Better Cloud AI Stock: CoreWeave vs. DigitalOcean

Both CoreWeave (CRWV) and DigitalOcean (DOCN) are service providers that aid companies in handling artificial intelligence (AI) tasks, leveraging their cloud-based graphics processing units (GPUs). Initially a cryptocurrency mining company, CoreWeave caters primarily to larger organizations. In contrast, DigitalOcean divides its servers into smaller, more manageable units called “droplets,” making it an ideal choice for small businesses and individual developers. Both companies are well-positioned to capitalize on the burgeoning AI market.

Conversely, it appears that investors have a more optimistic outlook for CoreWeave, which debuted at $40 in March and currently trades around $125. In contrast, DigitalOcean is trading at $29, which is almost 40% below its initial public offering price of $47 from last year’s March. Let’s examine which cloud AI stock might be the superior choice.

The differences between CoreWeave and DigitalOcean

Initially, CoreWeave functioned as a miner for Ethereum (ETH), but it shifted its focus in 2018 to utilize its graphics processing units (GPUs) for remote AI task processing. In 2022, it invested approximately $100 million to incorporate Nvidia’s (NVDA) H100 GPUs into its data centers and used these as collateral to acquire more funds for expanding data centers. This move attracted investments not only from Nvidia but also from Cisco and other prominent tech companies. Currently, CoreWeave manages 33 data centers spread across the United States and Europe – a significant increase from the three centers it operated at the end of 2022. Its key clients include Microsoft (MSFT) and OpenAI.

DigitalOcean’s cloud platform offers remote storage and computational resources, resembling Amazon Web Services and Microsoft Azure. However, unlike these major players that primarily cater to large corporations, DigitalOcean divides its cloud servers into smaller, more cost-effective portions for small businesses. In 2023, it extended its platform by incorporating cloud-based GPUs through the acquisition of Paperspace. Unlike CoreWeave, DigitalOcean has been growing at a slower pace; currently, it operates 15 data centers in nine geographical regions, compared to 14 centers at the end of 2022.

Which company is growing faster?

Between 2022 and 2024, CoreWeave’s yearly income experienced an astounding year-on-year growth rate, with a compound annual growth rate (CAGR) of 990%. This impressive growth transformed their initial $16 million into a substantial $1.9 billion by 2024. Meanwhile, DigitalOcean’s revenue expanded at a more conservative yet admirable CAGR of 16%, rising from an initial $576 million in 2022 to reach $781 million in 2024.

I’ve seen an incredible surge in growth with CoreWeave, outpacing DigitalOcean for three key reasons! First and foremost, while DigitalOcean offers a wide array of storage and computing solutions, CoreWeave has chosen to specialize solely in delivering top-tier cloud-based GPUs tailored to the demanding needs of AI tasks. This focused approach sets us apart, as DigitalOcean’s expansion into the AI market through their acquisition of Paperspace is still playing catch-up. The fact remains that DigitalOcean’s non-AI cloud services aren’t experiencing growth at the same rate as ours. I couldn’t be more excited about where we’re headed!

In the second instance, CoreWeave secured major clients such as Microsoft and OpenAI who had the financial means to significantly increase their usage of CoreWeave’s cloud-based GPU services swiftly. On the other hand, DigitalOcean catered to smaller developers and small-to-medium-sized businesses, charging them less for deploying their applications and sandboxes.

In the third instance, CoreWeave has incurred significant debt and suffered substantial losses in order to acquire additional GPUs and establish new data centers. On the other hand, DigitalOcean has been focusing on boosting its profitability rather than rapid expansion in the short term, managing to maintain a positive net income over the past two years.

Which stock has more upside potential?

Between the years 2024 and 2027, analysts predict that CoreWeave’s revenue will expand at a compound annual growth rate (CAGR) of 106%, reaching an impressive $16.7 billion by the final year. It is anticipated that this company will become profitable during this period. For DigitalOcean, the forecast is for a 14% annual increase in revenue, culminating in a total of $1.2 billion. Additionally, analysts expect their net income to rise at a CAGR of 29%, resulting in a significant $179 million by the year’s end.

CoreWeave’s projected growth path is nothing short of astonishing, and this expansion seems to be primarily fueled by substantial amounts of debt and additional stock offerings. However, with a market capitalization of $63.5 billion, it appears reasonably priced given its growth prospects, valued at approximately 13 times this year’s revenues.

With a market capitalization of $2.7 billion, DigitalOcean may appear inexpensive when valued at 3 times this year’s sales. However, it trades at this discount because its growth rate is significantly slower compared to other companies. Additionally, DigitalOcean’s cautious approach towards AI isn’t generating as much interest as CoreWeave’s aggressive expansion strategy in the same field.

Currently, it appears that CoreWeave offers a more promising investment opportunity in the cloud and AI sectors when compared to DigitalOcean. Despite its daring and assertive business tactics, this strategy might potentially yield larger long-term profits for its investors, as DigitalOcean’s relatively conservative approach may not generate the same level of returns.

2025-07-23 12:04

The differences between CoreWeave and DigitalOcean

Which company is growing faster?

Which stock has more upside potential?

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