This Artificial Intelligence Stock Could Be a Top Performer in the Next Market Rally

One of the more notable drivers of tech stocks in the last few years has been prowess in artificial intelligence (AI). Nvidia's AI chip has transformed the stock and the industry it serves, while the AI-driven capabilities of Palantir Technologies have taken its stock into the stratosphere, as its clients have benefited from massive productivity gains.

Investors are on the lookout for the next high-performing AI stock. Such predictions are difficult to make before they occur. However, CoreWeave (NASDAQ: CRWV) has the potential to become the same type of growth stock, and its attributes explain why.

Image source: Getty Images.

Why CoreWeave?

On the surface, CoreWeave may appear to be just another cloud stock. Companies like Amazon and Microsoft dominate the cloud business, and as a newly launched stock with a $45 billion market cap, CoreWeave may not appear particularly compelling.

Still, CoreWeave has developed a critical competitive advantage as it is the most prominent cloud company offering a cloud environment focused exclusively on AI. Thus, when its data centers work with Nvidia GPUs, CoreWeave holds an edge in AI training hardware.

Moreover, most companies do not want to pay the high cost of building their own data centers. Such AI-driven tasks also require more computing power than companies have available in-house. This plays into the hands of companies like CoreWeave, which can drive considerable revenues by offering such a service.

Thanks to its success in this business, the company's revenue growth is impressive by just about any measure. It generated nearly $1.4 billion in revenue in the third quarter of 2025, a 134% increase from year-ago levels.

CoreWeave's challenges

Unfortunately, keeping up with that rising demand has come at a cost. Over the same period, the cost of revenue surged 158% over the same time frame.

Consequently, such costs have weighed on CoreWeave's financials. It earned $52 million in operating income, down from $117 million in the same quarter last year. Additionally, it had to borrow money to keep up with demand, causing interest expenses to surge to nearly $311 million, compared to $104 million in the year-ago quarter.

A $127 million income tax benefit helped it stem losses. With that, CoreWeave lost $110 million in Q3, a significant improvement from the $389 million loss in the third quarter of 2024.

However, its $14 billion in debt is a concern, and that was highlighted again when CoreWeave issued $2 billion in convertible notes this month, later upsized to $2.25 billion.

While such added debt may seem unsettling, investors should know that these notes have a 1.75% interest rate and the option to convert to shares at specific prices through 2031. That may be a more appealing alternative to CoreWeave's existing debt, almost all of which is at interest rates ranging from 9% to 15%.

Admittedly, that debt could devastate CoreWeave stock if its cloud product fails to live up to expectations. Still, analysts forecast a 135% revenue increase in 2026, indicating its rapid growth is going to continue into the foreseeable future. Assuming it continues to make improvements, CoreWeave can likely refinance that debt at lower rates and possibly start retiring debt once it turns profitable or experiences a considerable bump in its stock price.

CoreWeave as the next great AI stock

Ultimately, CoreWeave's AI-specific cloud could significantly boost its stock value in the next tech rally.

CoreWeave is not the only cloud company, and the ongoing losses and rising debt levels make this a higher-risk stock. However, investors should consider the massive demand for AI and the company's triple-digit revenue growth. While this growth creates the need for massive investments and increased borrowing, it could also fuel growth in the stock price and eventual profitability.

Over time, such conditions can help the company refinance and retire debt as it solidifies its place in the market. That can not only make CoreWeave the next great AI company, but it could also fuel an outsized rally in CoreWeave stock.

Will Healy has positions in CoreWeave. The Motley Fool has positions in and recommends Amazon, Microsoft, Nvidia, and Palantir Technologies. 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.