Shares of Nebius Group (NBIS), a leading AI infrastructure provider, tumbled 5.06% in pre-market trading on Thursday, as investors reassess the company's valuation following its recent surge. The stock's decline comes despite the company's recent announcement of a significant multi-year contract with Microsoft, valued at up to $19.4 billion.

Nebius has been one of the hottest AI stocks of 2025, with its shares skyrocketing over 250% year-to-date through September 19. The company's focus on high-performance cloud computing infrastructure for AI systems has positioned it well in the rapidly growing artificial intelligence market. However, the stock's meteoric rise has led to concerns about its lofty valuation.

Recent analysis suggests that Nebius shares are trading at a premium compared to its competitors. For instance, CoreWeave (CRWV), another player in the AI infrastructure space, offers a more attractive valuation despite similar growth prospects. This disparity has prompted investors to reconsider their positions in Nebius, potentially leading to profit-taking and contributing to the pre-market plunge.

Adding to the concerns, Nebius has taken on nearly $1 billion in debt to fuel its expansion plans. While the company's recent equity offering has raised $4.2 billion in gross proceeds, the growing debt load and continued unprofitability – with an operating loss of $111.2 million in the second quarter – may be weighing on investor sentiment.

Despite these short-term headwinds, Nebius continues to show promise in the long run. The company's deal with Microsoft and the overall growth trajectory of the AI market, expected to reach $1 trillion by 2031, suggest strong potential for future revenue growth. However, investors appear to be taking a more cautious approach in the near term, reassessing the stock's valuation in light of these factors.