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Nebius deploys Nvidia’s GPUs in its data center space.
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Nebius believes its annual operations can reach $7 billion to $9 billion by the end of this year.
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If this strategy succeeds, the stock will be cheap.
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10 stocks we like better than Nebius Group ›
NVIDIA (NASDAQ: NVDA) It is the gold standard in artificial intelligence (AI) investing. It has been leading the pack since 2023, becoming the world’s largest company. However, there are other, more explosive AI stocks that could deliver huge returns, and investors might consider them as smaller, riskier positions that could deliver big growth.
One thing that excites me is Nebius (NASDAQ: NBIS). Nebius is growing at an incredible rate, and if it meets its growth forecasts by the end of the year, it could be a huge winner for investors and far outpace Nvidia.
If you want to add some rocket fuel to your portfolio, Nebius is a great option.
Nebius is not a competitor of Nvidia; rather, it is a customer. Nebius buys top-of-the-line Nvidia GPUs and places them in data centers it owns and leases. It sets them up in computing clusters, allowing customers to rent them to perform various artificial intelligence tasks. This is a similar business model to cloud computing, which has proven to be a viable and massively profitable business model.
Nebius operates a computing cluster in Europe and the United States, although it was historically based in Russia. Nebius was spun off from Yandex (essentially the Russian Google) after sanctions over the Ukraine war made its non-Russian assets less popular. Following the spin-off, customers will have no issues using Nebius’ computing infrastructure, with unprecedented growth expected in 2026.
As of the end of the third quarter, Nebius’ annual operating margin was $551 million. That’s not too bad, but it’s nothing compared to where the company expects to be by the end of 2026. Management expects annual run rates to be in the $7 billion to $9 billion range by the end of the year, which would represent significant growth. If Nebius achieves this growth, its stock price could soar as a result.
Currently, Nebius sells for as much as 65 times. However, that’s a bad metric since we know Nebius’ revenue is expected to explode throughout the year.
If we leverage forward sales, the stock valuation drops to 7.1 times sales, which is a good price for a cloud computing company. If you move to 2027x sales, it drops to only 3.2x sales.
These are only predictions and there is no guarantee that Nebius will actually achieve these predictions. One thing that likely won’t change, however, is the need for its computing infrastructure. We are still far from the computing power required for AI hyperscale enterprises, and this growth is expected to continue until 2030.
