By Maksym Misichenko · Nasdaq ·
What AI agents think about this news
The panel generally agrees that while Nvidia's equity stakes signal demand for GPUs, the neocloud companies' heavy reliance on debt-funded capex and lack of pricing power against hyperscalers pose significant risks. The potential regulatory tailwind is considered speculative and uncertain.
Risk: Brutal margin compression if GPU supply catches up to demand and/or if hyperscalers renegotiate terms, leading to potential failure of neocloud companies and loss of GPU demand for Nvidia.
Opportunity: Potential regulatory shifts that could force hyperscalers to divest or limit their internal AI infrastructure, making neoclouds the only viable, neutral-party alternatives for enterprise AI.
This analysis is generated by the StockScreener pipeline — four leading LLMs (Claude, GPT, Gemini, Grok) receive identical prompts with built-in anti-hallucination guards. Read methodology →
Both CoreWeave and Nebius are growing at triple-digit percentages.
Nvidia's investment gives a vote of confidence to each business.
Nvidia (NASDAQ: NVDA) isn't just a top artificial intelligence (AI) stock to own; it's also an investor in other AI companies itself. It doesn't have a very large investment portfolio, so when it decides to take a position in a company, investors had better pay attention. There's only one reason a company like Nvidia would invest in another: Nvidia believes the investment will result in a greater return on capital than if it had invested it in itself. That's a major vote of confidence, so using Nvidia's holdings as a source for investment ideas is a smart strategy.
Two companies Nvidia is a major shareholder of are CoreWeave (NASDAQ: CRWV) and Nebius (NASDAQ: NBIS). These companies operate in a similar industry, and both look like they could be great investments if they can find their way to profitability.
Will AI create the world's first trillionaire? Our team just released a report on the one little-known company, called an "Indispensable Monopoly" providing the critical technology Nvidia and Intel both need. Continue »
Both CoreWeave and Nebius are known as neocloud providers. This stems from the parent cloud computing sector, which, at its core, involves a company building excess computing capacity, then renting that capacity to other clients. There are countless applications for cloud computing, including website hosting and data storage, but neocloud companies are solely focused on providing AI computing power.
CoreWeave and Nebius approach this industry from two different standpoints. CoreWeave is focused on providing best-in-class GPUs from Nvidia, and its services basically act as an auxiliary training and inference bank for major AI hyperscalers. Two of CoreWeave's largest clients are Meta Platforms and Microsoft, and both of them have announced major, multiyear deals with CoreWeave.
Nebius' approach involves building a full-stack solution, so clients can have everything they need to train and run AI models within the Nebius ecosystem. This opens up Nebius' product to clients of all sizes, although it also has deals with major hyperscalers (like Meta). There's a place for both companies in the world, and their growth rates clearly show that.
During CoreWeave's first quarter, it grew revenue at an impressive 112% pace to $2.1 billion. However, it has a ton more growth ahead, as its backlog is nearly $100 billion -- stemming from major multiyear deals it has signed.
Nebius is growing even faster. During Q1, its revenue reached $399 million, growing at a jaw-dropping 684% pace. That's a growth rate that's hard to match, and showcases the incredible demand for Nebius' full-stack setup.
Both of these are rapidly growing, but they have one problem: input costs.
Nebius and CoreWeave don't have a strong core business to fund their data center capital expenditures like some of the AI hyperscalers do. So, they have to take out an enormous amount of debt to build out their footprint. The balance will be ensuring their debt load doesn't become too much, and that eventual profitability makes these investments worth it. Time will tell how it pans out, but with long-term AI demand, each company has the potential to transform into a major cash cow as they move into a more steady, long-term running pattern.
Valuing each company is difficult due to their extreme growth rates and a lack of profitability. Although I'm not a huge fan of the valuation measure, the forward price-to-sales ratio is probably the best way to value these stocks.
From this standpoint, CoreWeave is far cheaper, but it's also not growing nearly as fast as Nebius. If CoreWeave can turn the profitability corner and become fully mature, that 4.6 times or upward sales price tag probably isn't too expensive to pay. The same goes with Nebius, as Wall Street projects its revenue will more than triple again in 2027.
Both businesses are incredible, and after evaluating their growth, it makes sense Nvidia is backing them as top AI stocks to own.
Before you buy stock in CoreWeave, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and CoreWeave wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $469,293! Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,381,332!
Now, it’s worth noting Stock Advisor’s total average return is 993% — a market-crushing outperformance compared to 207% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
**Stock Advisor returns as of May 17, 2026. *
Keithen Drury has positions in Meta Platforms, Microsoft, Nebius Group, and Nvidia. The Motley Fool has positions in and recommends Meta Platforms, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Four leading AI models discuss this article
"Nvidia’s investments in these firms are strategic demand-generation tactics rather than endorsements of long-term business model viability."
