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Securing the Cloud: 2 Stocks for the Next Phase of the AI Boom
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The true scale of the artificial intelligence expansion isn't measured by front-end applications or consumer chatbots. Instead, it is being defined by the critical infrastructure that secures and powers these massive workloads. As enterprises transition from pilot programs to full-scale deployment, they face two massive bottlenecks: securing access to sensitive data across decentralized networks, and securing the raw, specialized computational power required to process it.
This is where the AI investment thesis shifts from speculative software to essential infrastructure. To build a resilient AI ecosystem, enterprises cannot rely on legacy frameworks. They need specialized, high-performance environments and bulletproof identity security to protect their digital perimeters.
👉 One company is the independent pioneer of identity management, serving as the essential security gatekeeper for enterprises migrating to modern cloud and AI architectures.
👉 The other is a specialized "neocloud" powerhouse, bypassing legacy cloud limitations to deliver the raw, GPU-accelerated computing power that modern AI workloads demand.
👉 Both companies occupy critical, highly defensible positions in the modern enterprise stack, making them indispensable to the next leg of tech infrastructure growth.
In this edition, we break down why Okta, Inc. (OKTA) and CoreWeave, Inc. (CRWV) represent two of the most vital, infrastructure-first AI stocks in the market today—and how they are positioned to capture the next wave of enterprise spending.
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Okta, Inc. (NASDAQ: OKTA) is a leading independent provider of identity management solutions, operating within the systems software sub-industry of the broader information technology sector. As enterprises globally shift away from legacy, on-premise security architectures toward modern cloud environments, Okta has established itself as the foundational layer of modern cybersecurity by pioneering the concept of Identity and Access Management (IAM). The company’s core philosophy is that in a cloud-first, mobile-centric world, the traditional network perimeter is obsolete; identity has become the new perimeter. Through its comprehensive, cloud-native platform, Okta enables organizations to securely connect the right people to the right technologies at the right time, protecting critical applications and data while delivering a seamless user experience for employees, partners, and customers alike.
Business Model and Revenue Streams 📦
Okta operates a highly scalable software-as-a-service (SaaS) business model, generating the vast majority of its revenue through recurring multi-year subscription agreements. This subscription-based model provides the company with exceptional revenue visibility and predictable cash flows. Okta’s product portfolio is broadly divided into two primary categories: the Workforce Identity Cloud and the Customer Identity Cloud. The Workforce Identity Cloud helps organizations secure and manage identity access for their internal employees, contractors, and partners across various applications and devices. This includes popular products such as Single Sign-On (SSO), Multi-Factor Authentication (MFA), and Lifecycle Management. The Customer Identity Cloud, which was significantly bolstered by the acquisition of Auth0, focuses on helping enterprises secure and customize the login experience for their external customers, ensuring that consumer-facing applications are both secure and frictionless.
The company’s revenue growth is driven by a dual-engine land-and-expand strategy. Okta initially "lands" new customers by solving immediate identity challenges, such as implementing MFA or SSO for a specific department. Over time, it "expands" its footprint within those organizations by upselling additional modules, securing more user seats, or cross-selling customer identity solutions to workforce identity clients. This model relies heavily on maintaining a high net retention rate, which measures the ability to grow revenue from existing customers over time. By serving as an independent, neutral identity provider that integrates with thousands of pre-built cloud, mobile, and on-premise applications, Okta avoids vendor lock-in and positions itself as an essential, infrastructure-agnostic partner for global enterprises.
From a macroeconomic perspective, Okta’s business model is subject to both tailwinds and headwinds. In recent quarters, elevated interest rates and persistent inflationary pressures have forced corporate IT departments to scrutinize their software budgets. This macroeconomic tightening has led to longer sales cycles, increased procurement scrutiny, and a general trend toward vendor consolidation. Rather than managing dozens of niche point-solutions, enterprises are actively seeking to consolidate their security spend onto unified platforms. This shift toward platform consolidation represents a significant opportunity for Okta, as it can position its comprehensive identity suite as a cost-effective, all-in-one alternative to fragmented legacy systems. Furthermore, regulatory mandates around data privacy and zero-trust security architectures continue to act as non-discretionary spending drivers, shielding cybersecurity budgets from the deep cuts seen in other software verticals.
