The Best AI Cloud Stocks to Buy Right Now

The artificial intelligence cloud has been the hottest segment of the market in 2026. So, which stocks should investors be looking at today? I want to discuss that with Neil. Neil, I'm going to let you go first. If you are looking in the AI cloud space today, what stock should be you be looking at first? >> So, there are different buckets of course of of cloud stocks. I'm sure you will talk about one side of the bucket. I'll take uh the the other site, one that has reported earnings uh this week. Well, the week we're recording this video that's Nebus or Nibbus and and Core Reef 2 NeoCloud players or AI cloud players, whatever term you want to use, is completely fine. Much smaller companies than the big hyperscalers out there, the Google Alphabet, the Amazons and and the Microsoft. You can also put Oracle into that conversation. the market would love to put Meta in that conversation as well. But unfortunately today Meta does not have a cloud business just yet. So Nebus Core with two Neo cloud players very well very small companies. I think both companies are worth around $50 billion right now. Both of them are growing of triple digits accelerated growth. Capex heavy. I think Core Reef expects capex for 2026 to be over $30 billion. is between 20 to $25 billion. I assume both of these numbers will be bigger in 2027 as they ramp up as more data centers come online as they get more GPUs. Both of them are doing this because the demand is there. The results I mean speaks for themselves. Both of them have seen that the pricing per megawatt has increased. So I think Nebis went from a base of $12 million per megawatt to now at in Q2 that was just above 20. And they're already seeing also some more premium for more shorter term contracts that could reach between4 to $50 million. Now, I'm not going to say that the whole business is going to see4 to $50 million, but there are certain uh clients that just need compute for x amount of months, maybe x amount of quarters as soon as possible, and they're willing to pay a premium for that. >> Well, let's talk about who those clients are because I think the client is most likely anthropic. >> The client could be anthropic, could also be Google because Google >> Well, Google is selling to Anthropic though. I mean, I think this is the this is the sort of strange piece of it is that Google is doing some of these short-term deals to serve Anthropic because they signed long-term deals with Anthropic and NABUS and Cororeweave are are kind of taking off that short-term offtake what what Google is calling a bridge. >> Yes. Um because Google did mention that in Q3 they they will be looking at some third-party um players for for those deals. I think they said that margins could get hit in Q3 as well. So, it makes sense that they could be uh one of these players that get mentioned there. I'm pretty sure that there are some other players out there that that pop up each and every month. Um most most of the shorter term contracts I do also think could go to enterprise players for for a name like Nebus. They've been going after the enterprise market. Of course, they enjoy the hyperscaler contracts because that gives them a huge amount of money up front. they can then go and say look we have contracts with the Microsoft we have a contract with Meta quite reputable names could get more attractive rates that way and continue to grow faster and faster. Now I'll talk specifically about Cororey for a bit because Cory unlike Nebus has not been getting that much love year to date. I think Nebus right now is up 150%. Cor is also up year to date but still down quite a lot from from the highs. The reason is one market well was expecting they actually got what what they wanted which is margin inflection. Now, it's not where it needs to be just yet, but at least there are some improvements which of course could help and should help a company like Corore Reef because one, they have a massive amount of debt because they need to build out all of these data centers. They need to buy all the GPUs. Second of all, interest expense keeps on increasing. So, I think it was up 100% year-over-year to over $600 million expected to increase to close to $900 million next quarter. And so the fears up to now was that if margins cannot be improved, it's going to be an issue for the company eventually, right? Okay, they can keep raising raising money, that's fine. Revenue can double year over year, that's fine. But at the end of the day, something needs to flow to the bottom line. And finally, this quarter we actually see some movement in the right direction. Of course again interest expense is growing quite quickly but now they should be on a path where revenue and actually revenue growth is expected to accelerate of next quarter and that should help them with this fear around the name where okay you have a ton of debt you are growing fast but hey at one point your business needs to turn a profit in order for you to pay down that debt over the next couple of years. So that's a positive thing for for corre as of right now. But I do still think there are some question marks around the name. Otherwise, I do think it would have been up more than what we've seen over the last 48 hours or so, which was positive, but could have been