Earnings Reports Ignite "AI Cloud," CoreWeave and Nebius Both Surge

The quarterly reports of two AI cloud computing companies far exceeded expectations, driving a collective rebound in the new cloud computing sector and reigniting market confidence in the demand for AI infrastructure.

On Wednesday, August 12, CoreWeave closed up 19% at $107.73, while Nebius surged 34% in a single day to $247.05, both reaching recent highs.

The second-quarter earnings of both companies far surpassed Wall Street expectations. CoreWeave’s backlog of sales orders climbed to $104 billion, while Nebius’s revenue soared 454% year-over-year.

The surge quickly spread across the entire AI infrastructure sector: chipmaker Micron Technology rose 4.9%, fellow cloud computing company IREN jumped 9.9%, and the S&P 500 Information Technology sector led the gains, pushing the overall market up by 0.3%.

(AI sector rally led by computing infrastructure, storage, and semiconductors)

This has led the market to reassess previous concerns about overbuilding. At least in the short term, demand for AI computing power has proven to be genuine, backed by signed contracts and prepayments, rather than mere speculation.

The outbreak of this rally is supported by structural factors.

According to position data from over 700 funds under Hazeltree, CoreWeave, Nebius, and Super Micro Computer consistently ranked in the top ten most shorted stocks throughout July. Highly concentrated short positions became the fuel for the rally after impressive earnings were released.

Nebius’s short interest was about 24%, causing its share price to leap from $193 to $247 in a single trading day. CoreWeave spiked significantly after hours on Tuesday, immediately triggering a buying spree across the new cloud computing sector.

This stands in stark contrast to the market environment in July, when U.S. chip stocks fell about 20% in a single month and South Korea’s KOSPI index dropped 22%, both recording their worst monthly performances since 2008. The market was widely concerned about overbuilding and overvaluation issues among AI cloud computing companies.

English edition of Wallstreetcn reports that CoreWeave’s financial figures are particularly impressive in scale.

The company’s second-quarter revenue reached $2.58 billion, slightly surpassing the market’s expectation of $2.56 billion and marking the fifth consecutive quarter of record-high revenue; per-share loss was $1.14, better than the estimated $1.41.

The order-level data is even more compelling: the backlog of sales orders for the quarter increased to $104 billion, nearly doubling from last November. More notably, new customer commitments in the current quarter not yet included in the Q2 earnings have reached $25 billion.

The company simultaneously raised its full-year revenue guidance to $12.4 billion–$13.2 billion, up from the previous range of $12 billion–$13 billion. Management also revealed that the annualized recurring revenue from the managed inference business climbed rapidly from about $1 million at launch to over $100 million in just a few months, with a target of $250 million by the end of the year.

Nebius also delivered an outstanding performance. The company’s Q2 revenue was $582.3 million, up 454% year-over-year; adjusted EBITDA reached $236 million with a 41% margin.

This quarter, the company completed four major deals, each averaging over $1 billion, with customer prepayments covering 50% to 60% of capital expenditures; in one auction for computing power, the transaction price was 15% higher than the previous peak Blackwell price.

After the earnings report, the analyst team at Raymond James reiterated their $125 target price and stated:

Investors are underestimating CoreWeave’s potential to become a leading hyperscale cloud service provider.

Bulls argue that demand consistently outpaces supply, strengthening pricing power.

According to reports, Nvidia is leading an infrastructure financing initiative of about $500 billion, targeting specialized AI cloud service providers. Piper Sandler raised CoreWeave’s target price to $153, listing it as their top pick; Citizens maintains a $180 target price.

Ayako Yoshioka, Senior Investment Strategist at Wealth Enhancement, commented:

At least in the near term, demand is decisively overpowering supply.

Brannin McBee, Co-Founder and Chief Development Officer of CoreWeave, also pointed out that the company recently signed several contracts for Nvidia A100 chips released in 2020 at nearly full price, with terms extended to 2029, underscoring the strong residual value of previous-generation AI chips. McBee said:

Driven by both inference and engineering needs, the lifecycle of older-generation GPUs is being extended, a trend we observe across our entire fleet.

Bears, however, remain cautious. DA Davidson maintains a neutral rating and a $100 target price, noting that CoreWeave’s roughly 9% cost of capital exceeds the implied return rate of about 4%, meaning "each new data center built is continually destroying value."

Bernstein maintains an underperform rating, pointing out that capital expenditure growth is outpacing revenue growth. Angelo Zino, Senior Vice President at CFRA Research, also warned:

We are building computing capacity on such a large scale that the potential for supply-demand mismatches still exists. If the bubble bursts earlier than the market expects, the new cloud computing companies will be hit the hardest.