWeave, following the past two launches -- Blackwell and Blackwell Ultra -- was the first to make those systems generally available.
All of this has helped CoreWeave to deliver soaring revenue in recent times. For example, in the latest period, revenue jumped to in the triple-digits to $1.3 billion.
Now, let's consider the Nvidia-CoreWeave relationship. As mentioned, Nvidia had more than 85% of its stock portfolio invested in the company as of the end of the third quarter. And just recently, Nvidia said it made a fresh $2 billion investment in CoreWeave Class A common shares to help fund the cloud company's buildout of AI factories -- the goal is to reach beyond 5 gigawatts of AI factories by 2030.
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Key Data Points
Nvidia makes a key move
Back in September, Nvidia made a key move that might ease investors' concern about CoreWeave potentially building out too much infrastructure. The chip giant agreed to purchase any unsold CoreWeave capacity through April of 2032.
All of this support of CoreWeave is a positive point, considering Nvidia's position in the AI market. This tech giant has a keen understanding of the AI space and visibility on orders to come as it communicates with its customers. This means Nvidia has what it takes to identify possible AI winners.
Does this mean you should follow Nvidia and pick up shares of CoreWeave? As mentioned, the company is delivering significant growth, and the general message from many AI players is the same: Demand for AI capacity continues to be strong. CoreWeave faces competition from big cloud service providers such as Amazon and Alphabet, for example.
But this smaller player may continue to see booming business for two reasons. First, it specializes in AI workloads, so it has a certain expertise here -- bigger players offer a broad range of cloud services beyond AI. Second, the level of demand suggests that there's plenty of room for many cloud providers to succeed.
CoreWeave's big risk
The biggest risk CoreWeave faces right now is the fact that debt, to support its infrastructure ramp-up, is on the rise.
CRWV Total Long Term Debt (Annual) data by YCharts
Though Nvidia invested to help CoreWeave build, the investment isn't enough to reach the 5 gigawatt goal. Taking on more and more debt to serve future demand always represents some risk, especially for a company that isn't yet profitable, so considering this, cautious investors might think twice before buying CoreWeave stock.
What about aggressive investors? Most investors probably shouldn't follow Nvidia and go all in on just one stock, but if you're highly focused on growth, it's a great idea to pick up a few shares of CoreWeave and hold on for the long term.
