Buy these 2 stocks amid AI financing concerns: Analyst

In a recent note, Truist analysts have identified two cloud providers, CoreWeave Inc (NASDAQ:CRWV) and Nebius Group NV (NASDAQ:NBIS), as potential buying opportunities amidst concerns over AI financing. Despite the withdrawal of the Firmus IPO, the analysts believe that the quality of the digital platforms and IT services space will become clearer in time. They recommend purchasing shares of CRWV and NBIS, citing strong revenue visibility in the long term.

The analysts have assigned a Buy rating to both stocks, with a price target of $165 for CRWV and $355 for NBIS. They argue that the current market weakness in these shares presents an attractive buying opportunity. Their assessment is based on the expectation of strong revenue growth for the AI cloud/neocloud cohort over the next two years, driven by a compute shortage and the need for companies to demonstrate execution, financing, and upstack expansion to build sustainable businesses.

CoreWeave Inc and Nebius Group NV are highlighted as leaders in the space, with both companies holding Platinum rankings on SemiAnalysis's ClusterMax 3.0. To illustrate the scale difference between the companies, the analysts note that CRWV has 1.5GW (1,500MW) of active capacity, while NBIS has approximately 450MW. This represents a significant gap, with CRWV's addition of 500MW capacity in Q2 being equivalent to around ten times the total capacity each company has brought online in its history.

The analysts emphasize that the large backlogs and limited active capacity of these companies will pose an execution challenge if they need to catch up and generate revenue. Both CRWV and NBIS are currently receiving more upfront payments and collecting pre-payments on around 70% of their recent deals, allowing them to operate with less external capital.