While CoreWeave grabs headlines with its Meta deal, rival neocloud Nebius might offer a better path for growth, according to one Wall Street firm.

CoreWeave, Inc. Inc.'s stock has been on a tear recently thanks to the artificial-intelligence trade, but one Wall Street firm believes that the real opportunity lies within the company's biggest neocloud rival: Nebius Group N.V.

Shares of CoreWeave rallied 12% on Tuesday on the news of a $14.2 billion cloud-computing agreement with Meta Platforms, bringing the stock up 46% in the last month. Still, the development wasn't enough to convince D.A. Davidson analyst Gil Luria, one of CoreWeave's biggest bears, to part with his underperform rating and price target of $36 on the stock.

While Luria acknowledged Tuesday that the Meta agreement was a positive driver for CoreWeave, he wrote that NEBIUS offers a much more compelling neocloud business model.

Fellow D.A. Davidson analyst Alexander Platt highlighted in a September note that Nebius's stock trades at "a noticeable discount" to CoreWeave's on a backlog basis. CoreWeave has around $30 billion in revenue backlog and a market capitalization of roughly $60 billion, compared with Nebius's roughly $20 billion in backlog and $28 billion market cap. Nebius also recently signed a high-profile agreement with a hyperscaler - a $17.4 billion deal with Microsoft Corp.

It's not as if Nebius's stock has been starved for momentum. The stock has also enjoyed a substantial run-up recently, rallying nearly 70% in the last month. But what differentiates it from CoreWeave is that Nebius "still has upside to its valuation based on this Microsoft contract alone which is providing higher-quality backlog, while not including what we believe is a likely other high-profile deal and market realization of the non-core business values in full," Platt wrote.

D.A. Davidson has a buy rating and $125 price target on Nebius shares.

Luria's biggest concern with CoreWeave is its capital structure. He pointed out that the company is generating less than 5% returns "on assets it has to borrow at [greater than] 9% to acquire." CoreWeave has funded its high capital expenditures by taking on debt, including using its Nvidia graphics processing units as collateral.

Luria said he didn't see the company's capital structure improving in the near future: "CoreWeave is likely to be forced to raise incremental capital to keep pace with their competitors and build out to meet commitments," he wrote.

And while the Meta deal diversifies CoreWeave's revenue streams, the company's customer base is highly concentrated among a few hyperscalers and AI companies.

According to Seaport analyst Jay Goldberg, who initiated coverage of both neoclouds last month with neutral ratings, Nebius is pursuing a broader customer base and spending significantly less on capital expenditures than CoreWeave.

"Ultimately, CoreWeave's focus on large customers is its greatest risk," Goldberg wrote.

Nebius can also sell off stakes in its noncore businesses to raise funding instead of taking on additional debt, Goldberg added. For example, the company has stakes in TripleTen, an education-technology platform that offers part-time coding boot camps; and Avride, which makes software for autonomous driving.

For Luria, the choice between CoreWeave and Nebius is clear, as Nebius offers "better customer mix, unit economics and capital structure."