Artificial intelligence (AI) stocks that are rapidly growing aren’t particularly abundant. A lot of the fastest-growing AI companies remain privately owned, making it difficult for most investors to buy or sell their shares. However, there are currently some publicly traded stocks showing impressive growth that might be worth considering.
Two notable AI stocks to watch are Nevius (NASDAQ:NBIS) and CoreWeave (NASDAQ:CRWV). Both operate in related fields and are expected to see significant demand. It seems like either could be a valuable addition to a portfolio, but potential investors should be prepared for some ups and downs because the high growth associated with these stocks can lead to volatility.
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The neo-cloud sector is seeing considerable expansion
Nebius and CoreWeave are recognized as neo-cloud companies, a segment of the cloud computing sector that has grown steadily over the last decade but now concentrates on AI-focused services. By offering AI-specific products, users can more easily set up, train, and deploy AI models in their preferred ways, which is certainly appealing. Both companies have attracted significant clients, including Meta Platforms and Microsoft.
You might wonder, why would behemoths like Meta and Microsoft partner with Nebius and CoreWeave if they’re already investing in their own data centers? Ultimately, it’s all about maximizing computing power as rapidly as possible. Plus, for Meta and Microsoft, the flexibility of renting data center space rather than owning it can be beneficial.
Nvidia (NASDAQ:NVDA) has also invested significantly in both firms. Given Nvidia’s own rapid growth, it wouldn’t make much sense to invest if it felt these companies wouldn’t keep up. Their growth metrics certainly justify Nvidia’s confidence in them.
Recently, CoreWeave reported a striking 112% year-over-year revenue increase, reaching a total of $2.1 billion for the quarter. While impressive, that number is, well, relatively small compared to the company’s backlog, which stands near $100 billion. About a third of that is anticipated to be realized within the next two years, indicating promising short-term growth for CoreWeave.
If CoreWeave’s growth catches your eye, you might be blown away by Nebius. In its first quarter, Nebius boasted a remarkable 684% year-over-year revenue growth, totaling $399 million. It seems Nebius is scaling up faster than CoreWeave, likely due to its popular model and lower initial revenue base. The company plans to add multiple data centers by 2026, potentially increasing its annual revenue run rate from $1.25 billion at the end of 2025 to between $7 billion and $9 billion by the end of 2026, which is quite astonishing.
Despite each company’s robust growth, they do face a significant hurdle.
Both companies rely on debt for expansion.
In contrast to leading cloud computing companies, Nebius and CoreWeave lack a core business to fund their construction projects. Therefore, they have to resort to borrowing money or issuing stock for financing. As a result, these stocks carry more risk than many other AI stocks.
Investors should keep in mind that if you want hefty returns, risks are part of the equation. This is the mindset investors in CoreWeave and Nebius really need to grasp.
While these stocks show great potential, challenging situations could lead to setbacks. Still, I am optimistic about the ever-increasing demand for AI, which seems to know no bounds. So, I believe these stocks could very well be some of the best options for long-term investment over the next decade.
Is now the right time to buy CoreWeave stock?
Before you jump into purchasing CoreWeave stock, you might want to consider the following:
Our analysts have pinpointed what they think are the Best 10 stocks to invest in right now, and CoreWeave isn’t listed there. Those 10 stocks possess the potential for substantial returns in the coming years.
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This commentary incorporates positions in Meta Platforms, Microsoft, Nebius Group, and Nvidia. The Motley Fool endorses and has interests in Meta Platforms, Microsoft, and Nvidia.
2 Hypergrowth AI Stocks to Buy and Hold for the Next Decade Originally published by The Motley Fool
