Bank of America recently raised its price targets for Nebius and CoreWeave, two specialized AI infrastructure providers carving out a niche in the 'neocloud' space.
This move signals growing Wall Street confidence, not just in the general AI boom, but in these companies' specific ability to turn that boom into predictable, long-term revenue. For months, the narrative was about massive potential demand for AI computing power. Now, thanks to a series of recent events, that potential is being converted into tangible, multi-year contracts, significantly de-risking their future.
So, what caused this shift? The chain of events is quite clear. First, the macro demand signal became undeniable. Tech giant Meta announced a massive capital expenditure (capex) plan of $115–$135 billion for 2026, largely dedicated to AI infrastructure. This created a powerful wave of demand that specialized providers like Nebius and CoreWeave are perfectly positioned to catch.
Second, both companies solidified this demand into concrete agreements. In just the last month, CoreWeave announced a massive $21 billion contract expansion with Meta and a new deal with AI lab Anthropic. Similarly, Nebius secured a deal worth up to $27 billion with Meta. These aren't just promises; they are signed, sealed, and delivered contracts that provide clear visibility into future earnings, what investors call 'backlog.'
Finally, both companies successfully mitigated key risks. On the technology front, their close partnership with NVIDIA gives them early access to the next-generation 'Rubin' AI chips, ensuring they remain at the cutting edge. On the financial front, CoreWeave secured a landmark $8.5 billion investment-grade loan. This not only provides the capital needed to build out data centers but also serves as a strong vote of confidence from the financial markets, lowering their cost of borrowing.
In essence, the combination of confirmed massive demand, locked-in long-term revenue, and reduced technology and financing risks created a compelling case for BofA to increase its valuation multiples for both companies, leading directly to the higher price targets.
- Neocloud: A term for a new generation of cloud providers that specialize in offering high-performance computing power specifically for AI and other intensive workloads, as opposed to the general-purpose services of traditional cloud giants.
- Capex (Capital Expenditure): Money a company spends to buy, maintain, or improve its long-term assets, such as buildings, vehicles, or in this case, data centers and servers.
- Backlog: The total value of confirmed orders from customers that have not yet been fulfilled. It is a key indicator of a company's future revenue.