NEBIUS (NBIS) stock plummeted 5.09% in Tuesday's pre-market trading session, as investors reassessed the company's valuation and debt load amid the booming artificial intelligence (AI) market. The drop comes despite the company's recent strong performance and expansion in the AI infrastructure space.

NEBIUS, a provider of high-performance cloud computing infrastructure for AI systems, has seen its stock surge over 300% this year through October 17. The company reported impressive second-quarter results, with sales soaring 625% year over year to $105.1 million. Additionally, NEBIUS recently signed a multiyear deal with Microsoft to deliver dedicated computing capacity, signaling strong future growth prospects.

However, the company's aggressive expansion strategy has led to a significant increase in debt. NEBIUS exited the second quarter with nearly $1 billion in debt, a dramatic rise from just $6.1 million at the end of 2024. Last month, the company closed a senior notes offering and issued more stock for a combined $4.2 billion in gross proceeds to finance its data center expansion. This mounting debt, coupled with a higher forward price-to-sales ratio compared to competitors like CoreWeave, may be causing investors to reassess the stock's valuation and potential risks, leading to today's sell-off.