Summary

• Nebius Group N.V. is a European AI leader, backed by Nvidia.

• NBIS's AI-centric cloud platform offers a cost-efficient, vertically integrated stack, providing a significant strategic advantage in the AI IaaS market.

• Led by Arkady Volozh, a renowned IT visionary and one of Europe's most impactful CEOs, Nebius Group leverages deep experience in building comprehensive ecosystems.

• Despite market uncertainties and competition, NBIS's partnership with Nvidia and robust fundamentals suggest a 45% upside potential, making it a compelling investment.

Introduction

Nebius Group N.V. is a European-based rising AI star that attracted my attention on the latest news that Nvidia holds a stake in this company. Nebius is well-capitalized to invest aggressively in growth and innovation to position itself in a rapidly growing market. The company is backed both financially and technologically by Nvidia, which is a big competitive advantage. Nebius is led by one of the most iconic IT CEOs outside the U.S., which is another massive fundamental strength. There is still a solid upside potential left on the table, meaning that NBIS merits a 'Strong Buy' rating.

Fundamental analysis

The stock currently trades at an all-time high of around $45 per share. NBIS gained 60% in 2025 alone, and such an impressive bull run is explained by the company's promising fundamentals.

NBIS

Let's start by introducing the business to my readers. The company focuses on building a full-stack AI infrastructure. The core asset is Nebius, the AI-centric cloud platform that can be used for intensive AI workloads. The full-stack approach means the platform includes large-scale GPU clusters, cloud platforms, and services for developers. The business model is built around the AI IaaS (Infrastructure-as-a-Service) approach.

NBIS

The management sees great potential in this space, expecting the total addressable market (TAM) to compound with a massive 35% CAGR by 2030. The management appears to be fair in their estimates for the TAM growth, as Grand View Research expects approximately the same growth rate for the industry. With that said, industry trends are extremely favorable for NBIS, and there are several indications that the company will be able to ride this AI wave successfully.

NBIS

The number one reason for my confidence in NBIS is its well-outlined differentiation strategy. The company's laser focus on the AI infrastructure allowed it to build a vertically integrated stack, which resulted in a 20-25% lower total cost of GPU ownership compared to an average GPU provider. I think that such a large gap in cost-efficiency provides NBIS with a solid strategic advantage.

I think that NBIS's ability to build such a robust and cost-efficient infrastructure was possible thanks to the stellar team of engineers led by one of the most iconic tech CEOs outside the U.S., Arkady Volozh. Mr. Volozh has vast experience in building successful ecosystems because he was the one who transformed a small research engine startup into one of Europe's largest tech companies. This company's name is Yandex, which expanded far beyond search under Volozh's leadership. Yandex was a comprehensive ecosystem that included cloud, e-commerce, navigation, mobility, payments, and many more. In Nebius he has a team of 400 brains who know the cloud and AI inside out.

NBIS

Nebius' vast potential has been recognized by the undisputed AI revolution leader, Nvidia. The company relatively recently raised $700 million in a private placement where Nvidia was a key investor. This is crucial because it is not only about the money invested, which is peanuts for a $3 trillion+ company like Nvidia. The key reason for optimism here is that the partnership ensures early access to Nvidia's cutting-edge hardware. This is another big advantage for Nebius that will highly likely help to stay ahead of the innovation curve.

With such a strong backup and experienced leadership, it is not surprising that NBIS plans to fire all cylinders by expanding aggressively. The company plans to invest $1 billion during the foreseeable future in expanding its AI infrastructure across Europe. In addition, Nebius also plans to expand its presence in the U.S.

NBIS

The important part is that Nebius is financially strong enough to deliver on its ambitious expansion plans. Apart from the recent funding round which I already mentioned, it is also worth emphasizing that NBIS has around $2 billion in cash reserves with minimal debt. Such a strong financial position gives the company the freedom to grow and take risks while competitors might be hesitating.

Data by YCharts

Despite being a young company, profitability metrics look good. EBITDA is rock-solid while sitting above a $1 billion psychological level. The company's free cash flow also does not look bad for a company that invests aggressively in R&D and CapEx.

Valuation analysis

The net income margin of Nebius is still slightly negative, which means that I do not have the opportunity to assess its forward P/E ratio trajectory. Therefore, I start with the DCF model straight away.

NBIS is not extensively covered on the Internet, meaning that there are no third-party WACC estimates available. As I mentioned, NBIS has minimal debt levels, which makes the cost of equity the better option for discounting future FCF.

Calculated by the author

The discount rate is 6.76%. The base-year revenue assumption of $684 million is from consensus estimates for FY2025. A 35% revenue CAGR is applied for the next five years, which relies on the projected TAM growth. The levered TTM FCF margin is 5.25%. Due to the expected aggressive investments in growth during 2025, I apply a very conservative 3% FCF for my base-year assumption. However, due to NBIS' strong potential, I incorporate a 300-basis point yearly expansion of the metric. Due to all the favorable factors and massive AI tailwinds, I use a 5% constant growth rate to determine NBIS' terminal value ('TV'). According to Seeking Alpha, there are 235.5 million NBIS shares outstanding.

Calculated by the author

The fair share price is almost $65. This is significantly higher than the last close, indicating a 45% upside potential. I find the valuation of NBIS highly attractive, which adds more confidence to my bullish opinion.

Mitigating factors

The current environment is very uncertain. This relates to almost everything spanning from geopolitics to the Fed's plans for further interest rate cuts. Due to its status as the world's largest economy and technological leader, everything that happens in the U.S. affects the entire world. Therefore, Donald Trump's second presidential term adds another thick layer of uncertainty for investors. In such an environment markets are becoming more nervous, and any unfavorable headline might lead to a stock sell-off, especially when we speak about young under-the-radar names like Nebius.

The AI infrastructure market is highly competitive with mega-scale players like AWS, Azure, and Google Cloud in the game. Such fierce competition leaves little room for strategic missteps for NBIS. The company's execution must be flawless, and the differentiation approach needs to be constantly enhanced, which is a challenging task.

While support from Nvidia is a vast asset, it also has some potential drawbacks. Having a partnership with such a large player is likely to create heavy dependence on Nebius. Disruptions in Nvidia's supply chain or changes in partnership terms might have materially adverse consequences for the company's growth prospects.

Conclusion

NBIS is poised to successfully capitalize on the rapid industry growth due to the leadership's vast experience in building extensive ecosystems, strategic support from Nvidia, and a fortress balance sheet enabling the company to invest aggressively in growth.