Recent Performance and Corporate Developments 📈
Okta has demonstrated resilient financial performance in a challenging macroeconomic environment, balancing top-line growth with a clear commitment to operating efficiency and GAAP profitability. The company's recent quarterly performance highlights its ability to navigate market headwinds while continuing to expand its market share.
Q1 2026 Financial Highlights: 💰
- Quarterly Revenue: $761.0 million, representing a solid year-over-year growth rate of 11.58%, driven by sustained demand for both workforce and customer identity solutions.
- Net Income: $63.0 million, marking a significant milestone in the company’s trajectory toward sustained GAAP profitability.
- Diluted Earnings Per Share (EPS): $0.36 per share, reflecting disciplined cost management and operational leverage.
- Average Trading Volume: 2,917,437 shares, indicating robust liquidity and active institutional interest in the stock.
- Year-over-Year Revenue Growth: 11.58%, showcasing resilient demand despite macroeconomic headwinds.
- Margins: While specific gross and operating margin percentages were not detailed in the latest quarterly packet, the transition to a positive GAAP net income of $63.0 million underscores expanding net margins and improved structural profitability.
Strategic Initiatives and Mergers: 🤝
While Okta has not announced any major corporate mergers in the immediate prior quarter, the company is actively participating in the broader 2026 cybersecurity M&A wave through strategic partnerships and product innovations designed to capitalize on the artificial intelligence revolution. A major milestone in this effort is Okta’s high-profile collaboration with Automation Anywhere, alongside industry giants Cisco, NVIDIA, and OpenAI, to launch "EnterpriseClaw." This next-generation platform is designed to run advanced AI agents securely inside enterprise systems. Because AI agents require deep access to corporate data and applications to execute complex tasks, securing their machine-to-machine identities is paramount. Okta's role in EnterpriseClaw is to provide the critical identity verification and access control layer, ensuring that AI agents operate strictly within authorized boundaries.
Furthermore, the company is preparing for its highly anticipated Oktane 2026 Conference scheduled for October 6, 2026. This event is expected to serve as a major catalyst, with management slated to unveil its formal strategy for "Agentic AI Monetization." As autonomous AI agents become more prevalent in the workforce, Okta plans to monetize the unique security requirements associated with non-human identities. This represents an entirely new addressable market for the company, moving beyond seat-based licensing for human employees to transaction- and API-based pricing models for digital agents.
Profitability and Fair Value 🎯
Okta’s financial profile has undergone a dramatic transformation over the past year. Historically viewed as a high-growth, high-burn SaaS business, the company has successfully pivoted toward a balanced growth-and-profitability model. The latest quarterly net income of $63.0 million and EPS of $0.36 demonstrate that Okta is now structurally profitable on a GAAP basis. This shift is critical in the current market environment, where investors are heavily penalizing unprofitable tech companies and rewarding those with strong free cash flow generation.
Evaluating Okta's valuation metrics reveals an intriguing discrepancy between trailing multiples and forward-looking growth potential. Based on its current market price of $89.04, Okta trades at a trailing twelve-month (TTM) Price-to-Earnings (P/E) ratio of 67.18. While a P/E of 67.18 may initially appear elevated to value-oriented investors, it must be analyzed in the context of the company's rapid earnings expansion. This is highlighted by Okta’s exceptional Price/Earnings-to-Growth (PEG) ratio of 0.08. A PEG ratio below 1.0 is generally considered undervalued, and a PEG of 0.08 suggests that the market is significantly underestimating Okta's projected earnings growth relative to its current share price.
Furthermore, Okta trades at a trailing Price-to-Sales (P/S) ratio of 5.11, which is remarkably modest for a dominant, high-margin software-as-a-service business. For comparison, during the peak of the enterprise software expansion, Okta regularly commanded double-digit P/S multiples. The current Enterprise Value-to-EBITDA (EV/EBITDA) ratio stands at 44.18, reflecting the company's growing operating profitability.