more. >> Yeah, I I want to bring in some of the questions about both of these companies because I think as we'll get to some of the hyperscalers in just a moment. I think that's a very different riskreward prof profile for investors who are looking at this space. You know, if you're Alphabet and you're making your your core business is spitting off $180 billion worth of cash and you're spending even a little bit more than that at 200 billion or so a year in capex, you can still handle that if if something goes south. Uh not quite the case with Nbius or Coreweave. You mentioned that they're taking out debt. I'll also point out that Coree's interest expense has skyrocketed in publicly traded markets. uh went from I believe it was about 7 or 8% to over 12%. That's fallen down a little bit. I think it was a little bit below 11% after uh their earnings report. But one of the things that stuck out to me with these both of these quarterly reports and I think Nibbius really um really highlighted it was their shortterm fundamentals or for the short-term economics on their deals are very positive. They also talked about uh one year 10-month payback. I believe that's also for the projects where customers are paying 60% upfront. So that changes your calculation, right? Like you don't you're you're yes, you're paying that back in a year and 10 months, but you're also getting a huge chunk of that. So that's not cash outflow upfront. Um it's a little bit like um so you don't you don't necessarily know how profitable these are going to be in three, four, five years. That's my question for you is what happens to these businesses after these bridge contracts because when you hear Alphabet talking, when you hear Microsoft talking, they don't say, you know what, we are going to be paying exorbitant prices to Nibbius and Cororeweave long-term. We love handing over our margin to them. They're saying, "Our data centers aren't done yet. We're building as fast as we can. We're putting way more capex into the ground than they are. Uh, but we're going to use them as a bridge because they maybe have power right now. They have a shell right now. Uh, you know, maybe we can even put our own GPUs in there. So, how do you think about that as an investor? Because the market is forward-looking and this quarter was great. Next quarter is probably going to be great. Into 2027, it's probably going to be great. My questions are more 2028 to 2030. What happens when we're not so supply constrained? >> It's a I mean, it's a fair question. And I think it's a question the market is also asking and the company management can say one thing. They can say look we provide a service we have added value services as well for now companies like to work with us. They like the service that they get. They like the pricing that they get. Although they they did this auction type uh pricing and I think it was 15% higher than than the last one. And the client that won it was extremely happy. they wanted to participate in the next one because of of the service that they got even though the pricing is higher than before. Of course, we can say it's just because right now the demand is so big. What happens a I assume a year from now the demand will still be there, but let's go with 2028 like you said. Look, I think we can all speculate, but at the end of the day, if if they attract the right clients, whereas the business continues to grow and the products that they sell or the service that they sell many users for that company, they will keep coming back to a nebuse or a core reef because if they attract more and more that means there's more demand flowing to them, which means they will be they will need more compute. Now as for pricing for that compute we can talk about yeah we can talk about maybe pricing coming down but volume increases way more than the price coming down for compute which I think I think is what's going to happen and then you need to have a business with added value services so you make up so you make up that difference which is something that Nebus has has done from the start they really did focus on value added services token factory some other software optimization where they You also have now that asset light business where they don't need the land, the power, the the GPUs, etc. They go to players that do have that but don't have Nebus expertise. They don't have Nebus clients. So it it's now flipping the script where Nebus Nebus needs the compute and the data set. They have the client, they just don't have it. They don't have the the shells themselves. They just go now to other. So basically what clients do with Nebus, Nebus then do does the same with some others. more circular AI economics >> which works well right now when the demand uh exceeds the uh the supply but to me it's pretty clear if you are executing well and your business attracts other very good businesses I think you'll do well in the future cuz I don't see all of the demand disappearing on the other side if you are a business that is just seeing oh the demand is super high right now my only goal is to to make sure that I collect as much cash as possible today because I can rent out this GPUs but you don't add anything else then you will have an issue I think two years down the line because yeah two years down the line fine you have