Nebius: Time To Exit On Stretched Valuation

Nebius (NASDAQ:NBIS) is a company that has seen significant growth in AI infrastructure demand. Earlier this year, it was highlighted as "One of the Most Interesting Companies in 2025" and received a buy rating. However, with its valuation stretched, it's time to consider exiting the investment.

Nebius Group (NASDAQ:NBIS), once hailed as one of the most interesting companies in 2025, has experienced remarkable growth in its AI infrastructure business. The company's second-quarter 2025 earnings report showcased a significant surge in revenues, with a 625% year-over-year increase to $105.1 million [2]. This growth was primarily driven by strong performance in its core business and the successful execution of its TripleTen team. The AI cloud infrastructure revenues grew by more than nine times year over year, driven by demand for copper GPUs and near-peak GPU utilization.

The company's ambitious growth plans have been reflected in its revised annualized run rate (ARR) guidance, which was raised from $750 million to $900 million to $1.1 billion [2]. Nebius Group has also expanded its customer roster, adding notable clients such as Cloudflare, Shopify, HeyGen, Lightning.AI, and Photoroom. These developments underscore the company's ability to capture demand in the rapidly expanding AI infrastructure market.

However, despite the impressive growth, there are several factors that investors should consider. The company's valuation has been stretched, with shares surging 36.7% since the earnings report [2]. This rapid appreciation may indicate that the stock is pricing in the full effect of the new outlook, leaving limited room for further upside.

Moreover, Nebius Group faces significant challenges, including intense competition in the AI cloud infrastructure space, heavy capital spending, and execution risks. The company's aggressive expansion plans, which include building out over 1 gigawatt of power capacity by 2026, involve substantial capital outlays and execution risks. Any delays in the supply chain, installation, or customer spending could lead to missing targets [2].

Another factor to consider is the volatile global macroeconomic environment, which could impact the demand for AI infrastructure services. Additionally, the company's positive adjusted EBITDA in its core AI infrastructure business is expected to turn slightly positive by the end of the year at the group level, but the full-year 2025 adjusted EBITDA is still projected to be negative [2].

Given these factors, it may be prudent for investors to reassess their positions in Nebius Group. While the company's growth prospects are promising, the stretched valuation and potential risks suggest that it might be time to consider exiting the investment.

References:
[1] https://simplywall.st/stocks/us/software/nasdaq-nbis/nebius-group/news/nebius-group-nasdaqgsnbis-evaluating-valuation-after-raised
[2] https://finance.yahoo.com/news/stay-invested-sell-nebius-stock-141500472.html