CoreWeave Stock Gets Two Upgrades. Investors Can Thank Nvidia.

Analysts at Melius Research and Wells Fargo Securities upgrade CoreWeave stock. (Courtesy CoreWeave)

Nvidia’s plans to invest $100 billion in OpenAI will have ripple effects throughout the artificial-intelligence industry, according to Melius Research. One beneficiary could be the cloud provider CoreWeave , which rents out Nvidia-powered servers.

Melius upgraded CoreWeave stock to Buy from Hold and lifted its price target to $165 from $128 in a research note. The OpenAI- Nvidia announcement signals accelerating demand for AI cloud computing, the firm argued, and CoreWeave is well-positioned to capture it.

CoreWeave stock was falling 0.5% to $132.44 on Tuesday.

The AI boom has meant a scarcity of two key commodities: chips and power. CoreWeave has both, which explains why it’s already working with names like Nvidia, OpenAI, Microsoft, Meta Platforms, and Google .

The company counts Nvidia as an investor and usually is among the first customers to receive the chip maker’s latest AI systems, Melius noted. And on the power side, CoreWeave has contracted around 2.65 gigawatts of power but deployed only a fraction of it. The company’s pending acquisition of Core Scientific —which has come under more scrutiny in recent weeks—would give it even more capacity, Melius said.

“Given incremental contracts from Nvidia, other clouds — and our view that CRWV [CoreWeave] will get many more incremental contracts we are raising estimates as it monetizes its available power,” wrote Melius analyst Ben Reitzes.

Analysts at Wells Fargo Securities concurred, upgrading CoreWeave stock to Overweight from Equal Weight and boosting their target price to $170 from $105 in a research note Tuesday.

The long-term future of the AI market is uncertain, the firm said, but demand for computing capacity is outstripping supply, and shortages will continue through at least early next year.

“In our view, these supply constraints bode well for CRWV who has proven able to, at times, better navigate the supply-demand imbalance,” the Wells Fargo analysts wrote, adding that CoreWeave is “solely focused on procuring and lighting up capacity.”

Here, too, Nvidia is providing support. CoreWeave revealed a $6.3 billion agreement with Nvidia last week that obligates the chip maker to purchase any unsold cloud-computing capacity through April 13, 2032.

The deal gives CoreWeave “a blank check to build out new capacity,” the Wells Fargo team said. The firm doesn’t expect any shortage of buyers for its available capacity in the near term, but the backstop from Nvidia should “shore up confidence” in the company’s continued expansion.

Investors expect to learn more about the Nvidia deal in November, when CoreWeave reports its third-quarter earnings.

Write to Nate Wolf at nate.wolf@barrons.com