The booming AI sector is primarily fueled by cloud computing, dominated by giants like Amazon Web Services, Microsoft Azure, and Google Cloud. However, specialized ‘neocloud’ providers CoreWeave and Nebius are rapidly emerging, showcasing astonishing revenue growth rates that dwarf those of their larger counterparts. While currently unprofitable due to aggressive expansion, these nimble newcomers offer investors a high-risk, high-reward opportunity for significant long-term upside in the AI infrastructure race.
Investing in cloud computing companies remains a primary avenue for gaining exposure to the burgeoning artificial intelligence (AI) megatrend. Most businesses lack the extensive resources and specialized expertise required to construct and operate their own AI-centric data centers. Consequently, they often opt to rent processing power from established cloud computing behemoths such as Amazon Web Services (AWS), Microsoft Azure, and Alphabet's Google Cloud. While these three dominate the industry, they are far from being the sole players.
Two agile newcomers, CoreWeave and Nebius, are rapidly emerging as formidable alternatives for businesses demanding robust AI cloud capacity. Benefiting from their smaller scale, these companies are demonstrating significantly faster growth rates. This dynamic shift raises a crucial question for investors: which cohort offers a more compelling investment opportunity now?
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The Established Giants Continue to Excel
AWS stands as the world's largest cloud infrastructure provider and is a significant driver of Amazon's overall profitability. In Q1, AWS contributed a staggering 59% of Amazon's operating income, with its revenue surging by 28%—marking its most rapid expansion in nearly four years.
Microsoft provides less granular detail regarding Azure compared to AWS and Google Cloud, disclosing only its impressive growth rate, which hit 40% in its most recent quarter.
Google Cloud, however, surpassed both with an outstanding 63% growth rate. This achievement was partially bolstered by its proprietary Tensor Processing Units (TPUs). These powerful computing units are specifically designed for deep learning and matrix mathematics workloads, offering a cost-effective advantage over general-purpose GPUs.
Alphabet's strategic deployment of TPUs has helped it accelerate its position in the AI infrastructure build-out. Now, Google is extending its strategy by directly selling these specialized AI chips to other companies, rather than exclusively offering their processing power for rent. While external sales of these units introduce a slight complexity in assessing the standalone performance of its infrastructure business, Google Cloud undeniably remains the fastest-growing among the three major players, despite being the smallest.
Though Microsoft's exact profitability figures for Azure are not fully disclosed, it is reasonable to conclude that Azure contributes substantially to Microsoft's bottom line. The significant profits generated by all three legacy players from their cloud divisions underscore the viability of cloud computing as a robust standalone business. The pressing question is whether CoreWeave and Nebius can achieve similar profitability.
Rapid Expansion, but Profitability Remains Elusive
CoreWeave and Nebius represent the 'neocloud' sector—specialized cloud computing providers with an exclusive focus on AI. Despite their distinct business models, both have successfully attracted major tech clients, including Microsoft and Meta Platforms. These high-profile customers, who possess their own data centers, nonetheless value the ability to swiftly acquire additional computing power without the lengthy process of building it themselves.
This surging demand from their growing client base has propelled CoreWeave and Nebius to achieve breathtaking growth rates, far exceeding those of the traditional cloud providers. In Q1, CoreWeave's revenue exploded by 112% year over year, while Nebius's revenue soared by an astonishing 684%.
Wall Street analysts are equally bullish on their future prospects. For 2026 and 2027, CoreWeave is projected to achieve revenue growth rates of 147% and 97%, respectively. Nebius is anticipated to grow even faster, with 2026 growth estimates around 551% and 2027 at 224%. However, these ambitious growth forecasts come with a caveat: neither company is expected to be profitable in the near future, as they are strategically reinvesting all available capital to aggressively expand their cloud infrastructure. This aggressive expansion strategy constitutes a central risk for investors but promises potentially massive returns if they sustain rapid growth and eventually achieve profitability.
While the established cloud companies remain excellent investments, investors seeking greater long-term upside potential and comfortable with a higher degree of risk might find CoreWeave and Nebius to be compelling stock picks in the dynamic AI landscape.
