Few stocks are as directly exposed to artificial intelligence as CoreWeave (CRWV 0.72%). The AI cloud infrastructure company reinvented itself, transitioning from a crypto mining company by repurposing its GPUs to provide AI computing power to customers like Microsoft, Nvidia, and OpenAI.

With the AI boom in full swing, that business model has led to jaw-dropping growth. In its second quarter, its revenue jumped 206% to $1.21 billion, showing how fast demand for its services is ramping up.

Now, CoreWeave just got another shot in the arm as the stock jumped 12% on Tuesday after announcing another blockbuster deal, this time with Meta Platforms (META 1.35%).

What’s happening with CoreWeave and Meta?

Meta is committing to spend up to $14.2 billion through 2032 on cloud computing capacity from CoreWeave, with an option to expand its commitment.

The deal comes at a time when Meta has been ramping up its spending on AI, seeing it as a must-win for its future. In June, Meta acquired a 49% stake in Scale AI, a data-labeling start-up, and poached its CEO, Alexandr Wang, to run its new AI lab.

On the same day that the CoreWeave news came out, Meta also announced that it’s buying the chip start-up Rivos, which designs chips based on RISC-V architecture, an alternative to those used by leading CPU architecture designers Arm, Intel, and AMD. Rivos is also expected to help Meta build out full-stack AI systems.

For CoreWeave, the deal builds on the earlier momentum it earned when it signed an expanded $6.5 billion agreement with OpenAI in September, bringing its total contract with OpenAI to $22.4 billion.

The drumbeat of positive news for AI includes rival Nebius’s $17 billion deal with Microsoft, Oracle’s huge cloud computing forecast, and CoreWeave’s own wins, including OpenAI, Meta, and a $6.3 billion deal with Nvidia, in which it will buy any of CoreWeave’s unused capacity, effectively backstopping the company’s growth.

Those news items, and improving sentiment around CoreWeave, sparked a recovery in the stock last month. After falling by more than 50% from its peak in June, CoreWeave jumped more than 50% off its lows early in September.

Is CoreWeave overvalued?

CoreWeave is a challenging stock to value. The company is delivering phenomenal top-line growth, but it’s also reporting huge losses. The company’s business model is risky. It’s borrowing billions of dollars to buy Nvidia GPUs and build out the infrastructure to provide next-generation AI computing.

That high-interest debt has also led CoreWeave to pay significant interest expense, set to be above $1 billion this year, essentially preventing CoreWeave from turning a profit.

For most stocks, to determine an appropriate valuation, you just look at the numbers. However, CoreWeave is in a class of its own. Given its growth rate, in which revenue is still tripling, the upside potential for the stock is tremendous, and conventional cloud computing businesses like Amazon Web Services and Microsoft Azure have shown how profitable cloud computing can be at scale.

Rather than parsing the numbers for CoreWeave to determine whether the stock is overvalued, investors are better off considering the future of the AI boom. If the massive capex buildout continues, including on CoreWeave’s infrastructure, the stock is a good bet to be a winner. At a market cap of $66 billion, the stock still has room to move higher.

However, if the AI boom turns into a bubble and spending suddenly slows, CoreWeave is likely to plunge. While it’s locked in multi-billion-dollar deals with the likes of Meta, the company will need more of those to turn profitable and justify its current valuation.

Either way, expect the volatility in the stock to continue.

Jeremy Bowman has positions in Amazon, Arm Holdings, Meta Platforms, and Nvidia. The Motley Fool has positions in and recommends Amazon, Intel, Meta Platforms, Microsoft, Nvidia, and Oracle. The Motley Fool recommends Nebius Group and recommends the following options: long January 2026 $395 calls on Microsoft, short January 2026 $405 calls on Microsoft, and short November 2025 $21 puts on Intel. The Motley Fool has a disclosure policy.

Oracle shocked analysts in its latest quarterly earnings call with revenue projections that cited $455 billion in contracts, up 359% from a year earlier. The optimistic forward-looking numbers caused the company’s stock to jump 36% on Wednesday, the company’s biggest one-day increase ever, and briefly made CEO Larry Ellison the richest man in the world.

