Nebius Group: A Rising Star in AI Infrastructure Investment

When considering data center stocks, most investors recognize names like Vertiv and CoreWeave, both integral to artificial intelligence (AI) infrastructure. Yet, Nebius Group (NASDAQ: NBIS), a less known player, warrants attention as a significant investment opportunity for 2025.

Understanding Nebius Group

Nebius is a spinoff from the Russian internet company Yandex. After Yandex divested Nebius, the company went public on the Nasdaq and successfully raised $700 million through a private placement, which included participation from Nvidia.

The company focuses primarily on equipping data centers with advanced GPU architecture. Additionally, Nebius operates an AI services division called Toloka, which has recently secured funding from Bezos Expeditions.

Image source: Getty Images.

Potential for Rapid Growth

In February, Nebius reported its financial results for the fourth quarter and the full calendar year of 2024. The company generated $37.9 million in revenue during Q4, reflecting a remarkable 466% year-over-year increase. Notably, its AI infrastructure contributed to more than half of this revenue and grew over 600% annually.

While these metrics are positive, management indicates that the best is yet to come. By December, annual recurring revenue (ARR) had reached $90 million, but expectations for Q1 suggest it could climb to “at least $220 million”—a substantial increase. Looking toward year-end, Nebius anticipates ARR to reach between $750 million and $1 billion.

Key to these ambitious targets is Nebius’s role in deploying Nvidia’s latest GPU architecture, named Blackwell, across Europe and the U.S. Furthermore, major cloud providers like Microsoft, Alphabet, Amazon, and Meta Platforms are projected to spend over $300 billion on capital expenditures just this year. This rising demand for AI infrastructure positions Nebius favorably for long-term success.

Current Investment Outlook

Nebius’s stock is presently trading below previous highs, yet recent trends indicate a momentum shift. Recent excitement in capital markets, partly due to new trade agreements between the U.S. and China, appears to be pulling Nebius upward. While current conditions might tempt quick action, caution may be wise.

During the upcoming Q1 earnings call, it will be crucial to determine if Nebius meets or exceeds its ARR goal of $220 million. This outcome, along with management’s forecasts, will provide insights into the company’s trajectory for the year.

Although I’m optimistic about Nebius’s prospects for Q1, I typically avoid momentum stocks. Long-term investors often have more favorable opportunities to purchase stocks at better valuations.

Considering Investment in Nebius Group

Before investing in Nebius Group, take a moment to evaluate its positioning within the broader market. It’s essential to assess the company’s financial health and growth trajectory based on upcoming reports and management insights.

While Nebius could see significant gains following a strong earnings report, these may not be sustainable. Investors may find more attractive entry points in the future as the stock fluctuates.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.