Rachael Rajan
2 min read
Investing.com — The withdrawal of the Firmus IPO has raised some concerns, but Truist analysts believe it is only a matter of time the quality of the digital platforms and IT services space becomes clear. In their recent note, firm analysts identify two cloud providers with backlogs providing meaningful revenue visibility, and say the softness in their shares is a buying opportunity.
Amid recent AI financing concerns, Truist recommends buying CoreWeave Inc (NASDAQ:CRWV) and Nebius Group NV (NASDAQ:NBIS) shares.
Truist has Buy ratings on both names and a price target of $165 on CRWV stock and $355 on NBIS.
Firm analysts say their multiple assumption for CRWV represents a premium to the median of 21x 2027 EV/EBIT among AI cloud providers and leading providers of AI infrastructure.
Meanwhile, NBIS’ 4.5x 2028E EV/Sales multiple on their 2028E revenue estimate is above the peer average in the AI cloud and hyperscaler industry. Truist notes that the premium is warranted given the expectation that NBIS will deliver industry-leading growth rates across 2026E-2028E.
The research firm observes that over the next two years, the AI cloud/neocloud cohort could report strong revenue growth rates given the compute shortage. However, the firm believes that cloud providers that demonstrate the necessary execution, financing, and upstack expansion to build sustainable businesses will distinguish themselves in the coming quarters.
“We continue to see CRWV and NBIS as leaders in the space, with their status as the only two companies holding Platinum rankings on SemiAnalysis’s ClusterMax 3.0 providing a further proof point of the quality of their platforms,” the analysts said.
To illustrate the difference in scale between Firmus, which has an active capacity of 46MW, on one hand, and CRWV and NBIS on the other, the analysts note CRWV has 1.5GW (1,500MW) and NBIS has ~450MW of active capacity. CRWV’s addition of 500MW capacity in Q2 is equivalent to ~10x the total capacity each company has brought online in their corporate history.
Truist emphasises that these numbers represent the actual capacity that AI clouds will be able to recognise revenue on. Furthermore, companies with larger backlogs and limited active capacity will face a higher execution hurdle if they must catch up and generate revenue.