Part of the reason Oracle was able to strike the deal with OpenAI at all is due to Ellison’s courting of Nvidia CEO Jensen Huang, which has allowed his company, despite previously trailing behind other cloud providers, to secure a large stockpile of top-of-the-line Nvidia GPUs and position itself as a significant player in the AI infrastructure space. The rally added to the 45% gain the company already notched up this year, and cemented Oracle’s AI-fueled comeback.

But while securing top-tier GPUs has bolstered Oracle’s infrastructure position, some analysts were quick to warn that the financial risk was heavily concentrated in a single, unproven customer. According to a Wall Street Journal report, the bulk of the company’s $455 billion remaining performance obligations, or RPO, will come from the $300 billion deal OpenAI. The AI firm announced it will tap Oracle’s computing infrastructure under the multi billion deal, one of the largest cloud contracts ever signed. It also far exceeds OpenAI’s current revenue, which recently hit $12 billion in annualized revenue, per The Information.

Because remaining performance obligations represent contracted but not yet delivered services, they are not guaranteed revenue; customers can delay, renegotiate, or even cancel portions of these commitments.

Cue fresh alarm bells over a potential AI bubble.

Fears that the AI sector might be in a bubble have intensified recently due to a combination of sky-high valuations, early signs of disappointing returns, and cautionary remarks from industry leaders. A recent study from MIT that found 95% of AI pilot programs fail to deliver meaningful returns, despite over $40 billion having been invested in generative AI projects, fueled fears that a gap was emerging between investment hype and real-world results. Days before the report was released, OpenAI CEO Sam Altman also said that he believed the AI sector might be experiencing a bubble in the private markets, expressing concern over the level of investor enthusiasm and the overvaluation of some startups.

Gary Marcus, an AI expert who has been warning of a potential bubble and problematic economics of AI since 2023, called the OpenAI-Oracle deal “peak bubble.”

“Oracle’s new market cap, near a trillion dollars, up nearly 50% this week, driven largely by this one apparently non-binding deal with a party that doesn’t have the money to pay for the services, seems more bonkers than most,” Marcus wrote in a Substack post.

He wasn’t the only one raising alarms about the deal’s credibility.

“This is a grotesque attempt by both Oracle and OpenAI to mislead investors and the markets at large with a contract that neither party can fulfill, and it virtually guarantees that OpenAI will run out of cash in the next few years,” Ed Zirtron, a technology writer and founder and CEO of EZPR who has also emerged as a vocal skeptic of the hype surrounding AI, said in a blog post. “OpenAI, while claiming it’ll make more revenue than NVIDIA by 2030, needs $250bn funding over the next four years to pay its $300bn compute contract with Oracle, who cannot physically build the data centers to service it in time.”

And it wasn’t just those who doubt the underlying potential of today’s AI models that questioned the economics of the deal.

“I’m not an AI bubble person, but it is very understandable for investors to be confused/concerned by the OpenAI-Oracle deal lol. OpenAI hasn’t even gotten the for-profit conversion approved and is promising people 300 billion dollars??” Miles Brundage, an AI researcher and former head of policy research at OpenAI, added in a post on X.

Investors also had questions. “How is this all going to work exactly? ORCL has to buy the chips, take on more debt, while OpenAI has $10B in revenue but will spend $60B/yr in CapEx for five years. What?” Ophir Gottlieb, CEO of Capital Market Laboratories, wrote on X .

OpenAI has made several other billion-dollar deals recently, including $10 billion to develop custom AI chips with Broadcom. The company is also still in the process of figuring out how exactly it’s going to restructure its corporate governance to allow its for-profit to raise more capital, although it’s made a significant step recently by getting lead investor Microsoft on board.

Taken together, OpenAI’s current revenue and capital commitments fall far short of what would be needed to fully fund the Oracle contract, with analysts estimating the company would need hundreds of billions in annual revenue to meet these obligations.

Representatives for OpenAI and Oracle did not immediately respond to a request for comment from Fortune.

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For American AI researchers, that’s almost unimaginable. In the U.S., surging AI demand is colliding with a fragile power grid, the kind of extreme bottleneck that Goldman Sachs warns could severely choke the industry’s growth.

In China, Ma continued, it’s considered a “solved problem.”

Ma, a renowned expert in Chinese technology and founder of the media company Tech Buzz China, took her team on the road to get a firsthand look at the country’s AI advancements. She told Fortune that while she isn’t an energy expert, she attended enough meetings and talked to enough insiders to come away with a conclusion that should send chills down the spine of Silicon Valley: in China, building enough power for data centers is no longer up for debate.

