Key Takeaways
- 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.
- 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 major deals with Meta Platforms and Microsoft.
- 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 offers a scalable and flexible solution for businesses to develop and deploy AI applications. As the demand for AI continues to grow, Nebius is well-positioned to capitalize on this trend and provide a critical infrastructure for the development of AI models.
Growth Drivers
One of the main growth drivers for Nebius is the increasing demand for AI infrastructure. However, electricity availability remains a significant bottleneck in the global AI infrastructure buildout. To address this constraint, Nebius has announced plans to secure 2.5 gigawatts of contracted power by the end of 2026, up from its previous target of 1 gigawatt. The company has also presold much of the capacity at its soon-to-be-opened data centers in the United Kingdom and Israel, which will be equipped with Nvidia’s latest Blackwell GPUs. This demonstrates the strong demand for Nebius’ services and its ability to execute on its plans.
Strong Execution and Demand Visibility
Nebius has demonstrated strong execution, quickly converting its new capacity into revenue. In the third quarter, the company’s revenues soared by 355% year over year to $146 million, as it fully sold its available capacity. Additionally, Nebius enjoys exceptional demand visibility, having entered into significant deals with major tech companies. The company has 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, Nebius is aiming for an annualized run rate of between $7 billion and $9 billion by the end of 2026.
Growth Potential
Analysts forecast that Nebius’ revenues will surge from an expected $555.9 million in 2025 to $27.1 billion in 2031. This represents a significant growth opportunity for the company, and its valuation reflects this potential. Currently, Nebius trades at a lofty valuation of nearly 64 times sales. However, if the company’s top line follows its expected growth path and its price-to-sales multiple gradually compresses to 8.5 in 2031, in line with the valuation of an average data center real estate investment trust (REIT), its market capitalization could exceed $230 billion. This would make Nebius a 10-bagger stock, with a potential return of over 1,000% from its current market capitalization of $21.4 billion.
Investment Considerations
Before investing in Nebius, it’s essential to consider the company’s growth potential and the risks associated with its high valuation. While the company’s strong execution and demand visibility are promising, the AI infrastructure market is highly competitive, and Nebius faces significant challenges in terms of electricity availability and regulatory uncertainty. Additionally, the company’s high valuation may make it vulnerable to market volatility. However, for investors willing to take on this risk, Nebius could offer significant returns in the long term. As with any investment, it’s crucial to conduct thorough research and consider multiple perspectives before making a decision. The Motley Fool’s Stock Advisor analyst team has identified other promising stocks that could offer significant returns, and investors may want to consider these alternatives before investing in Nebius.