CoreWeave and Nebius Are Solid Stocks to Bet on AI Infrastructure Explosion

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The rise of the neocloud has really excited risk-taking AI investors who are comfortable with excess levels of volatility for a shot at bigger returns. With the rise of CoreWeave (NASDAQ:CRWV) and Nebius Group (NASDAQ:NBIS) really capturing the love of traders because of their strong growth rates and even more promising long-term narratives, the average investor is most likely wondering if it’s worth exposing one’s portfolio to such an emerging and booming corner of the AI trade.

Undoubtedly, valuations do not come cheap, as you’d imagine. But they certainly don’t deserve to go for cheap, given the momentum they’ve enjoyed, the boom in AI demand, and the potential for where they could go over the next two to three years.

Lots of growth in the neocloud, but you’re paying up for the exposure

While I’m no advocate for just buying a stock based on its growth story and leaving the valuation as an afterthought, I do find the recent action in the so-called neocloud plays as nothing short of exciting. And in this piece, we’ll look closely at the two names to see if either is worth watching or even buying (small amounts) going into November.

Either way, there are big backers, a lot of hype, and the potential for shares to explode (or implode) in either direction over the near term. For longer-term AI investors, I’d say playing gradually, building a position, is the best way to go, especially as we wander into what’s been a rather choppy season of tech earnings due to high expectations for the results and even higher expectations for guidance.

CoreWeave

CoreWeave is a name tech investors are probably well familiar with by now. The AI infrastructure play went public earlier in the year, sinking into the Liberation Day sell-off before blasting off close to 370% from trough to peak. After a summer pullback, shares of CoreWeave now go for just shy of $140 per share. But the stock still doesn’t look like anything less than unfathomably expensive at more than 19 times price-to-sales (P/S).

With the firm rising close to 4% on Wednesday, on news that the firm is entering the federal market, I do think the ingredients are in place for another leg higher. With a new slate of AI tools, strategic acquisitions (like Monolith AI), and the foot on the gas pedal, I think it’ll be tough to slow CRWV shares down unless we’re dealt a big AI correction that many have been talking about all summer.

With big contract wins from some tech stars and the confidence of some big Wall Street analysts, I certainly wouldn’t place a bet against CRWV. If the AI demand boom still has legs, so, too, could CoreWeave stock, which may very well be headed to $170 per share, a price target held by Wells Fargo Securities. In any case, CoreWeave can easily grow into its high multiples amid the AI infrastructure boom. In the meantime, AI tools and the seemingly insatiable infrastructure boom work in the $69 billion firm’s favor.

Nebius Group

Neibus Group is a smaller ($31.4 billion market cap) player on the neocloud scene, with rapid adoption and the backing of the great Microsoft (NASDAQ:MSFT). Undoubtedly, anything that Microsoft and CEO Satya Nadella seem to touch turns into gold (think OpenAI). With shares up over 539% since landing on public markets last year, it’s clear that Microsoft has made another grand slam home run with the up-and-comer in AI cloud infrastructure.

Like with CoreWeave, the partnerships, investments, and contracts could pick up in pace, and that makes the high-flyer very dangerous to bet against. At 162.5 times trailing price-to-earnings (P/E), shares are also harder to value. Either way, if you can handle the volatility, I’d not be afraid to be a buyer on dips, especially as AI investors gravitate from large language model makers towards the infrastructure top dogs.

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