A Major Catalyst Could Boost CoreWeave and Nebius Margins by Up to 1,000 Basis Points, Says BofA

AI cloud providers CoreWeave (CRWV) and Nebius (NBIS) could see operating margins improve by 500 to 1,000 basis points as demand for GPU computing continues to exceed supply, according to five-star Bank of America (BAC) analyst Tal Liani. The analyst said that recent earnings from both companies showed they can increase revenue by using new-generation chips, while reducing costs by earning more from older GPUs for longer. As a result, Liani, who is ranked #708 out of 12,479 Wall Street analysts, kept Buy ratings on CoreWeave and Nebius with price targets of $140 and $310, respectively.

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Unsurprisingly, the stronger pricing is the result of customers still wanting more AI computing power than providers can offer. BofA said that demand remains strong from hyperscalers and AI labs, while enterprises are also increasing spending as early AI inference projects generate attractive returns.

And because capacity is still limited, customers are increasingly willing to pay premiums instead of waiting for cheaper computing. In addition, prices for newer GPUs continue to rise, while older generations have avoided the sharp discounts investors might normally expect after new products launch.

Older GPUs May Be Worth More Than Investors Expected

CoreWeave's Nvidia (NVDA) A100 fleet provides a good example. Those GPUs are contracted through 2029, which implies an economic life of at least nine years since they were first introduced in 2020. If older hardware can continue producing revenue for that long, CoreWeave does not need every new GPU generation to immediately replace the last one. Instead, newer systems can increase capacity while older machines keep generating cash.

That longer useful life also makes expanding aggressively easier to justify. CoreWeave plans to reach 8 GW of capacity by 2030, while Nebius expects to deploy more than 1 GW per year beginning in 2027. BofA believes this shows that the companies are confident that AI infrastructure demand will remain strong. At the same time, they also move the main bottleneck away from finding customers and toward securing enough power and actually building capacity on schedule.

Wall Street's Take

Overall, Wall Street remains bullish on both stocks, although the consensus targets are below BofA's forecasts. TipRanks currently shows that CoreWeave has a Moderate Buy consensus and a $136.48 average price target. Nebius also has a Moderate Buy consensus rating, with an average target of $264.22. (See CRWV Stock Forecast).