those GPUs but I can get my GPUs somewhere else and I'm getting some value added services on top of it. So, I guess those that can have an ecosystem of products and services will win, which is funny because we're going to talk about in another video about a specific company that does have a a bigger ecosystem and a distribution as well, but we'll leave that for for another time. Yeah. Let's let's move on to some of the other players that fall a little bit lower on that risk profile. You know, the the Neoclouds, and you can include even SpaceX in this. SpaceX has become a neocloud at this point, which is is crazy to say, but that is actually a majority of their business. It's bigger than launching satellites at this point. Uh so, but the two companies that I I think personally I'm the most interested in from this space, you know, one I own, one that one that I don't. We'll start start with the one that I own that I actually have a lot of questions about what they're going to be in the future, and that's Alphabet. Um a lot of things going right. I I'll start with what's going wrong. They're losing a lot of their talent. They're losing a lot of the people that not only have been built building Gemini the last few years, but built a lot of the tools that Alphabet and even the entire AI industry has been built on over the last 10 to 15 years. So that's a concern for me. The other piece, they have a phenomenal cloud business right now, but that cloud business and a lot of that cloud compute is being sold to Anthropic. I think you know they're not going to come out and say that hey you know what 80% of our cloud revenue is coming from from Anthropic but a huge chunk of that is coming from Anthropic. They are sacrificing their own AI business and development and I think this is one of the things that a lot of those people who are leaving are frustrated because hey management only has so much compute. We mentioned they're using some of this bridge from Cororeweave from Nibbius, you know, companies like that and they're saying, "Okay, we are going to make money now and serve this giant client who's willing to pay, willing to sign a long-term contract, and what we're going to sacrifice is our ability to operate on the leading edge of AI." And those researchers, you know, not necessarily something that they're super excited about. So you have the core business spitting off cash. Possible that you're going to get disruption of something like search, but you got so many other things, so many distribution avenues, Chrome, you have YouTube, you have Android, there's so much power in this business model. Uh, and if there is some sort of overbuild, if there is some sort of bubble and they go, you know what, we're not going to spend $200 billion a year on capex. We're just we're going to pull that back. we're only going to spend 100 billion on capex. That means that they go from free cash flow negative to free cash flow positive. So I think Alphabet I still have questions about the business. The valuation I don't necessarily love quite as much as I did, you know, a year or two ago when I was buying shares. Um but it's, you know, right now trading for 26 times forward earnings. But I still think if you're looking in this space, this is one of the safer plays. But what do you think? >> I agree. I think we talked about is in a in another show where if there is going to be a big crash, uh, a company like Google Alphabet can just go shop around and see what's available, right? Who >> which by the way they did after the com crash too. >> Yeah. Who needs to be rescued here? Here we are. Um but on the on the researcher side of things we we've seen the headlines and on the one hand okay headline wise it's not great but then on the other hand I I also don't think that they are in a position right now where if a couple of researcher even if it is uh Demis from uh from deep mind that steps down doesn't go away although there were some headlines and rumors that said that he wanted to step away completely I don't think they are at a stage where a handful of people will hurt the company for for the long run. I I'll actually go even further. If if it was the case that they are so important, then Gemini should not be behind right now because I mean Google themselves admitted and they said that Gemini they feel that Gemini is behind an open AAI and and an anthropic. They believe Gemini 4 should be much better. But clearly clearly they are focused more on the cloud business, the TPU business because that's where the money is at. Gemini reach what a a billion monthly active users right now. So and if you're not leading, you're you're still attracting a billion monthly active users, which again is is quite a good good place to be. Yeah, I that is what I keep coming back to when I look at, you know, should I should I completely unload my position? Uh I keep coming back to that this is this is still one of the safer plays in technology right now. They have you mentioned the TPUs that's I think something when when Anthropic is building on TPUs and not on Nvidia chips there are reasons for that from their original founding but that's telling you that you've got a technology that you can that you can sell that you can build on that is going to be much more powerful much more durable than uh than just one