By Nate Wolf

Shares of Nebius Group fell sharply Tuesday after the company announced plans to raise $3.75 billion through convertible bonds to help fund its data-center buildout.

Nebius will offer two series of notes, due in 2031 and 2033, respectively, in a private sale. Details such as the interest rate, initial conversion rate, and other terms for each series will be determined when the offering is priced, the company said.

Shares fell 8.5% to $118.60 as investors likely worried their own stakes will be diluted if bond buyers eventually convert their notes to stock. The drop in the stock follows a 15% spike Monday after Nebius won a cloud-computing deal with Meta Platforms worth up to $27 billion.

The day-to-day volatility comes with the territory, analysts at Citi say, but it shouldn't detract investors from buying Nebius. The firm initiated coverage of the stock with a Buy rating and a $169 price target in a research note.

Nebius has emerged over the last year as one of the so-called neoclouds, a collection of newer companies providing artificial-intelligence capacity. The company's rapid buildout and broad range of services make it a winner in the category, Citi analyst Tyler Radke argued.

Nebius combines the typical neocloud data-centers with in-house hardware designs and cloud software solutions. The software business is in the early stages today, but could expand rapidly as more customers turn to Nebius to assist with inference -- using trained AI models to make decisions and execute tasks.

While competitor CoreWeave opts for four-to-six-year, non-cancellable contracts, Nebius blends shorter, longer, and usage-based contracts that could give it more flexibility as these inference use cases expand.

Demand, meanwhile, isn't an issue. Citi expects data-center demand to grow to 110 gigawatts of AI load by 2030 from 18 gigawatts in 2025. Nebius itself had 170 megawatts of active power as of last year, but the company is targeting 5 gigawatts -- around 5% of total market share -- by 2030.

"NBIS is positioned to gain share within an AI compute market that itself is more than doubling every two years," Radke said.

The company will support its buildout using a $2 billion investment from Nvidia announced last week, a strong cash position, and now the $3.75 billion convertible note offering. Prepayments from customers are also funding new capacity, Citi noted.

Still, Nebius stock comes with some questions. The company only began trading as an independent company in 2024 after it spun out of Yandex's non-Russian business. Shares are up more than 350% in the last year, and just two clients -- Meta and Microsoft -- together represent around 40% of expected 2026 recurring revenue.

"We rate the company as High Risk given Nebius's limited trading history, the capital-intensive nature of [multi-gigawatt] AI datacenter expansion, AI headline volatility and meaningful exposure to a small number of large hyperscaler customers," Radke explained.

Investors should still consider the stock, Citi argued. They may just want to prepare for more boom-or-bust days ahead.

Write to Nate Wolf at nate.wolf@barrons.com

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March 17, 2026 09:46 ET (13:46 GMT)

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