Investors have been on the lookout for artificial intelligence (AI) stocks that may win in this market's next phase of growth. Companies continue to train models, but now and moving forward, these models are being put to work. This phase of thinking through and solving complex problems is known as inference, and it should drive growth in the years to come.
As companies aim to power training and inference, they need capacity -- and according to cloud providers big and small, demand has been soaring. These AI customers may turn to a cloud giant such as Alphabet to run their workloads, or they could choose to work with a smaller, specialized player such as the two I'll talk about here: Nebius (NBIS 3.07%) and CoreWeave (CRWV 1.92%).
Which is the better buy, according to Wall Street? Let's find out.
Image source: Getty Images.
The case for Nebius
Customers come to Nebius for its range of services -- such as managed services for Kubernetes, for example -- as well as access to graphics processing units (GPUs) and central processing units (CPUs) for workloads. As Nebius itself puts it, "we provide every essential resource for your AI journey."
All of this has clearly been popular with customers, as we can see from Nebius' earnings reports. In the latest quarter, the company sold out of all of its capacity, and revenue soared more than 300%. Nebius also signed its first major AI infrastructure deal -- with Microsoft, and worth as much as $19.4 billion. And the company signed a second significant deal with Meta Platforms, in this case for $3 billion.
The main challenge for Nebius -- and CoreWeave too -- is the need to invest heavily to meet demand. Nebius recently raised more than $4 billion through convertible notes and a follow-on equity offering to invest in GPUs, land, and other assets to expand its infrastructure.
NASDAQ: NBIS
Key Data Points
The case for CoreWeave
CoreWeave focuses on offering its customers access to its fleet of high-powered Nvidia GPUs for their workloads. The company works closely with the AI chip leader, and as a result, it was the first to make Nvidia's Blackwell and Blackwell Ultra platforms generally available as they launched. Now, we may expect the same as Nvidia prepares to release its Rubin platform later this year.
It's also important to note that Nvidia has more than 85% of its portfolio invested in this AI cloud specialist -- considering Nvidia's understanding of the AI market, it's well-positioned to identify future winners.
Like Nebius, CoreWeave has seen revenue climb in the triple digits as customers seek out capacity for their AI workloads. In the recent quarter, CoreWeave's revenue advanced 133%. CoreWeave, too, must invest in infrastructure to keep up with this demand, and investors have worried about the company's debt levels as it pursues this growth story.
Debt-to-asset ratios show that CoreWeave's operations, compared to those of Nebius, are more heavily funded by debt.
CRWV Debt to Assets (Quarterly) data by YCharts
What Wall Street says
Now, let's consider which stock is a better buy today according to Wall Street. Both companies have more "buy" recommendations than "hold" or "sell" ratings. And Wall Street expects both to climb over the next 12 months. Now here are the specifics: The average price target for CoreWeave calls for a 43% increase in this period, while the price target for Nebius implies a 67% gain.
So, though Wall Street recommends buying both of these stocks, if analysts are right, Nebius could deliver the biggest win over the coming year. The company may also carry a bit less risk as its financial picture is more favorable.
What does this mean for you as an investor? Both of these stocks could represent interesting AI investments. These companies each offer services that are in great need today -- and this should continue well into the future. And though analysts may be more confident about Nebius' balance sheet, both of these stocks still come with some risk as they depend on the strength of the AI boom. So these players may not be the best choice if you're a cautious investor. But if you're a growth-focused investor, then you might consider picking up a few shares of Nebius -- if Wall Street is right, the stock could offer the biggest reward 12 months from now.