“This is a stark contrast to the U.S., where AI growth is increasingly tied to debates over data center power consumption and grid limitations,” she wrote on X.

The stakes are difficult to overstate. Data center building is the foundation of AI advancement, and spending on new centers now displaces consumer spending in terms of impact to U.S. GDP—that’s concerning since consumer spending is generally two-thirds of the pie. McKinsey projects that between 2025 and 2030, companies worldwide will need to invest $6.7 trillion into new data center capacity to keep up with AI’s strain. 

In a recent research note, Stifel Nicolaus warned of a looming correction to the S&P 500, since it forecasts this data-center capex boom to be a one-off build-out of infrastructure, while consumer spending is clearly on the wane.

However, the clear limiting factor to the U.S.’s data center infrastructure development, according to a Deloitte industry survey, is stress on the power grid. Cities’ power grids are so weak that some companies are just building their own power plants rather than relying on existing grids. The public is growing increasingly frustrated over increasing energy bills – in Ohio, the electricity bill for a typical household has increased at least $15 this summer from the data centers – while energy companies prepare for a sea-change of surging demand. 

Goldman Sachs frames the crisis simply: “AI’s insatiable power demand is outpacing the grid’s decade-long development cycles, creating a critical bottleneck.” 

Meanwhile, David Fishman, a Chinese electricity expert who has spent years tracking their energy development, told Fortune that in China, electricity isn’t even a question. On average, China adds more electricity demand than the entire annual consumption of Germany, every single year. Whole rural provinces are blanketed in rooftop solar, with one province matching the entirety of India’s electricity supply. 

“U.S. policymakers should be hoping China stays a competitor and not an aggressor,” Fishman said. “Because right now they can’t compete effectively on the energy infrastructure front.”

China has an oversupply of electricty

China’s quiet electricity dominance, Fishman explained, is the result of decades of deliberate overbuilding and investment in every layer of the power sector, from generation to transmission to next-generation nuclear.

The country’s reserve margin has never dipped below 80%–100% nationwide, meaning it has consistently maintained at least twice the capacity it needs, Fishman said. They have so much available space that instead of seeing AI data centers as a threat to grid stability, China treats them as a convenient way to “soak up oversupply,” he added.

That level of cushion is unthinkable in the United States, where regional grids typically operate with a 15% reserve margin and sometimes less, particularly during extreme weather, Fishman said. In places like California or Texas, officials often issue warnings about red-flag conditions when demand is projected to strain the system. This leaves little room to absorb the rapid load increases AI infrastructure requires, Fishman ntoed. 

The gap in readiness is stark: while the U.S. is already experiencing political and economic fights over whether the grid can keep up, China is operating from a position of abundance.

Even if AI demand in China grows so quickly renewable projects can’t keep pace, Fishman said, the country can tap idle coal plants to bridge the gap while building more sustainable sources. “It’s not preferable,” he admitted, “but it’s doable.”

By contrast, the U.S. would have to scramble to bring on new generation capacity, often facing years-long permitting delays, local opposition, and fragmented market rules, he said. 

Structural governance differences

Underpinning the hardware advantage is a difference in governance. In China, energy planning is coordinated by long-term, technocratic policy that defines the market’s rules before investments are made, Fishman said. This model ensures infrastructure buildout happens in anticipation of demand, not in reaction to it.

“They’re set up to hit grand slams,” Fishman noted. “The U.S., at best, can get on base.”

In the U.S., large-scale infrastructure projects depend heavily on private investment, but most investors expect a return within three to five years: far too short for power projects that can take a decade to build and pay off.

“Capital is really biased toward shorter-term returns,” he said, noting Silicon Valley has funneled billions into “the nth iteration of software-as-a-service” while energy projects fight for funding. 

In China, by contrast, the state directs money toward strategic sectors in advance of demand, accepting not every project will succeed but ensuring the capacity is in place when it’s needed. Without public financing to de-risk long-term bets, he argued, the U.S. political and economic system is simply not set up to build the grid of the future.

Cultural attitudes reinforce this approach. In China, renewables are framed as a cornerstone of the economy because they make sense economically and strategically, not because they carry moral weight. Coal use isn’t cast as a sign of villainy, as it would be among some circles in the U.S. –  it’s simply seen as outdated. This pragmatic framing, Fishman argued, allows policymakers to focus on efficiency and results rather than political battles.

