Nebius Group (NBIS): A Hidden Gem in the AI Infrastructure Boom

The global race to dominate AI infrastructure is intensifying, yet one European player—Nebius Group (NASDAQ: NBIS)—is flying under the radar despite possessing a rare combination of vertical integration, strategic partnerships, and undervalued assets. As enterprises worldwide ramp up AI investments, Nebius' ability to deliver cutting-edge compute power, optimized infrastructure, and proprietary technologies positions it as a hidden gem poised for recognition. Here's why investors should pay attention.

Vertical Integration: The Secret to Cost Efficiency and Performance

Nebius' control over its entire infrastructure stack—from custom-designed servers and data centers to in-house software orchestration—creates a moat against rivals. Its vertical integration allows it to:
- Optimize for next-gen hardware: Servers are co-engineered with NVIDIA to support future GPU architectures, reducing obsolescence risks.
- Achieve hyperscaler-level efficiency: Data centers in Finland operate at a Power Usage Effectiveness (PUE) of ~1.13, rivaling giants like Microsoft and Google. Energy savings are further enhanced by repurposing waste heat for municipal heating, cutting household energy costs by up to 12%.
- Eliminate OEM markups: Sourcing hardware directly from Taiwanese ODMs bypasses traditional supply chain inefficiencies, lowering costs by double digits.

This integration isn't just about cost savings—it's about delivering a seamless, high-performance platform tailored for AI workloads. For example, Nebius' cloud platform integrates NVIDIA's A100, H1, and H2 GPUs, enabling clients to train complex models at scale.

NVIDIA Partnership: A Strategic Win-Win

Nebius' relationship with NVIDIA transcends typical vendor-client dynamics. NVIDIA is both a partner and a shareholder (holding ~1.2 million NBIS shares), with collaboration rooted in Nebius' Yandex-era legacy as NVIDIA's largest non-U.S./China customer. Key milestones include:
- Early access to next-gen hardware: Nebius is the first European cloud provider to deploy NVIDIA's Blackwell GPUs and will be an early adopter of the 72-GPU GB300 NVL72 superchip, ideal for agentic AI and multi-modal reasoning. These systems will launch by Q4 2025.
- Pre-validated architectures: As a NVIDIA Reference Platform Cloud Partner, Nebius offers pre-configured, enterprise-ready GPU clusters, reducing deployment time for clients.

While NVIDIA's stock has surged 45% YTD, Nebius trades at a fraction of its value—despite its unique role in NVIDIA's ecosystem. This disconnect suggests a valuation gap waiting to close.

ClickHouse Stake: A Hidden $2 Billion Asset

Nebius' 28% stake in ClickHouse, an open-source columnar database, is often overlooked but strategically vital. ClickHouse is gaining traction as a high-performance analytics engine for AI applications, with its valuation now at $2 billion. Combined with Nebius' subsidiaries like Avride (autonomous driving) and TripleTen (edtech), this portfolio underscores Nebius' ambition to build an AI-driven ecosystem.

Catalysts on the Horizon: Earnings, Hardware, and Institutional Momentum

Three catalysts could unlock Nebius' potential in 2025:
1. Q2 Earnings (July 28): Analysts project revenue of $500M–$700M, up from $300M in Q1. A strong report could attract institutional buyers, especially as the stock's 200-day moving average ($34) has provided support.
2. GB300 Deployment: Q4's launch of NVIDIA's superchip will open doors to enterprise AI clients requiring ultra-high compute power.
3. Convertible Notes Funding: A $1B private placement (announced in June) will finance data center expansions and GPU acquisitions, fueling growth.

Despite recent inflows (e.g., $12M from Centaurus Financial and $12M from WCM Investment in early 2025), institutional ownership remains low at 21.9%, leaving room for significant buying. Analyst upgrades—like Arete Research's “Strong-Buy” with a $84 price target—signal a shift in sentiment.

Risks, but the Upside Outweighs Them

Nebius isn't without risks. Its P/E ratio of -80.79 reflects current losses, and execution risks around the GB300 rollout exist. However, Nebius' path to profitability hinges on scaling revenue (targeting $2B in 2025 CapEx) and leveraging its vertical model to boost margins.

Investment Thesis: Buy Ahead of Q2 Results

Nebius is a prime example of a “value in transition” stock: undervalued today but primed for growth. With AI infrastructure spend expected to hit $200B by 2030, Nebius' advantages—vertical integration, NVIDIA synergy, and underappreciated assets—position it to capture share.

Recommendation:
- Entry Point: $45–$50, below the June 2025 high of $46.05 but above the 50-day average ($41.93).
- Target: $65–$70 by end-2025, aligning with analyst consensus and reflecting institutional inflows.
- Hold for: 12–18 months, through key catalysts and valuation re-rating.

The market's neglect of Nebius is puzzling given its strengths. As AI infrastructure demand surges and institutions finally take notice, now is the time to stake a claim in this underappreciated leader.