Investing in AI: Opportunities in a Changing Landscape
Earlier this year, investors focused on capital spending for artificial intelligence (AI) infrastructure faced surprising news. China’s DeepSeek announced that its new R1 large language model (LLM) was developed for just $6 million, causing significant drops in major AI tech stocks. However, the specific costs involved in creating DeepSeek’s model remain unclear. In response, major U.S. tech companies confirmed their intentions to continue investing billions to enhance data center and AI computing capabilities through 2025. As these expenditure plans progress, investors should consider two expanding tech stocks that stand to benefit.
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Nebius Group: A Restructured Powerhouse
Nebius Group (NASDAQ: NBIS), based in Amsterdam, emerged from the restructuring of Russian search engine giant Yandex. Trading for Yandex was halted after Russia’s invasion of Ukraine. Once a Russian consortium acquired its domestic assets, the restructured entity began trading on the Nasdaq last October under the name Nebius Group.
This company combines its core AI infrastructure with three additional businesses: AI development partner Toloka, educational technology firm TripleTen, and the autonomous vehicle and delivery robot maker Avride.
Nebius has seen a promising start in its first full year on the Nasdaq, recording a 67% gain year to date. Quarterly revenue surged from $11.4 million in the first quarter to nearly $38 million in the fourth quarter. The full-year revenue for 2024 reached $117.5 million, with management optimistic about continued growth. CEO Arkady Volozh stated that achieving a $1 billion annual revenue run rate by the end of 2025 is “well within reach.”
The restructuring has also left Nebius in a strong financial position, ending the fourth quarter with $2.45 billion in cash and minimal debt—more than 25% of its total market cap of $9.3 billion.
Prominent AI chip maker Nvidia (NASDAQ: NVDA) has taken notice. In December, Nvidia participated in a $700 million private funding round for Nebius and holds over 1 million shares of its stock worth about $33 million, according to Nvidia’s latest Form 13F filing.
Nvidia’s Ongoing Growth Potential
Maintaining its position as a leader, Nvidia still has significant growth opportunities. Despite early concerns about capital spending on AI infrastructure slowing down, several major tech companies, including Microsoft, Meta Platforms, Amazon, and Alphabet, recently confirmed plans to invest at least $300 billion collectively in ongoing AI capital expenditures this year.
This context suggests that DeepSeek may have excluded various essential costs when announcing that its R1 LLM was built for only $6 million. Research expenses, trial architectures, data handling, and algorithm work may not have been accounted for. Following DeepSeek’s revelation, the state-owned Bank of China also stated it would invest approximately $137 billion over the coming years to bolster the AI supply chain.
Although Nvidia’s stock price has fluctuated recently, this range-bound phase offers investors a unique opportunity to acquire shares before potential returns accelerate.
Highlighting Two Promising AI Investments
Nvidia is set to report its fiscal fourth-quarter results on February 26, where updates on the sales of its Blackwell architecture and the timeline for its upcoming Rubin AI platform may be shared.
Revenue growth may slow, yet any indication that sales might continue to rise over the next year could serve as a catalyst for the stock. Additionally, Nvidia boasts various expanding segments, including gaming, automotive, and robotics—explaining its interest in Nebius.
Nebius’ Avride branch focuses on autonomous driving technologies, vital for self-driving vehicles and delivery robots. The investment rationale for Nebius revolves around management’s ambitious revenue targets for 2025 and the nearly $2.5 billion cash reserve. If successful in reaching its highest revenue potential for 2025, Nebius is currently trading at a forward enterprise value-to-sales ratio of less than 7, a reasonable figure for a high-growth tech entity.
Both Nebius and Nvidia represent appealing choices for investors eyeing opportunities in the technology sector throughout 2025.
Don’t Let This Opportunity Pass You By
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- Nvidia: An investment of $1,000 when we doubled down in 2009 would now be worth $348,579!*
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Currently, we’re issuing “Double Down” alerts for three remarkable companies, and another opportunity like this may not arise again soon.
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*Stock Advisor returns as of February 21, 2025
John Mackey, a former CEO at Whole Foods Market (an Amazon subsidiary), is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokesperson for Facebook, and the sister of Meta Platforms CEO Mark Zuckerberg, is also on the board. Suzanne Frey, an executive at Alphabet, serves on The Motley Fool’s board. Howard Smith holds positions in Alphabet, Amazon, Microsoft, Nebius Group, and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft, Nebius Group, and Nvidia. 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 adheres to a disclosure policy.
The views and opinions expressed herein do not necessarily reflect those of Nasdaq, Inc.
