We came across a bullish thesis on Nebius Group N.V. (NBIS) on Substack by Oguz Erkan. In this article, we will summarize the bulls’ thesis on NBIS. Nebius Group N.V. (NBIS)’s share was trading at $27.99 as of March 7th.
A close-up view of an AI-platform software code running on a monitor.
Nebius is rapidly emerging as a disruptive force in AI infrastructure, leveraging its roots in Yandex while carving out a unique position in the high-performance cloud computing market. Founded by Arkady Volozh, a serial entrepreneur who has successfully navigated multiple technological revolutions, Nebius retained crucial international assets after Yandex’s forced divestiture in 2024, including a state-of-the-art data center in Finland and an AI-centric cloud platform. These assets form the backbone of Nebius’s strategy, enabling it to deliver specialized AI infrastructure designed for the accelerating global demand for machine learning applications.
The company’s aggressive growth strategy is backed by a $700 million funding round led by Nvidia, Accel, and Orbis Investments. The partnership with Nvidia grants Nebius early access to cutting-edge GPU technology, such as the GB200 chips, ensuring it remains at the forefront of AI processing power. Unlike traditional cloud providers that offer generalized services, Nebius is building a vertically integrated AI infrastructure that provides end-to-end solutions, from high-performance data centers to ultra-fast data transfer networks. This model positions Nebius similarly to electricity providers, where its AI compute power functions as a vital utility in an increasingly AI-driven economy.
Nebius generates revenue through direct AI compute sales, enterprise partnerships, and long-term contracts, securing stable cash flows in a rapidly expanding market. While traditional cloud providers focus on broad applications, Nebius’s AI-specific infrastructure allows it to serve as a key partner for companies scaling AI-driven operations. Despite its potential, Wall Street has largely overlooked the company, though institutional ownership has quietly doubled in just three months. This signals growing recognition of Nebius’s disruptive capabilities. Financially, Nebius stands on solid ground, with nearly $2.5 billion in cash and virtually no debt, providing ample resources for rapid expansion. Management has committed to investing $1 billion in growth this year alone, reinforcing its ambition to become a dominant AI infrastructure provider. The company plans to quadruple its data center capacity by 2026, further solidifying its market position.
Nebius’s revenue trajectory is staggering, with annual recurring revenue projected to grow sixfold in 2024 alone. The increasing reliance on AI models across industries ensures exponential demand for its services, giving it a distinct competitive edge. In just one year, Nebius’s revenue surged from $20.9 million to $117.5 million, with Q4 revenue alone increasing from $6.7 million to $37.9 million. By March 2025, ARR is expected to surpass $220 million, with management targeting $750 million by year-end. Even without relying on management’s optimistic forecasts, the company’s rapid scaling underscores its exceptional execution capabilities.
Valuation models suggest that Nebius is significantly undervalued relative to its growth potential. Assuming conservative revenue growth of 40% annually, the company could reach $4 billion in revenue by 2030, implying a valuation of $16 billion under a 20x earnings multiple. Adjusting for probability-weighted scenarios, the present value stands at approximately $8.94 billion, representing a 27% upside from its current market cap. Nebius’s proven leadership, specialized AI infrastructure, and accelerating revenue growth position it as one of the most compelling long-term investments in the AI revolution. As institutional investors begin accumulating shares, a rapid re-rating of the stock could follow, making this a rare opportunity to invest ahead of the broader market’s recognition.
Nebius Group N.V. (NBIS) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 66 hedge fund portfolios held NBIS at the end of the fourth quarter which was 10 in the previous quarter. While we acknowledge the risk and potential of NBIS as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NBIS but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.