Baird Initiates Coverage on AI Compute Stocks: CoreWeave and Nebius Rated Outperform

Baird Bullish on AI Infrastructure: CoreWeave and Nebius Initiated at Outperform

U.S. investment bank Baird recently released a research report formally initiating coverage on two AI infrastructure-focused tech companies—CoreWeave and Nebius—with an Outperform rating. The move is seen by the market as a positive signal for the AI compute leasing and cloud services niche. Baird analysts noted in the report that as demand for large model training and inference continues to surge, companies with differentiated GPU cluster management capabilities and flexible access to capital are poised for significant growth in the coming years.

CoreWeave: From Crypto Mining to AI Compute Powerhouse

CoreWeave started as a cryptocurrency mining operation before pivoting to become a cloud platform specializing in GPU-as-a-Service. The company now operates multiple high-density data centers, primarily deploying NVIDIA's H100 and subsequent GPU models. Baird believes CoreWeave's core advantage lies in its ability to provide large-scale compute at lower costs than traditional cloud giants, thanks to its aggressive early investments in power supply and hardware procurement. The company has reportedly secured long-term contracts with leading AI startups and large tech firms, locking in revenue for years to come. Analysts emphasize that CoreWeave's "asset-light, operation-heavy" model offers high flexibility amid the current AI compute crunch, but also flag concerns over its debt leverage and customer concentration risk.

Nebius: A Differentiated Path for a European AI Cloud

Unlike CoreWeave, Nebius emerged from the spin-off of Russian internet giant Yandex's cloud business. Now headquartered in the Netherlands, it focuses on providing compliant, low-latency AI training and inference services for European and Middle Eastern markets. Baird's report highlights Nebius's unique value in its "sovereign cloud" positioning—amid increasingly stringent data localization regulations, European enterprises increasingly prefer local or regional cloud providers. Additionally, Nebius has developed proprietary AI infrastructure management software that optimizes GPU utilization and reduces energy consumption, a critical advantage in Europe's high energy cost environment. Analysts expect Nebius to turn EBITDA positive by 2025, though it must contend with competition from hyperscale cloud providers like AWS and Azure in the near term.

Industry Context: AI Compute Demand Drives Capital Expenditure Surge

Baird's ratings come at the peak of the AI infrastructure investment boom. According to industry research, global data center capital expenditure is expected to grow over 50% year-over-year in 2024, with a significant portion directed toward GPU servers. Meanwhile, GPU instances from traditional cloud providers are often in short supply, creating a window of opportunity for specialized players like CoreWeave and Nebius. However, concerns about potential oversupply persist, especially after the mass rollout of next-generation Blackwell architecture GPUs. Baird remains cautiously optimistic, believing that high-end compute will remain in a tight balance at least through the first half of 2025.

Risks and Challenges: Valuation, Competition, and Geopolitics

Despite the positive ratings, Baird also outlines several risk factors. First, both CoreWeave and Nebius are not yet consistently profitable, with valuations heavily reliant on future growth expectations; a slowdown in AI capital expenditure could lead to significant stock price corrections. Second, tech giants—Microsoft, Amazon, and Google—are accelerating their development of proprietary AI chips and expanding internal compute capacity, potentially squeezing third-party compute providers. Additionally, Nebius faces regulatory scrutiny in some Western markets due to its Russian ties, while CoreWeave must navigate supply chain uncertainties stemming from U.S. chip export controls to China.

Market Reaction and What to Watch

Following the announcement, shares of CoreWeave and Nebius saw modest gains in pre-market trading, though overall volume was light. Some investors view Baird's ratings more as a confirmation of industry trends than an immediate catalyst for individual stocks. In the coming months, the market will closely monitor both companies' quarterly earnings, particularly customer signing velocity, GPU utilization rates, and unit economics. If they can consistently demonstrate advantages in cost control and technological iteration, Baird's Outperform ratings may gain broader consensus.