Piper Sandler names CoreWeave top pick in ’megawatt’ AI infrastructure race

The hits keep coming for CoreWeave, which was up 19% yesterday after a flood of strong Big Tech quarterly results ignited a broad rally across AI infrastructure names. Now, Wall Street is stepping in with fresh analytical support for the specialized cloud operator.

In a new research note initiating coverage on two leading public "neoclouds," Piper Sandler analyst James Fish assigned CoreWeave an Overweight rating with a $151 price target, while initiating rival Nebius Group with a Neutral rating and a $224 price target. At current market levels, Fish sees a better risk-reward profile associated with CoreWeave, pointing to near-term execution and estimate risks around Nebius.

"We have a favorable view on the industry, as we are in the early stages of an AI-infrastructure build-out that we believe these two will materially benefit from over the near-to-medium term," Fish wrote to clients, noting that at current valuation levels and estimate setups, Piper Sandler sees "a better risk-reward associated with CRWV."

Both companies are positioned to gain share in the early stages of a sweeping AI-infrastructure build-out that Piper Sandler terms "Megawatt Mania." The firm projects the AI-compute market to grow at a 56% compound annual rate to $109 billion by 2029, driven by demand that will outpace supply for multiple years. According to Piper Sandler’s Megawatt Market Model, total AI compute is expected to expand sixfold over the next few years, with CoreWeave and Nebius capturing 12% and 9% of global megawatts by 2028, respectively.

Lower Costs Than Hyperscalers

Central to the thesis for both neoclouds are their deep relationships with Nvidia and specialized architectures. Even as the silicon market shifts toward "Jensen’s Law" and GPUs maintain useful life beyond traditional five-year depreciation cycles, GPU pricing has risen amid ongoing scarcity.

By utilizing custom software and infrastructure architectures, both CoreWeave and Nebius achieve costs and pricing that are more than 40% lower than traditional hyperscalers—some of whom double as major customers.

The underlying business models are capital-intensive upfront and carry high customer concentration, along with long-term "DIY" risk as major clients build out internal capabilities. However, long-duration contracts and Master Services Agreements (MSAs) yield strong visibility, exposure to high-growth AI use-cases, and steady long-term cash flows.

CoreWeave’s Software and Financing Edge

When evaluating CoreWeave specifically, Piper Sandler highlighted its software orchestration stack, SUNK, and its broader engineering team as key differentiators that reduce cost per token and enable multi-cloud deployments.

Additionally, Fish noted that CoreWeave’s MSAs and financing arrangements mitigate debt risk that the market still misunderstands. Piper Sandler believes its medium-term financial estimates and Megawatt Model projections for CoreWeave remain conservative.

Nebius: Differentiated Technology, Near-Term Risk

Nebius stands out for its asset-light scaling model, custom server and rack designs, its Soperator platform, Token Factory toolkit, and full end-to-end platform, alongside its use of customer prepayments to finance growth. Piper Sandler’s analysis of contracted versus active power suggests Nebius could grow into a $25 billion-plus annual run-rate business by 2028.

However, near-term risks to estimates—specifically surrounding Nebius’s Vineland data center meeting on August 5—prompted the firm to take a more cautious Neutral stance, making CoreWeave the preferred pick on a risk-adjusted basis.

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