Nebius Group: A Buy in the AI Neocloud Race – Goldman Sachs Sees 54% Upside

The AI infrastructure boom is reshaping the tech landscape, and Goldman Sachs has just placed its bet on one of its key beneficiaries. In a new report, the firm initiated coverage of Nebius Group (NASDAQ: NBIS) with a "Buy" rating and a $68 price target, signaling confidence in the company's ability to capitalize on the demand for outsourced AI computing power. This analysis dives into why AI infrastructure is a strategic growth catalyst for Nebius, weighing its strengths, valuation, and risks.

The AI Neocloud Opportunity

Nebius operates in the AI neocloud market, a subset of the broader cloud computing sector focused on providing scalable GPU infrastructure for artificial intelligence development. Unlike traditional cloud providers, neocloud firms like Nebius specialize in delivering the high-performance computing resources (e.g., GPUs) needed to train and run AI models. Goldman's report highlights this as a $100 billion addressable market by 2027, driven by enterprises and developers seeking to avoid the high capital costs of building their own AI hardware.

Why Nebius Stands Out

Goldman's bullish thesis hinges on three pillars: full-stack software expertise, operational cost efficiencies, and scalability. Nebius' software layer optimizes GPU utilization, reducing compute costs for clients—a critical advantage in a market where price competitiveness is paramount. The firm's vertically integrated model, which includes hardware procurement, data center construction, and software development, allows it to control costs and scale rapidly.

Valuation: A Discounted Play in a Premium Sector

Nebius trades at an enterprise value-to-sales (EV/Sales) multiple of 3x, significantly below its closest rival, CoreWeave, which commands a 5x multiple. This discrepancy, Goldman argues, reflects Nebius' underappreciated growth potential. With $1.4 billion in cash and a 400% year-over-year revenue growth rate, the company is well-positioned to capitalize on its opportunities.

Growth Catalysts in Sight

• Partnerships: Nebius' recent stake in Nvidia—a 1.19-million-share position valued at $25 million—signals a deepening relationship with the GPU leader, likely securing preferential access to hardware.
• Global Expansion: The launch of its first AI factory in the U.K., equipped with 4,000 Blackwell GPUs, marks a push into Europe. Plans to expand into three additional global markets by 2026 could further drive revenue.
• Autonomous Vehicle Platform: Nebius is developing an AI infrastructure platform for autonomous vehicles, a high-growth sector with potential to diversify its revenue streams.

The Risks

Despite the positives, challenges remain. Nebius reported a negative EBITDA for 2025 and raised its capital expenditure guidance to $2 billion, signaling the need for ongoing funding. Additionally, geopolitical risks—such as tariffs under a Trump administration—could disrupt its supply chain. Retail sentiment on platforms like Stocktwits remains neutral, though the stock's 60% year-to-date gain suggests some investor optimism is already priced in.

The Bottom Line

Goldman's 4:1 upside-to-downside ratio underscores its belief that Nebius' risks are manageable given its $10.5 billion market cap and fortress-like cash position. The $68 price target implies a 54% premium to current levels, aligning with the firm's view that Nebius is undervalued relative to peers.

Investors should consider:
1. Valuation upside: Closing the gap to CoreWeave's 5x EV/Sales multiple could justify a higher stock price.
2. Execution risk: Scaling infrastructure and maintaining partnerships will be critical.
3. Sector momentum: The AI boom shows no signs of slowing, and Nebius' niche position could pay dividends.

Investment Takeaway: Nebius is a buy for investors with a 12–18 month horizon, provided they are comfortable with the company's growth-at-cost model and the macro risks it faces. The Goldman call is a strong vote of confidence in an underappreciated player in the AI infrastructure race.

This analysis is based on publicly available data and does not constitute financial advice. Always conduct your own research before making investment decisions.