What's Happening?
Nebius and CoreWeave are emerging as significant players in the AI cloud-based GPU market, leveraging investments from Nvidia. Nebius, formerly known as Yandex, has transformed into an AI company after
divesting its Russian assets due to sanctions. It now operates cloud-based GPUs for AI tasks, with a single data center in Finland and additional leased centers in Missouri, France, and Iceland. CoreWeave, originally an Ethereum mining company, shifted its focus to AI applications following the crypto crash of 2018. It operates 33 data centers across the U.S. and Europe. Both companies have strong ties with Microsoft, with Nebius securing a $17.4 billion AI infrastructure deal and CoreWeave generating 70% of its revenue from Microsoft. Nvidia holds a 0.5% stake in Nebius and a 6.4% stake in CoreWeave, indicating confidence in their growth potential.
Why It's Important?
The competition between Nebius and CoreWeave highlights the growing demand for cloud-based AI infrastructure, which is crucial for companies looking to process AI tasks without investing in costly on-site hardware. Nvidia's investment in both companies underscores the strategic importance of cloud-based GPUs in the AI sector. As these companies expand their data center operations and partnerships, they are poised to influence the AI industry's landscape significantly. Their growth could lead to increased accessibility and scalability of AI technologies, benefiting businesses and consumers alike. However, both companies face challenges in achieving profitability due to high operating expenses and the need for economies of scale.
What's Next?
Nebius plans to expand its data center operations, including building a new facility in New Jersey and signing a colocation deal in the UK. Analysts expect Nebius's revenue to grow at a CAGR of 233% to $4.34 billion by 2027, with adjusted EBITDA turning positive in 2026. CoreWeave aims to continue its rapid expansion, with revenue projected to grow at a CAGR of 112% to $18.1 billion by 2027. The company is likely to pursue additional acquisitions to enhance its data center capacity. Both companies will need to manage their debt and share dilution as they strive for profitability.
Beyond the Headlines
The shift of Nebius and CoreWeave from their original business models to AI-focused operations reflects broader trends in the tech industry, where companies are increasingly pivoting towards AI and cloud computing. This transformation raises questions about the sustainability of such rapid growth and the ethical implications of AI technology deployment. As these companies expand, they may face scrutiny over data privacy and security, particularly given their ties to major tech firms like Microsoft.