When assessing fair value, it is important to note that Okta’s stock has experienced a one-year price decline of 27.05%, underperforming the broader technology sector. This sell-off, driven by macroeconomic concerns and past security incidents, has compressed Okta's valuation to highly attractive levels. According to independent valuation metrics, the GF Value for Okta is estimated at $103.09. With the stock currently trading at $89.04, and having recently touched lows near $79.06, Okta appears to be trading at a meaningful discount to its intrinsic fair value, offering a compelling margin of safety for long-term investors.
Analyst Estimates and Ratings 📊
Wall Street analysts have grown increasingly bullish on Okta, recognizing the company's strong positioning within the rapidly expanding cybersecurity market. The consensus rating for Okta over the past six months stands at a resounding Buy, supported by 21 Buy ratings, 4 Hold ratings, and 0 Sell ratings. There are currently no Strong Buy or Sell ratings on the consensus ledger, indicating a highly uniform bullish sentiment among the major investment banking firms covering the stock.
Consensus Rating: Buy
Price Target: $103.00 (with independent fair value estimates matching at $103.09)
The stock has experienced significant positive street action recently, with 3 analyst upgrades occurring within the last 90 days. The latest consensus grade headline for the stock is "Overweight," signaling that institutional portfolio managers are being advised to hold a larger position in Okta relative to its benchmark index.
This positive sentiment is further supported by recent analyst commentary. On May 18, 2026, KeyBanc bumped its price target for Okta to $103, noting that enterprise security spending is "catching fire" as organizations prioritize threat defense in the wake of rising cyberattacks and AI-driven vulnerabilities. Additionally, on May 20, 2026, Jefferies published a research note stating that Okta is highly likely to beat its first-quarter contracted revenue (bookings) growth target when it reports earnings. While Jefferies cautioned that the company's second-quarter outlook could be conservative due to macroeconomic prudence, the underlying demand for Okta's core identity platform remains robust, setting the stage for potential earnings beats.
Investor-Focused Takeaway: Is OKTA Right for Your Portfolio?
What to Watch in the Near Term: 📈
- Q1 Fiscal Year 2027 Earnings Release (Catalyst on May 28, 2026): Investors should closely monitor the upcoming earnings report to see if Okta beats its contracted revenue growth targets as predicted by Jefferies, and pay close attention to management's forward guidance for the rest of the fiscal year.
- Oktane 2026 Conference (Catalyst on October 6, 2026): Watch for concrete product announcements and pricing details regarding "Agentic AI Monetization," which could open up a highly lucrative, non-human identity security market.
- EnterpriseClaw Traction: Track the adoption and commercial success of the EnterpriseClaw collaboration with Automation Anywhere, NVIDIA, OpenAI, and Cisco, as this serves as a key indicator of Okta's relevance in the emerging AI-agent ecosystem.
- Operating Margin and Free Cash Flow Expansion: Monitor whether Okta can maintain its trajectory of GAAP profitability and continue expanding its net income beyond the $63 million reported in the latest quarter, proving the long-term scalability of its business model.
Recommendation:
Okta, Inc. presents a compelling, balanced opportunity for growth-oriented investors looking to gain exposure to both the cybersecurity and artificial intelligence sectors. The stock's 27.05% decline over the past year has significantly de-risked its valuation, compressing its P/S ratio to a reasonable 5.11 and resulting in an incredibly low PEG ratio of 0.08. This suggests that the market has overreacted to near-term macroeconomic headwinds and is failing to price in Okta's long-term earnings potential. While short-term volatility should be expected—particularly surrounding the upcoming Q1 earnings release and conservative guidance expectations—the company’s transition to GAAP profitability, its dominant position in the IAM market, and its innovative partnerships in AI security make it an attractive long-term addition to a diversified technology portfolio. Investors may want to consider building a position on current price weakness ahead of the upcoming catalysts.
