Bond.az -- Investment bank D.A. Davidson has adopted a more cautious stance on two hot AI infrastructure companies, downgrading its outlook on Nebius Group and CoreWeave while maintaining a bullish long-term view on the AI cloud market.
Analyst Gil Luria said both companies are well-positioned to benefit from surging AI compute demand, but current valuations and operational risks limit near-term upside.
D.A. Davidson initiated coverage on Nebius with a 'Neutral' rating and a $250 price target, praising its execution, capital discipline, and diversified AI cloud strategy.
The note highlighted Nebius balanced customer approach and healthy balance sheet, noting minimal net debt and flexibility for expansion.
Nebius revenue is projected to surge from about $534 million in 2025 to $3.36 billion in 2026 and over $10.6 billion in 2027.
However, the brokerage warned that Nebius trades at roughly a 30% premium to its backlog, limiting short-term appreciation potential.
Davidson also assumed coverage on CoreWeave with a 'Neutral' rating, cutting its price target to $100 from $175, citing concerns over profitability, debt dependence, and insider selling.
CoreWeave reduced customer concentration risk by expanding relationships to include OpenAI and Meta, but remains one of the least profitable AI cloud providers with adjusted EBIT margins of only around 1% on an $8 billion revenue run rate.
CoreWeave is projected to generate nearly $13 billion in revenue in 2026 and over $25 billion in 2027, but is expected to remain heavily leveraged.
Davidson noted CoreWeave blended borrowing costs above 9%, reinforcing concerns about long-term returns, justifying a discount to Nebius based on backlog valuation.
