1 Nvidia-Backed AI Stock to Buy Before It Soars 35%, According to a Wall Street Analyst

Key Points

• Nvidia is invested in this stock and works closely with this artificial intelligence player.

• This company recently reported quarterly revenue that tripled from the year-earlier period.

• 10 stocks we like better than CoreWeave ›

Nvidia (NASDAQ: NVDA) has become a famous artificial intelligence (AI) player over the past few years, selling the most sought-after AI chips on the market. And that's resulted in soaring earnings and a stock price that's followed. But Nvidia isn't only involved in selling AI products and services. The company, like you and me, also is investing in stocks that could benefit from the AI revolution.

Yes, Nvidia is an investor too. The company's $4.3 billion investment portfolio includes six stocks involved in AI -- and one of them stands out as a huge conviction as it represents 91% of this portfolio. Nvidia owns 24,277,573 shares of the company, which equals a market value of more than $3.9 billion. And Nvidia isn't alone in its optimism about this AI player's future. This stock may soar 35% over the coming 12 months, according to one Wall Street analyst. Let's take a look at this Nvidia-backed AI stock to buy before it does.

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Image source: Getty Images.

Why follow Nvidia?

First, though, a quick note on why we should consider a stock that Nvidia favors. As mentioned, Nvidia is a giant in the AI market, and this company doesn't only stick to designing its chips. Nvidia also communicates extensively with customers and governments and has its finger on the pulse of the AI market. The company has a good idea of what future demand will look like, as it recently predicted that AI infrastructure spending may reach as much as $4 trillion by the end of the decade.

That means Nvidia knows how to spot a strong AI company. On top of this, Nvidia actually is "putting its money where its mouth is," to use an old expression, and has invested in this company in a big way. Considering this, it's a great idea to have a look at this particular AI growth story.

So, which Nvidia-backed company may be on the road to big gains? I'm talking about CoreWeave (NASDAQ: CRWV), a cloud provider in the GPU-as-a-service (GPUaaS) market. GPUs, or graphics processing units, are the key AI chips driving critical tasks like the training and inferencing of large language models. GPUaaS allows customers to rent out compute as needed, and they like this as it allows them to limit costs and gain in efficiency.

Citizens JMP analyst Greg Miller recently boosted his recommendation on CoreWeave to "outperform" from "market perform," set a price target of $180, and based this on growing momentum in the GPUaaS market. This price target represents an increase of 35% from the stock's closing price on Sept. 22.

The GPUaaS market

To understand CoreWeave's potential, it's key to take a closer look at the GPUaaS market and the company's relationship with GPU leader, Nvidia. The GPUaaS market is expected to expand at a compound annual growth rate of 30% to more than $73 billion over the next seven years, according to Global Market Insights.

CoreWeave is an expert in the field, with its cloud platform built specifically for AI workloads -- this may help it stand out from larger cloud service providers that offer many other services beyond AI to their customers. CoreWeave also holds another advantage, and that's its close relationship with Nvidia. Not only is the chip giant an investor in CoreWeave stock, but it's also supporting the company in other ways. For example, CoreWeave has been the first to make Nvidia innovations generally available to customers. And in a recent agreement, Nvidia said it would buy any cloud capacity CoreWeave is unable to sell to others through 2032. This removes a key risk from the CoreWeave story.

CoreWeave stock already has soared, advancing more than 230% from its initial public offering back in March, but like Nvidia and Citizens JMP's Greg Miller, I don't think the potential for gains is over. The company has reported strong growth, with revenue tripling in the recent quarter, and the general demand for AI capacity supports the idea of more growth ahead.

All of this means that now, before this Nvidia-backed player surges 35%, is a great time to get in on the story and hold on for the long term as the AI boom continues.

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Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.