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CoreWeave, Inc. Class A Common Stock (NASDAQ: CRWV) represents one of the most compelling, high-stakes infrastructure plays of the modern artificial intelligence era. Operating as a specialized "neocloud" provider, the company has carved out a highly profitable niche by bypassing the legacy, generalized cloud architecture of traditional tech giants to focus exclusively on high-performance, GPU-accelerated computing workloads. Backed heavily by chip giant Nvidia, CoreWeave acts as a critical intermediary in the AI value chain, purchasing massive quantities of cutting-edge graphics processing units (GPUs) and leasing them to enterprise clients, AI startups, and research institutions that require immense computational power to train and run large language models. As the market grapples with an unprecedented demand for AI compute, CoreWeave has positioned itself as the premier alternative to legacy hyperscalers, offering a pure-play entry point into the physical infrastructure powering the generative AI revolution.
Business Model and Revenue Streams 📦
CoreWeave’s business model is built entirely around the concept of specialized cloud infrastructure, commonly referred to in the industry as a "neocloud." Unlike traditional cloud giants like Amazon Web Services (AWS), Microsoft Azure, or Google Cloud Platform (GCP)—which designed their data centers for general-purpose CPU computing and web hosting—CoreWeave built its architecture from the ground up for massive parallel processing. The company's primary revenue stream is Compute-as-a-Service (CaaS), where customers rent access to high-end Nvidia GPUs on demand or through long-term contracts. This specialized focus allows CoreWeave to deliver superior performance, lower latency, and more efficient cooling and power configurations for AI training and inference than its legacy competitors.
The scale of CoreWeave's business model is vividly illustrated by its massive backlog. The company recently added over $40 billion in backlog, pushing its total contracted demand close to the historic $99.4 billion milestone. This backlog is not monolithic; it spans multiple high-growth verticals. The company's financial services backlog is approaching $10 billion, driven by quantitative trading firms and institutional banks requiring heavy compute for risk modeling and algorithmic simulations. Additionally, CoreWeave has seen a significant expansion in physical AI and robotics workloads, where developers require massive simulation environments to train autonomous systems. This contracted backlog provides highly predictable, long-term revenue streams that help justify the immense capital expenditure required to build out these advanced data centers.
However, the macroeconomic environment presents a complex web of opportunities and challenges for CoreWeave. On the demand side, macroeconomic tailwinds are exceptionally strong. As noted by prominent investors like Chamath Palihapitiya, the market is currently experiencing an "AI compute crunch" characterized by exploding compute demand and rising token prices. This supply-demand imbalance ensures that CoreWeave can maintain high utilization rates and premium pricing for its GPU clusters. On the flip side, the current high-interest-rate environment poses a substantial hurdle for an asset-heavy business. CoreWeave’s business model is incredibly capital-intensive; the company must purchase billions of dollars worth of hardware upfront before generating lease revenue.
Furthermore, trade policies, export controls, and supply chain bottlenecks surrounding advanced semiconductor technology directly impact CoreWeave's ability to secure inventory. Because the company is heavily reliant on Nvidia's product roadmap, any delays in chip manufacturing or changes in international trade regulations could disrupt its expansion plans. Finally, the competitive landscape is shifting rapidly. The massive capital flows entering the AI space have caught the attention of legacy players. For instance, the recently announced $5 billion joint venture between Google Cloud and Blackstone to create a rival "Newcloud" infrastructure venture represents a direct challenge to CoreWeave's market share, signaling that competition is heating up as capital-rich giants attempt to replicate the neocloud model.
Recent Performance and Corporate Developments 📈
Q1 2026 Financial Highlights: 💰
- Revenue: $2,078,000,000 ($2.078 billion), representing an explosive 111.69% growth Year-over-Year (YoY) compared to the same period in the prior year.
- Net Income/Loss: -$740,000,000 (-$740 million), reflecting the heavy upfront capital expenditures and depreciation costs associated with rapid infrastructure expansion.
- Diluted EPS: -$1.40 per share, driven by the company's aggressive reinvestment phase and capital-raising activities.
- Price-to-Sales (TTM) Ratio: 9.40 (with some database providers calculating it at 8.87), demonstrating a premium valuation reflecting its triple-digit top-line growth.
- Enterprise Value-to-EBITDA (EV/EBITDA): 37.16, illustrating the high valuation multiples currently commanded by leading AI infrastructure plays.
- Price-to-Earnings (TTM) Ratio: -35.51, as the company prioritizes market share and hardware acquisition over near-term GAAP profitability.
