Fears about the billions in debt needed to build data centers has clobbered the artificial-intelligence trade, but Wall Street still isn't ready to give up on AI cloud providers.
In the past two days, CoreWeave and Akamai Technologies have gotten nods -- CoreWeave from Goldman Sachs' Gabriela Borges, who raised her rating to Buy from Neutral and Akamai from Raymond James' Frank Louthan, who went to Strong Buy from Outperform.
The upgrades are surprising since CoreWeave triggered last week's AI rout. Shares of the neocloud provider tumbled 25% after investors by the yield on CoreWeave's 9.625% notes went into selling mode.
Not as talked about but nearly as bad was Akamai's 18% plunge, which translated into loss $2.75 billion in market capitalization.
Though the stock was up 2.6% to $89.49 on Tuesday, it is down about 16% in October and was on pace to log its fifth consecutive monthly drop. Since the end of May, shares have shed $8.88 billion in market value, according to Dow Jones Market Data.
The stock is also sharply below its 50-day moving average of $108 and its 200-day moving average of $112.30.
Raymond James' Louthan simply isn't fazed by any of it, writing tongue-in-cheek: "We are upgrading shares...following the 'AI Is Dead' trade last week." He kept his $170 price target, which represents 94% upside from the closing price of $87.25 on Monday.
Akamai is known for its cybersecurity offerings, but has seen its cloud and infrastructure business segment become a standout this year.
Louthan said the hit to the stock last week was due to Akamai's $5.5 billion capital commitment to generate more than $11 billion in revenue from Anthropic, but that now is the time to buy and hold.
"The market is probably concerned about broader AI firms (like Anthropic) being able to stay funded to maintain their obligations like the recent deal with AKAM," Louthan said.
"In the short term, we believe AKAM is getting beaten up as it is providing funding for a deal that now could be viewed as having a lower probability of being fulfilled," he added.
And Louthan simply believes Akamai is a buy because AI demand isn't going away and neither is the momentum in the stocks.
That's the word from analysts, at least for the time being.
On Monday, Goldman's Borges said CoreWeave's business is "biased to the upside" over the next 24 months because of favorable contract pricing. In other words, computing providers can charge more for AI computing power as demand for AI compute accelerates.
This is all to say that while investors are still scared about AI debt, Wall Street clearly isn't.
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