Nebius: Why Investing Now Might Not Be the Best Strategy

The article discusses the author's previous recommendation to buy Nebius Group stock, citing the company's potential for expansion and growth. However, the author now advises against buying more stock, citing reasons not specified in the abstract. The author's previous "Strong Buy" rating is mentioned.

Nebius Group (NASDAQ:NBIS) has been a darling of the tech sector, particularly for its AI infrastructure capabilities. Initially recommended as a "Strong Buy" due to its potential for expansion and growth, recent developments warrant a reevaluation of this recommendation. Despite the company's impressive revenue growth and ambitious capacity targets, several factors suggest a more cautious approach.

Initial Success and Growth

Nebius Group has shown remarkable growth, with a 385% increase in revenue compared to the same quarter last year. The company's AI-centric cloud platform, Nebius AI, and its generative AI solutions, Toloka AI, have been key drivers of this growth. The company's quarterly earnings, although reporting a loss of ($0.48) EPS, reflect significant revenue expansion [1].

Capacity Expansion and Market Positioning

Nebius Group has set an ambitious target of securing one gigawatt (GW) of capacity by 2026. This target is part of the company's strategy to capture a significant share of the growing AI infrastructure market. By scaling capacity, Nebius aims to secure large enterprise and hyperscaler contracts, positioning itself as a key player in the AI infrastructure space [2].

Analyst Ratings and Institutional Investor Activity

Despite the company's strong fundamentals, analyst ratings have been mixed. While some analysts maintain a "Buy" rating, others have downgraded Nebius to a "Sell" rating. Institutional investors have shown interest in Nebius, with several hedge funds and investment firms adding to their stakes in the company [1].

Competitive Landscape and Valuation

The AI infrastructure market is highly competitive, with players like CoreWeave (CRWV) and Microsoft (MSFT) aggressively expanding their capacities. CoreWeave, in particular, has raised substantial debt to fund its data center buildout, which could impact its profitability. Microsoft, with its Azure platform, is a dominant force in the cloud infrastructure space and is rapidly making inroads into AI infrastructure [2].

Nebius Group's valuation, as measured by the price/book ratio, is 4.53X, which is lower than the industry average of 102.14X. However, the company's Zacks Rank is currently #3 (Hold), indicating a neutral rating from Zacks Investment Research [2].

Conclusion

While Nebius Group's potential for growth and expansion is undeniable, the mixed analyst ratings, competitive landscape, and valuation metrics suggest a more cautious approach. Investors should carefully consider these factors before making any investment decisions. The company's ability to execute on its ambitious capacity targets and maintain profitability will be key to its long-term success.

References
[1] https://www.marketbeat.com/instant-alerts/nebius-group-nasdaqnbis-lowered-to-sell-rating-by-wall-street-zen-2025-08-17/
[2] https://finance.yahoo.com/news/nebius-1-gw-capacity-target-140700738.html