Key Takeaways
- Nebius (NASDAQ: NBIS) is a full-stack artificial intelligence (AI) infrastructure company that provides on-demand access to high-end graphics processing units (GPUs) for training and inferencing AI models.
- The company’s shares have soared by over 207% so far this year and could rally further in the coming months.
- Nebius has demonstrated strong execution, quickly converting its new capacity into revenue, and enjoys exceptional demand visibility with multi-year deals with major tech companies.
- Analysts forecast that Nebius’ revenues will surge from $555.9 million in 2025 to $27.1 billion in 2031, making it a potential 10-bagger stock.
Introduction to Nebius
Nebius (NASDAQ: NBIS) is a full-stack artificial intelligence (AI) infrastructure company that provides enterprises with on-demand access to high-end graphics processing units (GPUs) for training and inferencing AI models. Through its cloud platform, the company aims to address the growing demand for AI infrastructure, which is being driven by the increasing adoption of AI and machine learning technologies. With its headquarters in Amsterdam, Nebius has established itself as a major player in the AI infrastructure market, and its shares have soared by more than 207% so far this year.
Growth Drivers
One of the key growth drivers for Nebius is the increasing demand for AI infrastructure, which is being driven by the growing need for high-performance computing power. To address this demand, Nebius has announced plans to secure 2.5 gigawatts of contracted power by the end of 2026, up from the 1 gigawatt it previously aimed for. The company has also presold much of the capacity at its soon-to-be-opened data centers in the United Kingdom and Israel, which are being fitted with Nvidia’s latest Blackwell GPUs. Additionally, Nebius has demonstrated strong execution, quickly converting its new capacity into revenue, with third-quarter revenues soaring by 355% year over year to $146 million.
Demand Visibility
Nebius enjoys exceptional demand visibility, with multi-year deals with major tech companies such as Meta Platforms and Microsoft. The company has entered into a $3 billion, five-year deal to supply processing power to Meta Platforms and a $17.4 billion, five-year deal with Microsoft. Based on its outlook, the company is aiming for an annualized run rate of between $7 billion and $9 billion by the end of 2026. This strong demand visibility provides a solid foundation for Nebius’ growth prospects, and analysts forecast that the company’s revenues will surge from $555.9 million in 2025 to $27.1 billion in 2031.
Valuation and Growth Prospects
Nebius currently trades at a lofty valuation of nearly 64 times sales, which may seem expensive to some investors. However, if the company’s top line follows its expected growth path and its P/S multiple gradually compresses to 8.5 in 2031, in line with the valuation of an average data center real estate investment trust (REIT), the company’s market capitalization could be above $230 billion. This represents a more than 10-fold increase from its current market capitalization of $21.4 billion, making Nebius a potential 10-bagger stock. While this scenario is reasonably plausible, it’s essential to consider the risks and uncertainties associated with investing in a high-growth company like Nebius.
Investment Considerations
Before investing in Nebius, it’s essential to consider the potential risks and uncertainties associated with the company’s growth prospects. While Nebius has demonstrated strong execution and enjoys exceptional demand visibility, the company’s valuation is lofty, and there are risks associated with the AI infrastructure market. Additionally, the company’s growth prospects are dependent on the continued adoption of AI and machine learning technologies, which may be subject to regulatory and technological disruptions. Therefore, it’s crucial to carefully evaluate the company’s growth prospects and consider alternative investment options before making a decision.