1. Independent oil & gas

Going into its second quarter earnings, Permian Resources (NYSE:PR) has been gaining a lot of momentum with its share price up almost 40% since April. A big chunk of this impressive trajectory came following its first quarter results in May, which sent the stock flying by double digits as the oil & gas enterprise far exceeded expectations.

Through a combination of robust cost controls and better-than-expected production volumes, the company reported its highest free cash flow in the history of the business, setting a new record high. That’s despite a downward trajectory in oil & gas prices during the period. And if its August results hold similar positive surprises, the growth stock could be due for another surge.

However, it’s important to remember that nothing’s set in stone. The downward trend in oil & gas prices has since continued, averaging around $60 per barrel over the last three months versus the first quarter’s $70. That creates a natural headwind if management can’t offset this decline with increased production.

2. AI Infrastructure

Another US growth business that’s seen its shares surge this year is CoreWeave (NASDAQ:CRWV). Despite only going public in March, the artificial intelligence (AI) infrastructure cloud provider has already delivered a whopping 215% return for shareholders!

Looking at its first quarter results, that’s not a major surprise given revenues exploded by 420%, driven by high demand from AI companies looking to rent computing power to train their models. This has also translated into a 63% year-on-year increase in revenue backlog from $15.9bn to $25.9bn, thanks mostly to a new strategic partnership with OpenAI (creators of ChatGPT).

Moving into the second quarter, expectations are high. But while its history as a public company is still short, a similar display of gargantuan growth could send the stock flying once second-quarter earnings are released in August.

Having said that, even if the firm continues to outperform, there’s no guarantee that the shares will climb higher. Why? Because Augst is also when the IPO lock-up expires, releasing around 180 million pre-IPO shares into the market. In other words, a massive wave of selling activity may be just around the corner as insiders look to take their profits.

3. More AI spending

CoreWeave isn’t the only business looking to cash in on AI, with Amazon also reporting next month. Its first quarter results beat expectations, reversing the downward trend from earlier in the year, underpinned by higher AI workloads. And with AI spending still ramping up, the growth from its AWS division could continue into the second quarter, pushing Amazon shares even higher.

But just like the other growth shares on this list, there are threats to consider. The company has significant exposure to the tariff trade war, particularly with China. And while AWS is proving to be a cash cow, there are growing concerns of deceleration that could prevent the stock from taking off next month.

Nevertheless, all three businesses appear to have a lot of potential. So investors may want to take a closer look.

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However, one that’s up even more is CoreWeave (NASDAQ: CRWV), whose shares have increased by 109% in May. It partly has Nvidia to thank for that, as recent regulatory filings show that the AI chip juggernaut raised its existing stake in CoreWeave just after its IPO in March.

Should I buy any CoreWeave shares for my ISA? Let’s take a closer look.

Sizzling-hot growth

Founded in 2017, CoreWeave is a cloud computing company that provides infrastructure for AI and machine learning workloads. It offers on-demand access to powerful GPU hardware (mainly Nvidia’s), enabling organisations to train AI models and process large datasets. 

In other words, its data centres are purpose-built for AI, which companies rent access to.

The company is no minnow, as it was valued at $23bn at its IPO. Its market cap has since shot up to $41.5bn. This means CoreWeave is already more highly valued than FTSE 100 blue-chips like Tesco and Standard Chartered, despite being less than a decade old.

As it only went public in late March, the Q1 report CoreWeave dropped on 14 May was its first as a public company. Growth was outstanding, with revenue skyrocketing 420% year on year to $982m. That was well above market expectations for $860m.

Back in March, the company signed a five-year contract worth $11.9bn with ChatGPT maker OpenAI to provide it with AI infrastructure. As part of the deal, OpenAI also took a stake in CoreWeave.

With this $11.9bn in the bag, the firm’s revenue backlog jumped to $25.9bn at the end of March. And management now anticipates annual revenue of $4.9bn to $5.1bn, up from previous expectations of approximately $4.6bn.

Looking ahead, Wall Street sees revenue topping $16bn by 2027!

High customer concentration

A risk here is potential overreliance on a key customer, namely Microsoft. Last year, the software giant was responsible for a whopping 62% of CoreWeave’s revenue. While the firm plans to diversify its customer base, any slowdown in AI spending from Microsoft might significantly impact growth.

Also, CoreWeave plans to spend $20bn-$23bn this year in order to meet growing AI infrastructure demand from OpenAI and Microsoft. 

Understandably, it’s still not profitable, and the adjusted net loss for Q1 was $149m. Given the capital-intensive nature of building out AI data centres, profits might not materialise for a while.

Should I buy CoreWeave stock?

The fact that Nvidia has been adding to its stake is a strong endorsement of CoreWeave’s cloud infrastructure platform. Blue-chip customers like Microsoft and OpenAI add significant weight to the bull case.

Weighing things up, this looks like a top-notch AI company with a long potential runway of growth ahead of it. However, the stock is trading at 15 times sales, which is pretty pricey.

As a rule of thumb, I don’t invest so soon after an IPO, no matter how glittering and exciting it is. I wait until the company finds its feet, making sure quarterly growth targets are hit. Then, once I’ve learned more about the firm, I wait for a dip that I think looks attractive.