Strategic Initiatives and Mergers: 🤝
CoreWeave has been exceptionally active in the capital markets to support its hyper-growth trajectory, having raised over $20 billion in capital so far in 2026. This aggressive financing pace has become a central point of debate among Wall Street analysts, with some viewing it as a necessary land grab to secure market dominance, while others worry about the long-term debt burden and equity dilution. A significant portion of this capital is being deployed directly into purchasing next-generation hardware and expanding its global data center footprint.
A key pillar of CoreWeave's strategic moat is its deep partnership with Nvidia. Nvidia has doubled down on CoreWeave, which now stands as the chipmaker's second-largest AI holding. This close relationship ensures that CoreWeave receives priority allocations of highly coveted GPUs, such as the H100, H200, and upcoming Blackwell architectures, giving it a head start over smaller competitors. Interestingly, CoreWeave recently highlighted a booming "used GPU market" for previous-generation chips. While Wall Street remains hyper-focused on Nvidia's next-gen Blackwell chips, CoreWeave has successfully monetized its existing inventory of older GPUs, proving that demand for compute is so intense that older architectures remain highly lucrative assets rather than rapidly depreciating liabilities.
While there are no recent corporate mergers to report, the competitive landscape has been altered by major alliance formations. The announcement of Alphabet's Google Cloud and Blackstone committing $5 billion to a new AI cloud venture directly targets CoreWeave's territory. This development caused CoreWeave's stock to pull back by approximately 4% in mid-May 2026, as investors digested the reality of competing against Blackstone's immense real estate and capital resources combined with Google's established cloud ecosystem.
Profitability and Fair Value 🎯
Evaluating CoreWeave's profitability requires a shift away from traditional value metrics toward growth-adjusted valuation. With a net loss of $740 million in Q1 2026, the company is clearly in a heavy investment phase. In the world of cloud infrastructure, profitability lags capital expenditure by several quarters; the cash outflow for GPUs occurs today, while the high-margin leasing revenue is recognized over the life of the customer contract. With a massive $99.4 billion backlog, the long-term path to profitability is highly visible, provided the company can successfully execute its build-out and maintain high lease utilization rates.
From a valuation standpoint, CoreWeave's P/S ratio of 9.40 and EV/EBITDA of 37.16 are undeniably high compared to legacy technology firms. However, when adjusted for growth, the picture changes. The company's Price/Earnings-to-Growth (PEG) ratio stands at an attractive 0.88. Typically, a PEG ratio below 1.0 indicates that a company is undervalued relative to its expected earnings growth. This suggests that if CoreWeave can successfully transition its massive revenue growth (~112% YoY) into net profitability as its capital expenditure pace moderates, the current stock price of $107.30 may ultimately look cheap in hindsight.
Nevertheless, some analysts urge caution. Following a 40% run-up in the stock price, some Wall Street firms downgraded the stock from Strong Buy to Neutral, arguing that the valuation has become stretched in the near term. The primary risk lies in the company's high capital intensity. If the AI boom slows down, or if the Google-Blackstone venture triggers a pricing war that compresses rental margins, CoreWeave could find itself saddled with expensive hardware and high debt-servicing costs. For now, the fair value of the stock appears to be highly dependent on the company's ability to maintain its pricing power and rapidly convert its backlog into recognized revenue.
Analyst Estimates and Ratings 📊
Consensus Rating: Buy
Price Target: Currently supported by strong buy-side action, with 10 Buy ratings, 6 Hold ratings, and 1 Sell rating over the last six months.
The stock has experienced 1 analyst upgrade in the last 90 days, reflecting continued institutional confidence in the company's backlog expansion and Nvidia backing. However, the most recent street action has leaned "Neutral" following the announcement of the Google-Blackstone joint venture, which has introduced a layer of competitive uncertainty. With an average daily trading volume of 21,953,198 shares, CoreWeave enjoys deep liquidity, making it a highly active vehicle for institutional investors looking to express a view on the physical layer of the AI expansion.
Investor-Focused Takeaway: Is CRWV Right for Your Portfolio?
