An Ex-OpenAI Researcher With $20 Billion Just Built a Neocloud Trifecta: Here Are the 3 Stocks He's Buying.

Key Points

Leopold Aschenbrenner, a prominent German AI researcher and investor who previously worked at OpenAI, launched his Situational Awareness hedge fund in Sept. 2024. That AI-focused fund has delivered a return of more than 1,000% since its inception and now manages more than $20 billion in assets.

Aschenbrenner believes the ultimate bottleneck for the AI market’s growth won’t be algorithms, but rather the physical constraints of data centers, chips, and power grids. That’s why his fund invests heavily in “neocloud” companies. Unlike “hyperscale” clouds like Amazon Web Services (AWS), which provide a broad range of general-purpose cloud services, neocloud companies only provide cloud infrastructure services for AI companies.

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An illustration of an AI chip on a circuit board.

Image source: Getty Images.

By installing specialized hardware (like data center GPUs) across their streamlined architecture, neocloud companies can process AI tasks faster and more cheaply than hyperscalers. They can also offer more flexible contracts. According to Synergy Research Group, the neocloud market could grow at an explosive 58% CAGR from 2025 to 2031 as the AI market expands.

What are Aschenbrenner’s three big neocloud stocks?

That’s why Situational Awareness’s investments in three neocloud companies — Nebius (NASDAQ: NBIS), CoreWeave (NASDAQ: CRWV), and IREN (NASDAQ: IREN) — are attracting so much attention. Nebius, which is based in the Netherlands, provides customized AI infrastructure services for the data training, edtech, and robotics markets. CoreWeave, based in the U.S., primarily helps companies run GPU-intensive tasks remotely. IREN, which is headquartered in Australia, is another vertically integrated AI cloud data center company which only uses renewable energy.

Nvidia (NASDAQ: NVDA), the world’s largest producer of data center GPUs, owns major stakes in Nebius and CoreWeave, and has the option to buy a major stake in IREN. Analysts expect all three companies to deliver explosive sales growth over the next few years.

Company	2026 Revenue Growth	2027 Revenue Growth	2028 Revenue Growth
Nebius	550%	225%	90%
CoreWeave	147%	97%	60%
IREN	46%	311%	111%

See also <!DOCTYPE html><html><head><title>The Magnificent 7 Stocks: A Deeper Look at Earnings Performance</title></head><body><h2>Challenging June-Quarter Results</h2><p>Disappointing market reactions followed the June-quarter earnings reports of Tesla TSLA, Alphabet GOOGL, Microsoft MSFT, and Amazon AMZN from 'The Magnificent 7' group, while Apple AAPL and Meta META received more positive feedback. The interpreted downturn may signal tougher times ahead for this elite group, possibly marking the end of their market reign.</p><h2>Growth Potential Amidst Turbulent Market Sentiments</h2><p>Despite this, the majority of the 'Mag 7' stocks exhibit robust growth in both revenues and earnings, positioning them as sustainable growth performers in the current market landscape. With most companies showing impressive financial numbers and a positive growth trajectory stretching into the foreseeable future, Amazon's remarkable earnings surge of almost 100% and Alphabet and Microsoft's solid performances reflect the overall positive outlook for these market giants.</p><h2>Strategic AI Investments and Market Discontent</h2><p>While the lack of clarity on monetizing significant AI investments has left investors skeptical, the commitment of these companies to enhance AI infrastructure ensures their relevance and leadership in an AI-centric future. Market concerns are primarily due to the perceived ambiguity around the returns on these substantial investments. However, Alphabet's CEO warning about the risks of underinvestment in AI underscores the critical nature of these strategic moves.</p><h2>Current and Future Growth Expectations</h2><p>Charts highlighting consensus expectations for the 'Mag 7' stocks portray a promising growth trajectory, with anticipated earnings growth of 33.5%. These projections, combined with a favorable revisions trend in the Technology sector, suggest continued prosperity for key players in the industry.</p><h2>Insights from Earnings Season and Future Expectations</h2><p>Recent Q2 earnings reports indicate a positive trend, with S&P 500 members showcasing a notable 11.2% increase in earnings and a resilient 5.5% rise in revenues. As more companies prepare to reveal their financial results, the upcoming reports from industry titans like Disney, Uber, and Shopify will provide further insight into the market's direction.</p><h2>Historical Context and Future Projections</h2><p>Examining the historical context of revenue and earnings beats percentages reveals a new low for Q2 revenue beats at 59.2%, emphasizing the unique challenges faced in the current economic landscape. Despite this, the overall outlook remains optimistic, with total S&P 500 earnings expected to climb by 10.5% and revenues by 5.3% from the previous year.</p><h2>Paving the Way for Future Growth</h2><p>As the market navigates through uncertain terrains, the strategic investments and growth initiatives undertaken by the 'Magnificent 7' stocks position them favorably for future success. By staying ahead of emerging trends like AI and fostering sustainable growth, these companies are set to maintain their leadership positions in the ever-evolving market landscape.</p></body></html><!DOCTYPE html><html lang="en"><head> <meta charset="UTF-8"> <meta http-equiv="X-UA-Compatible" content="IE=edge"> <meta name="viewport" content="width=device-width, initial-scale=1.0"> <title>Insightful Analysis on Revenue Growth Trends</title></head><body> <article> Insightful Analysis on Revenue Growth Trends

Data source: Marketscreener.

Nebius, CoreWeave, and IREN trade at six, three, and seven times next year’s sales, respectively. Those price-to-sales ratios are surprisingly low, but that’s probably because investors are concerned about the high costs of expanding their cloud infrastructure.

But over the long term, economies of scale could reduce their costs and stabilize profit growth. That’s why it could be smart to invest in these neocloud companies, even as near-term concerns about their spending continue to compress their valuations. It’s also a good idea to follow Aschenbrenner and Nvidia’s lead and spread your bets across all three companies — as well as other neocloud companies — just in case one of them fizzles out.

Should you buy stock in Nebius Group right now?

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Leo Sun has positions in Amazon. The Motley Fool has positions in and recommends Amazon and Nvidia. The Motley Fool has a disclosure policy.

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