Nebius Group N.V. (NASDAQ: NBIS) experienced a decline of 4.6% in its stock price as of December 5, closing near $98. This downturn follows a remarkable rise over the past months, which has now prompted investors to question whether the company”s valuation has escalated too quickly. Despite the recent drop, Nebius” shares are still over 400% above their lows from earlier this year, reflecting significant optimism surrounding the AI infrastructure sector.
The company”s stock has seen a meteoric rise, propelled by substantial contracts with tech giants such as Microsoft and Meta. With a market capitalization nearing $25 billion, Nebius trades at impressive multiples, including nearly 68 times its trailing revenue and close to 200 times its trailing earnings. Given these elevated valuation metrics, the recent stock pullback seems to be a natural correction following a year of extraordinary gains.
Nebius, which transitioned from a segment of Yandex to an independent AI infrastructure provider, has made significant strides in the AI sector. The company is actively building extensive GPU clusters and AI cloud environments across North America and Europe, positioning itself as a key player in the emerging “neocloud” market. This market consists of non-hyperscaler cloud companies that focus on AI-first infrastructure, challenging the dominance of major providers like Amazon, Google, and Microsoft.
In recent developments, institutional interest in Nebius has notably increased, with firms such as Sassicaia Capital Advisers initiating positions by acquiring over 25,000 shares during the second quarter. This growing institutional ownership, now at approximately 22%, signals a shift towards more long-term investment strategies in the technology sector, despite the inherent risks associated with rapid expansion and high capital expenditure.
Nebius” growth trajectory is underpinned by remarkable revenue momentum, evidenced by a staggering 355% year-on-year growth in Q3. The company”s bullish outlook is further supported by two significant contracts. In September, Nebius secured a five-year deal with Microsoft for high-performance GPU capacity, valued between $17.4 billion and $19.4 billion. This agreement catalyzed a nearly 50% surge in the stock price in one trading session, establishing Nebius as a viable competitor against established U.S. cloud providers.
Following this, Nebius announced another multi-year contract with Meta, worth $3 billion. This partnership is expected to commence shortly and is reportedly constrained more by Nebius” capacity than by demand, strengthening its position as a crucial infrastructure provider for major AI companies. The combination of these contracts has significantly bolstered revenue visibility and investor confidence, contributing to Nebius” 248% stock surge year-to-date.