What to Watch in the Near Term: 📈
- Q2 2026 Earnings & Capacity Guidance (August 12, 2026): This upcoming catalyst will be critical for assessing how quickly CoreWeave is deploying its newly raised capital and whether it is securing adequate supply of Nvidia's next-generation Blackwell chips.
- Strategic Financing & Runway Update (October 15, 2026): Investors must closely monitor the terms of any new debt or equity raises and how the company plans to manage its interest expense in a high-rate environment.
- Q3 2026 Earnings & Hyperscaler Pricing Dynamics (November 12, 2026): This release will provide the first clear look at whether the Google-Blackstone "Newcloud" venture is impacting CoreWeave's pricing power or causing margin compression.
- Backlog Conversion Rate: Tracking how quickly the $99.4 billion backlog is converted into active, revenue-generating contracts will be the ultimate test of CoreWeave's operational execution.
Recommendation:
CoreWeave, Inc. (NASDAQ: CRWV) is a classic high-beta, high-reward infrastructure play that is ideally suited for growth-oriented portfolios with a high tolerance for volatility. The company's triple-digit revenue growth, $99.4 billion backlog, and strategic alignment with Nvidia provide a formidable competitive moat that legacy hyperscalers will find difficult to dismantle overnight. However, the company's heavy net losses, immense capital intensity, and the emerging competitive threat from the Google-Blackstone alliance mean that this is not a low-risk investment. The recent pullback in the price action to $107.30, combined with a growth-adjusted PEG ratio of 0.88, offers an attractive entry point for long-term investors who believe that the AI compute crunch is a multi-year secular trend. Conservative investors, however, may want to wait for signs of stabilizing capital expenditures and a clearer path to GAAP profitability before establishing a position.
Final Take: The Security Gatekeeper and the Compute Engine of the AI Era
The AI revolution cannot exist in a vacuum. To deploy machine learning and automated intelligence at scale, enterprises require two foundational pillars: absolute security at the point of access, and massive, specialized computational power to run the models.
That is where Okta (OKTA) and CoreWeave (CRWV) become indispensable.
🔑 Okta, Inc. (OKTA) — The Identity Perimeter Securing the AI Enterprise
✔ Pioneer and market leader in Identity and Access Management (IAM), defining identity as the modern security perimeter
✔ Cloud-native platform that seamlessly connects users to critical applications while securing distributed enterprise environments
✔ Highly sticky, recurring subscription model benefiting from the structural migration away from legacy on-premise security architectures
➤ Best for: Investors seeking a stable, high-moat cybersecurity compounder that acts as the primary gatekeeper for cloud and AI enterprise access.
⚡ CoreWeave, Inc. (CRWV) — The High-Performance GPU Engine of AI
✔ Specialized "neocloud" architecture designed exclusively for heavy GPU-accelerated workloads, bypassing legacy cloud limitations
✔ Deeply integrated partnership with Nvidia, ensuring priority access to the world's most powerful AI chips
✔ Explosive demand from AI startups, research labs, and enterprises needing immediate, outsourced computational scale
➤ Best for: Investors looking for direct, high-operating-leverage exposure to the physical infrastructure and hardware scaling the AI landscape.
Investor Insight
🧩 Want mission-critical cybersecurity with recurring revenue and deep enterprise lock-in? → OKTA
⚙️ Want hyper-growth, GPU-centric cloud infrastructure directly aligned with the hardware frontier? → CRWV
Bottom Line:
Artificial intelligence cannot scale without trust, and it cannot run without raw horsepower.
Okta secures the identities that access these powerful new enterprise systems, while CoreWeave provides the specialized compute engine required to train and deploy them.
As the AI landscape transitions from speculative experimentation to secure, industrial-scale deployment, OKTA and CRWV represent the dual pillars of access and execution.
Not investment advice. Do your own research.
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Important: This newsletter does not provide investment advice. The stocks mentioned should not be taken as recommendations. Your investments are solely your decisions.
Disclosure: We hold no positions in any companies mentioned, either through stock ownership, options, or other derivatives. We wrote this article ourself, and it expresses our own opinions. We have no business relationship with any company whose stock is mentioned in this article. |
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