thing. And so this is this is kind of the new conglomerate in technology. Let's talk about another one of those conglomerates. And I'm actually getting more and more interested in Amazon right now. And part of that is to me Amazon has the fewest places where they can be disrupted of any of these companies because retail is not going anywhere, right? Like re the retail business is just going to be what it is. is it's going to continue to be, you know, something that people rely on all over the world. I don't see anybody coming in and competing with them. AWS, I had a lot of questions about them a couple of years ago, but I think as we've sort of matured in the AI industry, it's become pretty clear that someone, as this business looks much more commodity like from a token side, someone is going to have to be that lowcost provider. That has always been Amazon. They have always been the lowcost provider of compute. It's why in the early days of AWS, Netflix was built on AWS. Snapchat was built on AWS. Basically, everything in Silicon Valley was built on AWS. We're going to be in a little bit different world in the world of AI because you do have an Alphabet that is playing in this game. But a lot of those established companies are going to stay on Amazon. There's going to be a lot of people who don't necessarily want to go to Alphabet. They're not going to want to build on SpaceX's compute or maybe on Meta's compute. So, you know, even Microsoft, Microsoft, I think, is sitting in an okay position, but they're not going to be I don't think they operate their cloud as efficiently as AWS, which is why AWS hasn't been run over by a company like that. So, I just keep coming back to this is still, you know, what they are. They're not going to do anything impressive. They're not going to release their own model that's going to change the world. they're just going to provide compute to other companies to do the stuff that they do. And that's a probably a pretty good place to be. >> I agree. I I say time and time again, Amazon is in my opinion one of the best businesses on the planet. And if if I had to pick one name and I don't touch it for the next decades, it's probably this one because their total adjustable market just continues to grow. But they also want to go into into satellite communications. M they're also going to healthare they can go where wherever they they want they are extremely efficient in the long run of course in the short term they will always have fluctuations with regards to cash flow but from operating activity I mean is is doing very well contrary to just free cash flow it's it's funny because a year ago AWS was regarded as oh it's slowing down it's not growing as fast as as before and now we're we're what our third consecutive quarter of accelerated growth or so. Yeah. >> So, things can flip quite quickly and they also have their stake right in all of these uh AI names. >> Well, let's let's mention that because I did want to bring up Anthropic. When you look at their price earnings multiple on a trailing basis, it's about 21 on a forward basis goes up to 29. The reason for that is they mark those equity positions in companies like startups to market each month. Alphabet doing the same thing. So there's nonoperating profit is is the line item that you want to look at if you're looking at the income statement. But they're actually the biggest shareholder in Anthropic. Alphabet was one of the big uh the big early investors as well. But Amazon has done follow-on investments and they were one of those early investors as well. So they actually have the biggest uh stake in Anthropic. If Anthropic does go public later this year, that's going to hit their balance sheet too. >> Yeah. And that's the thing. If and when Antropic goes public, hopefully they do go later this year. It might be the top, it might not, I don't know. But at least we get to look inside that business. We get to see what exactly is going on with one of the biggest AI names right now. And I think that could be eye opening for for investors and the market hopefully in a good way, but you never know. >> Yeah, exactly. And you know, who is signing all these short-term deals? Is this Anthropic just trying to get as much comput as they can before they go public so they can record that revenue? Uh, we'll have to see. Lots to think about. Okay, we talked about four stocks here today. I want to know your top stock between Cororeweave, Nibbius, Amazon, and Alphabet. Which one do you have Neil? >> If I had to rank them, it would probably still be Nius number one, then an Amazon, then Alphabet, then Core. >> And I'm going to I'm going to I'm staying away from the Neoclouds right now. I just see too much risk there. Uh it's not a game that I that I really want to play. You know, when when are these prices uh per megawatt going to start coming down? But I kind of equally like Amazon and Alphabet. Um, Alphabet is the one stock that I own, but if I was going to buy a new stock today, it might actually be Amazon because I like their position and I kind of have more questions strategically about what Alphabet's doing in the future. So, let us know what you think in the comments section below. Don't forget to subscribe here to the Montly Fools channel. Thanks for watching everybody. See you next time.