The AI Investment Boom
Investors seeking high-growth opportunities have been flocking to the artificial intelligence (AI) sector in recent years. Companies in this space have demonstrated impressive revenue growth, often in the double and triple digits, and forecast strong long-term prospects. The bright outlook is driven by AI’s promise to deliver significant advantages such as efficiency, performance, and lower costs, prompting widespread adoption across industries.
Two notable beneficiaries of this AI boom are Nvidia (NVDA 0.33%) and CoreWeave (CRWV -5.39%). Nvidia is the world’s leading AI chip designer, while CoreWeave rents out access to computing power. Nvidia’s shares have surged nearly 800% over three years, and CoreWeave’s stock has jumped 268% since its March initial public offering (IPO). Both represent compelling AI investments, but which is the better high-growth buy right now?
The Case for Nvidia
Nvidia dominates the AI chip market with its graphics processing units (GPUs) that power key AI tasks such as model training and problem-solving. Tech giants like Meta Platforms and Alphabet have turned to Nvidia for its superior technology. Demand for Nvidia’s latest Blackwell architecture and chip has been exceptionally strong, surpassing supply when launched last year. Despite some investors being disappointed by the shift from triple-digit to double-digit revenue growth, Nvidia’s quarterly revenue of about $44 billion makes such high growth rates increasingly challenging to maintain.
Nvidia’s commitment to annual GPU updates will likely maintain its market leadership. The company’s diverse presence across AI products and services, along with its gaming business, provides investors with a level of security.
The Case for CoreWeave
CoreWeave’s business model revolves around renting access to Nvidia’s computing power, operating around 250,000 Nvidia GPUs across over 30 data centers. Nvidia’s flexibility in allowing customers to access GPUs for varying durations has been a key factor in CoreWeave’s success. The company’s revenue has surged 420% to $981 million in the latest quarter. Nvidia’s 7% stake in CoreWeave and its support have helped the company rapidly expand its GPU fleet.
However, CoreWeave is at a different stage of development than Nvidia. It must invest heavily in GPUs to meet demand, which pushes it further from profitability. In the latest quarter, CoreWeave reported a loss per share of $1.49, deepening from $0.62 in the year-earlier period.
Which is the Better High-Growth Buy?
While CoreWeave’s growth is impressive and could continue to surpass Nvidia’s, its dependence on Nvidia’s GPUs poses a risk. Nvidia, on the other hand, offers a more diversified portfolio and is trading at a reasonable valuation of 33 times forward earnings estimates. For most investors, Nvidia’s significant growth levels and lower risk make it the better buy.
