Nebius Group (NBIS): A Small-Cap Backed by NVIDIA

Key Points

• Nebius Group (NASDAQ: NBIS), a Netherlands-based AI technology company, has drawn attention due to NVIDIA’s (NASDAQ: NVDA) backing.
• Despite NVIDIA's backing, Nebius shares are down nearly 20% from their 52-week high, but its strong revenue growth and ambitious AI infrastructure expansion highlight its potential.
• While it lacks analyst coverage, Citron Research has predicted that Nebius could become an “AI Wall Street darling.”

Several small and mid-cap companies have captured investor attention over the previous year thanks to NVIDIA’s NASDAQ: NVDA disclosed investments in these firms. One recent standout is Nebius Group NASDAQ: NBIS, a technology company now drawing comparisons to other NVIDIA-backed successes like SoundHound AI NASDAQ: SOUN, which surged over 800% in the past year. 

Despite this connection, Nebius has faced challenges, with its stock down almost 20% from its 52-week high in December.  But does NVIDIA’s involvement signal a buying opportunity? Let’s dive deeper.

What Is Nebius Group?

Nebius Group N.V. is a Netherlands-based technology company specializing in AI-driven solutions for businesses and consumers. Its flagship offerings include Nebius AI, a cloud platform designed for AI deployment and machine learning; Toloka AI, which focuses on generative AI applications like model training and data generation; Avride, a provider of autonomous vehicle solutions for logistics and ride-hailing; and TripleTen, an EdTech platform that equips learners with STEM and tech skills.

Previously known as Yandex N.V., the company underwent a transformation following sanctions imposed on Russia after its invasion of Ukraine. Yandex divested its non-Russian assets, leading to Nebius’s independence and subsequent Nasdaq listing in October 2024.

Following its debut, Nebius raised $700 million through a private placement involving NVIDIA and Accel Ventures.

Why Is NVIDIA Interested?

NVIDIA’s investment aligns with Nebius’s strong growth trajectory and its focus on AI infrastructure. In Q3 2024, Nebius reported revenue of $43.3 million, an almost 200% increase compared to the previous quarter. The AI infrastructure segment demonstrated exceptional growth, expanding nearly 300% quarter-on-quarter and almost 650% year-on-year, showcasing the company's rapid advancements in its core AI offerings.

The AI cloud business is on track to hit an annualized run rate of $120 million, while forward guidance estimates revenues between $750 million and $1 billion by 2025.

Nebius’s strategic initiatives include expanding its data center footprint. It recently launched a GPU-equipped facility in Kansas City and plans to open another U.S. cluster by 2025, bolstering its AI infrastructure capabilities. With partnerships like its collaboration with Uber Technologies for autonomous vehicles, Nebius is leveraging its diverse portfolio to drive innovation.

The NVIDIA Factor and Citron’s Bullish Call

NVIDIA’s support has sparked optimism, further amplified by Citron Research’s endorsement of Nebius as a potential “AI Wall Street darling.” Citron sees parallels between Nebius and competitors like CoreWeave, projecting the stock could reach $60 per share, offering significant upside from current levels.

Nebius plans to invest $1 billion in AI infrastructure by 2025, focusing on renting capacity to enterprises scaling their AI operations. This capital commitment reflects its ambition to establish a strong foothold in the rapidly growing AI sector.

Why Nebius Is a Unique Play in AI Infrastructure

While NVIDIA’s backing and Citron’s bullish outlook are compelling, investing in Nebius involves risks. The company faces stiff competition from established players. However, its financial strength, bolstered by almost $2.3 billion in cash and rapid revenue growth, positions it as a high-potential opportunity for risk-tolerant investors.

The real potential also lies in Nebius’s ability to leverage its NVIDIA partnership to secure relationships with other industry leaders, such as Advanced Micro Devices NASDAQ: AMD and Magnificent Seven tech giants and cloud hyperscalers like Microsoft NASDAQ: MSFT and Amazon NASDAQ: AMZN. If successful, Nebius could unlock significant long-term value and immense growth, making it a standout in the AI and tech scene.

Nebius Group offers a unique blend of opportunity and risk for investors seeking exposure to emerging AI infrastructure plays. NVIDIA’s involvement certainly adds an extra layer of intrigue.