Artificial intelligence (AI) has been on a blistering run over the past several years, and its adoption shows no signs of slowing. These cutting-edge algorithms promise to change the technology landscape as we know it, and it's been a windfall for companies at the forefront of this technology. Nowhere is that more apparent than in Nvidia (NVDA 1.33%).
The AI-centric chipmaker pioneered the graphics processing units (GPUs) that create lifelike images in video games. Those same processors are now the gold standard for powering AI, making Nvidia the de facto flag-bearer for the technology.
In the first quarter, Nvidia effectively doubled its position in CoreWeave (CRWV 3.27%), prompting investors to take a fresh look at the neocloud operator.
Image source: Getty Images.
The case for neoclouds
Cloud computing became widely available more than two decades ago, providing businesses with on-demand computing services. Neoclouds are the latest version of these services, offering GPU-as-a-service (GPUaaS) and AI-as-a-Service (AIaaS). CoreWeave is the largest and most well-known of these neocloud providers.
CoreWeave has a strategic partnership with Nvidia, giving the company something of a competitive advantage. By collaborating with Nvidia, CoreWeave has access to the company's most recent state-of-the-art AI chips.
Nvidia already had a sizable position in CoreWeave, owning more than 24.2 million shares. According to a regulatory filing released after the market close on Friday, Nvidia nearly doubled its holdings in the first quarter, bringing its total stake to more than 47.2 million shares. In all, Nvidia owns roughly 11% of CoreWeave's outstanding stock, a stake currently worth $4.9 billion and 20% of the chipmaker's equity portfolio.
NASDAQ: NVDA
Key Data Points
When he announced the investment earlier this year, Nvidia CEO Jensen Huang expounded on the opportunity, saying:
CoreWeave's deep AI factory expertise, platform software, and unmatched execution velocity are recognized across the industry. Together, we're racing to meet extraordinary demand for Nvidia AI factories -- the foundation of the AI industrial revolution.
Given Nvidia's growing ties to CoreWeave and its massive vote of confidence, should investors follow suit?
Paint the numbers
CoreWeave's growth is compelling. In the first quarter, revenue surged 112% year over year to $2 billion, while its loss per share was essentially flat at $1.40.
Perhaps as important is the company's backlog, which surged 284% year over year to $99.4 billion, which provides insight into future revenue. In fact, CEO Michael Intrator said on the earnings call that "demand is accelerating across the board."
NASDAQ: CRWV
Key Data Points
As CoreWeave continues to expand to meet unrelenting demand, the company is investing heavily in capital expenditures (capex), with 2026 spending expected to range from $31 billion to $35 billion. Despite the heavy investment, CoreWeave said, "Our deployments continue to be profitable at the contract level." This suggests that as the company scales, the profits will likely come.
Ready for prime time?
CoreWeave isn't yet profitable, but it did keep the red ink static in the first quarter. Value investors will likely take a hard pass at the company's lack of profits, despite its stellar growth. That said, the stock is selling for roughly 8 times sales, down from its mid-2025 peak of 27 times sales. On the other hand, Nvidia -- which is highly profitable -- and selling for just 27 times forward earnings, gives investors another way to play the AI boom.
That said, Nvidia's mentorship, combined with the company's accelerating revenue growth, might make it worth owning a small stake in CoreWeave as part of a balanced portfolio.
