Analysts sees long-term AI demand, but upside limited for Nebius and CoreWeave
Investing.com -- Investment bank D.A. Davidson has adopted a more cautious stance on two of the hottest AI infrastructure companies, downgrading its outlook on both Nebius Group and CoreWeave despite maintaining a bullish long-term view on the artificial intelligence cloud computing market.
In separate research notes published Monday, analyst Gil Luria said both companies remain well-positioned to benefit from surging demand for AI compute power, but current valuations and operational risks limit near-term upside.
D.A. Davidson initiated coverage on Nebius with a “Neutral” rating and a $250 price target after the stock’s dramatic rise over the past year. The firm praised the company’s execution, capital discipline and diversified AI cloud strategy, calling it “the best executing public AI cloud.”
The note highlighted Nebius’ balanced customer approach and healthier balance sheet compared with peers, noting that the company operates with minimal net debt and retains flexibility for future expansion. Davidson also pointed to additional value from Nebius-owned assets including Avride and ClickHouse.
Financial forecasts in the report project Nebius revenue to surge from about $534 million in 2025 to $3.36 billion in 2026 and more than $10.6 billion in 2027.
However, the brokerage warned that Nebius already trades at roughly a 30% premium to its backlog, limiting short-term appreciation potential despite the company’s strong fundamentals.
Davidson also assumed coverage on CoreWeave with a “Neutral” rating, while cutting its price target to $100 from $175. Although the firm acknowledged CoreWeave’s growing importance in the AI infrastructure ecosystem, it expressed concern over profitability, debt dependence and insider selling.
The analyst said CoreWeave has successfully reduced customer concentration risk by expanding relationships beyond major backers such as NVIDIA and Microsoft to include OpenAI and Meta.
Still, Davidson argued that CoreWeave remains one of the least profitable AI cloud providers, citing adjusted EBIT margins of only around 1% on an $8 billion annualized revenue run rate. Rising memory and infrastructure costs could further pressure margins because long-term customer contracts may not adequately hedge future component price increases.
CoreWeave is projected to generate revenue of nearly $13 billion in 2026 and more than $25 billion in 2027, but the company is also expected to remain heavily leveraged.
Davidson noted that CoreWeave’s blended borrowing costs remain above 9%, reinforcing concerns about long-term returns. The firm said these risks justify the stock trading at a discount to Nebius based on backlog valuation metrics.