Unlocking the Potential of AI Infrastructure
Citron Research’s Andrew Left has made some bold calls recently, including going short on MicroStrategy, a large buyer of Bitcoin. However, his latest call is generating significant buzz in the investment community. Left believes he has identified Wall Street’s next artificial intelligence (AI) darling, and it’s none other than Nebius Group (NASDAQ: NBIS).
A Mysterious Past
Until recently, Nebius had been flying under the radar. The Amsterdam-based company was previously owned by Russian search engine giant Yandex, but following Russia’s invasion of Ukraine, the U.S. imposed sanctions on Russian-affiliated companies. Earlier this year, the international assets were split off from Yandex in a $5.4 billion deal, and Nebius began trading on the Nasdaq again on October 21.
A Growing Player in AI Infrastructure
Nebius provides computing capabilities, storage, and tools and services for developers, making it part of a growing list of companies that rent their infrastructure to AI companies. Powering AI is expensive and energy-intensive, and Nebius’s core AI platform is designed to handle massive AI workloads. Companies looking to develop AI capabilities can pay a subscription to use the infrastructure offered by companies like Nebius.
A Sleeper Stock with Massive Potential
Left believes Nebius is a “sleeper” with massive potential, citing its undervaluation compared to CoreWeave, another AI infrastructure company rumored to be preparing a public offering that could value the company at $35 billion. If Nebius trades at a 50% discount to CoreWeave, that results in a $60 stock price, according to Citron. Nebius traded below $28 when Citron posted about it on December 3.
Nvidia’s Vote of Confidence
Nebius received a significant boost when AI chip king Nvidia participated in a $700 million private placement for the company. Additionally, Nebius on its website says its customers will be some of the first to use Nvidia’s next-generation Blackwell platform. This partnership adds credibility to Nebius’s growing reputation in the AI infrastructure space.
Rapid Revenue Growth and Strong Balance Sheet
Nebius projects revenue will grow 200% to 300% in 2025 to a range of $500 million to $700 million. The company plans to spend anywhere from $600 million to $1.5 billion for more capacity at its data centers in Finland, France, and North America. With about $2.3 billion of cash on its balance sheet and very little debt, Nebius is well-positioned for future growth.
A Compelling Investment Opportunity
While Nebius is not yet profitable, its rapid revenue growth, strong balance sheet, and partnership with Nvidia make it an attractive investment opportunity. Investors may want to consider taking a starter position, although it’s essential to weigh the potential risks and rewards. With the AI sector receiving huge valuations, Nebius could be a hidden gem waiting to be discovered.
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