Meta Platforms Just Gave a Massive Warning to CoreWeave and Nebius. Is It Time to Sell These AI Infrastructure Stocks?
Meta Platforms plans to rent out excess cloud capacity, causing CoreWeave and Nebius shares to drop significantly. Despite this competition risk, strong AI infrastructure demand and existing multi-billion dollar contracts with Meta suggest these neocloud providers remain well-positioned for growth.
Shares of neocloud infrastructure providers CoreWeave (CRWV +5.77%) and Nebius Group (NBIS 0.90%) were clobbered on July 1 after it emerged that hyperscaler giant Meta Platforms (META +3.12%) plans to compete with them.
CoreWeave stock shed almost 14% of its value in a single session, while Nebius dropped by 17%. Meta Platforms, on the other hand, gained nearly 9% after Bloomberg News reported that the Magnificent Seven company is planning to rent out its excess cloud computing capacity to customers. That doesn't bode well for CoreWeave and Nebius at first, as both companies are in the business of building dedicated AI data centers and renting out their capacity to customers looking to run AI workloads in the cloud.
So, it was easy to see why their shares fell substantially following the Bloomberg News report. In fact, Meta won't just be moving into Nebius and CoreWeave's territory; the tech giant's reported move could also hurt the prospects of these neocloud providers. Let's see why that may be the case.
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CoreWeave and Nebius have signed massive contracts with Meta Platforms
Meta Platforms has been spending aggressively to build AI data center infrastructure capacity. At the same time, the tech giant has been renting capacity from CoreWeave and Nebius to support the rollout of AI tools across its apps and advertising platform.
NASDAQ: NBIS
Key Data Points
CoreWeave expanded its agreement with Meta in April this year to provide cloud computing capacity through December 2032 in a deal worth $21 billion. It is worth noting that the two companies had originally signed a $14.2 billion deal in September 2025. Similarly, Nebius announced in March that it will provide $12 billion in dedicated cloud computing capacity to Meta starting early next year.
What's more, Nebius added that Meta has committed to buying $15 billion in additional capacity over five years, which the neocloud provider had originally planned to sell to other third-party AI cloud customers. The total value of this agreement was worth a whopping $27 billion.
Not surprisingly, shares of Nebius and CoreWeave dropped like a rock after Bloomberg News reported Meta's planned initiative of selling its excess AI computing capacity to customers. However, the report also added that this business plan is currently in development and may change.
The sharp decline in these AI stocks could be a buying opportunity
There is no doubt that CoreWeave and Nebius could take a hit if Meta decides to compete with them, especially considering that it is a customer. However, Meta's plan of selling AI computing capacity to customers isn't official yet. But even if that were to be the case, investors shouldn't forget that the demand for CoreWeave and Nebius' dedicated AI data centers is exceeding supply.
CoreWeave management noted on the May earnings call that the demand for its AI cloud platform "is accelerating and we remain largely sold out of our 2026 capacity." Even better, the company's customer base is getting diverse. It had 10 customers at the end of Q1 who had committed to spending at least $1 billion on its cloud platform. CoreWeave points out that 30% of its $99.4 billion revenue backlog was from foundational AI labs, such as Anthropic.
Meanwhile, Nebius management noted on the May earnings call that it typically sees "several customers competing for every GPU we bring online." Nebius also added that every data center that it builds is sold. This explains why both companies have been clocking phenomenal revenue growth.
Data by YCharts
More importantly, both companies are in a solid position to sustain their impressive growth rates. That's because the demand for AI data centers far exceeds supply, a situation that's likely to persist. According to Goldman Sachs, data center power demand in the U.S. is projected to more than double to 66 gigawatts (GW) in 2027 from 31 GW last year.
The strong demand scenario is likely to persist through the end of the decade, with Gartner estimating that the power usage of AI-focused servers could grow from 21% last year to 44% in 2030. The firm also adds that the overall electricity usage of data centers is poised to jump by almost 5x through 2030. So, even if Meta stops being a customer for CoreWeave and Nebius, the neocloud providers can allocate the capacity to other customers.
So, if Meta starts competing with them, there is enough room for another company to join Nebius and CoreWeave in providing AI data center infrastructure. After all, several cloud providers are building and deploying data center capacity, and that hasn't been enough to meet the phenomenal demand. All this explains why CoreWeave and Nebius are anticipated to sustain solid growth rates.
Data by YCharts
Another important point worth noting is that CoreWeave can now be bought at just 6.6 times sales following its latest slide. While Nebius remains expensive at 65 times sales, it can justify that valuation given its stunning growth rate, which could make it a multibagger in the long run. So, the recent pullback in these AI stocks looks like a solid opportunity for investors to buy more shares as they can step on the gas once again on the back of their solid financial growth.