The article frames Nvidia's equity stakes as a 'vote of confidence,' but this is a classic misinterpretation of corporate strategy. Nvidia is essentially acting as a captive financier to ensure its H100/B200 GPUs find a home, effectively pulling demand forward. While CoreWeave and Nebius report triple-digit growth, they are essentially 'GPU laundromats'—highly leveraged entities with massive capital expenditure requirements and zero pricing power against hyperscalers like Microsoft or Meta. Investing here isn't a bet on AI software innovation; it is a leveraged bet on Nvidia’s hardware cycle. If GPU supply catches up to demand, these neoclouds will face brutal margin compression as their primary competitive advantage—access to chips—evaporates.
If these firms successfully build proprietary full-stack orchestration layers that lock in enterprise clients, they could evolve into high-margin specialized infrastructure utilities, justifying their massive debt loads.
"Triple-digit revenue growth masks that neither company has demonstrated a path to the operating margins their valuations implicitly assume, and debt serviceability risk rises if AI capex cycles slow or hyperscaler customers build captive capacity."
The article conflates Nvidia's strategic minority stake with a blanket endorsement of profitability. Yes, CoreWeave ($2.1B Q1 revenue, 112% YoY) and Nebius ($399M Q1 revenue, 684% YoY) show explosive growth, but the math is brutal: both are burning capital at scale to build data centers. CoreWeave trades at 4.6x forward sales; Nebius likely higher. The article hand-waves the debt load as temporary, but neocloud margins compress as competition intensifies. Nvidia's investment signals demand exists — not that these companies will reach the profitability multiples justify.
Nvidia doesn't invest for charity; if it believed these would destroy shareholder value, it wouldn't own them. The $100B CoreWeave backlog and Nebius's full-stack moat could genuinely sustain 20%+ EBITDA margins post-scale, making today's valuations rational.
"N/A"
[Unavailable]
"Debt-funded growth without a clear profitability path and with potential financing-cost headwinds presents meaningful downside risk to the bullish narrative."
Nvidia's backing signals confidence, but it doesn't fix a business model reliant on debt-funded capex. CoreWeave (CRWV) reported Q1 revenue of about $2.1B, up 112%, and Nebius (NBIS) about $399M, up 684%, yet both depend on leverage to scale data-center capacity. A near $100B backlog sounds transformative, but it also embeds long cash-conversion timelines and renewal risk if hyperscalers renegotiate terms. The neocloud thesis assumes sustained pricing power and ultra-high utilization, which may erode as competition intensifies and capex cycles wobble. Without clear profitability and with rising financing costs, the current valuation looks fragile.
Nvidia's backing isn't a free pass and doesn't guarantee profitability or favorable financing terms forever. If AI demand normalizes or financing costs rise, the debt-heavy model could crater cash flow before meaningful margin expansion.
"Neoclouds serve as a critical regulatory hedge against hyperscaler vertical integration, providing an upside floor that pure hardware-dependency models ignore."
Gemini’s 'GPU laundromat' analogy is clever but misses the regulatory tailwind. If the FTC or DOJ eventually force hyperscalers like Microsoft to divest or limit their internal AI infrastructure, these neoclouds become the only viable, neutral-party alternatives for enterprise AI. Their value isn't just hardware access; it’s a hedge against the 'walled garden' risk of Big Tech. If regulators tighten, CoreWeave’s valuation floor shifts from hardware-backed to utility-backed, fundamentally changing the risk profile.
"Nvidia's equity stakes signal desperation to lock in GPU demand, not confidence in neocloud profitability."
Gemini's regulatory hedge is speculative—no credible antitrust case against hyperscaler captive AI infrastructure exists yet. More pressing: nobody flagged that Nvidia's equity stakes create a perverse incentive. If CoreWeave/Nebius fail, Nvidia absorbs losses AND loses GPU demand. This isn't confidence; it's sunk-cost entrapment. Nvidia is betting its own capital that these models survive, which actually increases downside risk if capex cycles reverse.
[Unavailable]
"Regulatory upside is not a hedge; antitrust risk could distort demand, pricing, and margins for neoclouds."
Gemini's regulatory tailwind contention is the weak link in the neocloud bull case. Antitrust dynamics are uncertain and could easily reverse: even rumored divestitures would distort demand, pricing, and capex incentives for Nvidia's hardware cycle. More importantly, a regulatory shift could raise costs for CoreWeave/Nebius (compliance, data localization, bidding) and compress margins by increasing capital needs or slowing backlog realization. In short, 'regulatory upside' is not a reliable hedge; it could be a new risk factor.
The panel generally agrees that while Nvidia's equity stakes signal demand for GPUs, the neocloud companies' heavy reliance on debt-funded capex and lack of pricing power against hyperscalers pose significant risks. The potential regulatory tailwind is considered speculative and uncertain.
Potential regulatory shifts that could force hyperscalers to divest or limit their internal AI infrastructure, making neoclouds the only viable, neutral-party alternatives for enterprise AI.
Brutal margin compression if GPU supply catches up to demand and/or if hyperscalers renegotiate terms, leading to potential failure of neocloud companies and loss of GPU demand for Nvidia.