Therefore, I’ll just keep CoreWeave stock on my watchlist for now.

The post This Nvidia-backed stock just reported 420% growth! Should I buy it? appeared first on The Twelfth Magpie.

Here, I want to show how some of Buffett’s lessons can offer valuable perspective, even for investors who primarily focus on growth stocks (unlike Buffet).

Understanding where we are

Right now, the US stock market’s pricey. This is reflected in the fact that Buffett’s holding company, Berkshire Hathaway, has been a net seller of stocks for some time. It has massively slashed its giant stake in Apple and sold down many financial stocks (perhaps in anticipation of a recession?).

Buffett most famously said: “Be fearful when others are greedy and be greedy when others are fearful”. In early April, the market tanked when President Trump dropped his tariffs bombshell and stoked a lot of fear.

Since then though, the market’s bounced back strongly, and I think a lot of greed is taking over again. For example, one artificial intelligence (AI) growth stock that’s caught my eye is CoreWeave (NASDAQ: CRWV). This newly-public stock’s up 94% so far in May, suggesting that ‘risk-on’ mode is back again.

I haven’t been a net seller of stocks like Buffett. But knowing that we’re in a richly valued market characterised by rising greed helps me not become greedy myself. Were fear to take over again, I’ll start getting greedy.

Don’t invest in overcomplicated business models

Buffett has admitted to a limited understanding of AI technologies. He said: “I really don’t know anything about it.” That underscores his cautious approach to investing in sectors he doesn’t fully comprehend.

Returning to CoreWeave, is this a business I fully understand? On one level, yes. The cloud company operates data centres that are custom-built for AI workloads. It essentially rents out this AI infrastructure to other organisations and companies.

It’s backed by Nvidia and has key contracts with Microsoft and OpenAI — all three are innovative leaders in the AI revolution. CoreWeave’s revenue surged 420% in Q1 to $982m, which is certainly eye-catching.

However, this doesn’t mean I’ll rush out to buy the shares. Microsoft accounted for over half of CoreWeave’s revenue last year, indicating high customer concentration risk.

Moreover, I’m still learning about some complexities of the business model, illustrated below.

Buffett cautions us to “never invest in a business you cannot understand”. Therefore, I need to do further research to understand what I might potentially be investing in with CoreWeave.

If I can’t perceive a competitive advantage due to complexity, I’ll put the stock in what Buffett calls the “Too Hard” box and move on.

Be patient

Finally, Buffett says that the stock market is “a device for transferring money from the impatient to the patient.”

It’s too early to tell if CoreWeave will be a stock market winner. It may well become one, but if I invest at the wrong time, it could still turn out to be a lousy investment for many years. Even the best companies can produce poor returns if purchased at the wrong price.

By contrast, if I’m patient, I’ll likely be presented with a far lower valuation whenever there’s another market sell-off. I’m watching it closely.

The post I’m listening to billionaire Warren Buffett in today’s stock market appeared first on The Twelfth Magpie.

Mostly looking beyond this week

I’ve not allocated any more money to my ISA in the last few days. I don’t have the spare cash to do so, but there’s an important lesson here for other investors. Just because there’s a £20k ISA limit per year, it doesn’t mean I have to hit this mark. I haven’t fully utilised it this year, but that’s fine! Rather, investing the money I have when I can afford to makes sense. I don’t have to put myself under undue pressure simply because the deadline is looming.

A second point is that I want to focus on saving to allocate for the new ISA year. The earlier I can free up some money to buy stocks with, the better. The benefit of compounding returns (particularly with dividend shares) means that time in the market beats trying to time the market. So as soon as I do have funds available, I want to be ready to rock and roll.

Finally, I use the deadline week as a good time to review my overall portfolio. I check and see whether I currently have too much exposure to a particular area of the market, or if my conviction towards any of the companies has changed. This then helps to guide me in what I’ll look to buy for my ISA in the coming months to fill any gaps I’ve identified.

Thinking about future themes

For example, one area I know I don’t have much exposure to is AI. I’ve been a bit slow to get started on this theme and could do with increasing it in the coming months. To that end, one idea I’m considering is CoreWeave (NASDAQ:CRWV).

The business went public last week, so it’s a completely fresh US stock for investors to mull over. It’s a cloud computing company that specializes in AI-focused infrastructure. It makes money by selling access to computing power to other companies that are pushing AI forward. What I like about the business is that it already has long-term contracts in place with some large players, such as OpenAI and Microsoft. To some extent, this guarantees steady revenue streams, which is important for a newly listed public firm.

It could do well going forward in taking advantage of the continued AI boom. Particularly in the AI cloud market, I think there’s huge scope for growth in the coming years.

One risk is that CoreWeave highly depends on a few major clients, such as Microsoft. If one of these clients switches to another provider or builds its own AI infrastructure, revenue could take a major hit. Despite this concern, I think it’s a stock I’ll add to my ISA when I have some free cash in the coming month or so.

The post It’s ISA deadline week! Here’s my 3-step game plan appeared first on The Twelfth Magpie.