For Fishman, the takeaway is blunt. Without a dramatic shift in how the U.S. builds and funds its energy infrastructure, China’s lead will only widen.

“The gap in capability is only going to continue to become more obvious — and grow in the coming years,” he said.

Network platform company Arista Networks (ANET 2.38%) is the 15th best stock performer over the last 10 years, according to MacroTrends. To understand why, look no further than the company’s otherworldly growth rate: It has averaged 29% quarterly revenue growth during the past decade, according to YCharts, meaning its revenue has grown by nearly 900%.

The past decade saw a mega-trend play out in investing: Computing and software increasingly moved to the cloud, and Arista Networks was a major beneficiary of the trend. Its two largest customers — Microsoft and Meta Platforms — have spent billions of dollars building out the necessary data centers, driving strong revenue growth for Arista.

Between now and 2030, another mega-trend appears poised to play out in the investing world. Yet again, it seems that Arista Networks’ ship will sail ahead on these strong tailwinds.

The AI trend isn’t done yet

Artificial intelligence (AI) is having its moment in the limelight. Whether it’s reading AI summaries for search results, turning family photos into Ghibli-style art, or having ChatGPT give ideas for starting conversations, regular people are interacting with AI applications more and more. Businesses are also increasingly finding ways to integrate AI automation into tasks, making their operations more efficient.

However, the increasing use of AI comes at a cost. In May, the aforementioned Ghibli-style art trend overwhelmed OpenAI‘s graphics processing units (GPUs). Simply put, they were overworked, pointing to an ongoing need to build out AI infrastructure.

According to McKinsey & Company, AI infrastructure spending could hit an astronomical $6.7 trillion by 2030. That number is up for debate. But less debatable is that the cloud computing giants have already committed to spending hundreds of billions of dollars in coming years to meet surging demand for AI.

AI data centers need network solutions, which is where Arista Networks comes in. Understanding the nuts and bolts of how this space works is admittedly difficult. But suffice it to say that Arista is considered to be a leader when it comes to cloud-based network solutions, and its revenue has consequently more than tripled over the last five years as demand surged.

ANET Operating Margin (TTM) data by YCharts.

As the chart above shows, strong demand has also lifted the operating margin for Arista Networks to an all-time high. This could be reason for concern for those looking to buy the stock today. After all, if the AI trend has already experienced its fastest growth rate, then one would expect Arista’s own growth to slow and its profit margin to come back down to normal, potentially hurting the stock.

However, given the ongoing commitments to AI capital expenditures, I don’t believe Arista Networks is about to be a victim in a cyclical downtrend. On the contrary, the cycle trend still seems to be up.

Can Arista Networks’ top line double in five years?

For its part, Arista Networks estimates its market opportunity at over $70 billion. For comparison, management expects to generate $8.2 billion in revenue this year. That’s a big number, yes. But it’s still well below the size of the market opportunity, suggesting plenty of upside opportunity.

Should Arista Networks generate revenue of $8.2 billion in this coming year, it would represent 17% growth from 2024. That’s a strong growth rate, but a step back from its 20% growth in 2024. And it’s a significant drop from its five-year average of about 29% top-line growth.

Let’s assume that Arista grows by 17% in 2025, and growth thereafter slows to about 14%. This would be about half of its average growth rate over the last five years. Given the company’s leadership position in a large growing market and its long track record of taking market share, I believe these assumptions are conservative.

Under these assumptions, it’s possible that Arista Networks’ revenue could almost double by the end of 2030. Importantly, this level of growth could be enough to sustain its stellar profit margins.

Trading at 45 times its trailing earnings, Arista Networks stock isn’t cheap right now. It would have room to fall if growth stumbled by a significant amount and margins took a step back.

However, given the strong trends in the space right now, I believe Arista’s growth will likely stay strong. Should its growth rate reaccelerate within the next five years (as it’s done multiple times in the past), then perhaps revenue could more than double in the next five years.

I believe Arista Networks stock looks pricey, but that’s justified given its leadership position for an important growth trend. I expect its revenue to increase nicely and for its profit margins to stay strong, which means that its shareholders will likely enjoy many more years of positive stock returns.

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Jon Quast has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Arista Networks, Meta Platforms, and Microsoft. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.