Nebius Group (NASDAQ: NBIS) has been making headlines recently due to its increasing contracted power guidance, a surge in demand for its AI cloud services, ambitious revenue projections for 2026, and impressive momentum from significant data center projects and customer acquisitions. The company’s share price has shown notable resilience, with a 30-day return of 6.47% and an astounding one-year total shareholder return of 177.77%, closing recently at $100.61.
As interest in AI infrastructure rises, Nebius is attracting attention not only for its own performance but also as part of a broader market trend reflecting rapid developments in this sector. Despite the impressive share price increase, analysts are grappling with whether Nebius is truly mispriced or if the current valuation accurately reflects its growth potential. The prevailing market narrative suggests that Nebius may be overvalued, with a fair value estimate of $45.62, signaling a significant valuation gap when compared to its recent close.
Founded by Arkady Volozh, who previously led Yandex and left Russia due to political opposition, Nebius has major financial backers including a significant $700 million investment from Nvidia. This partnership not only helps secure valuable technology but also provides discounted access to Nvidia’s chips, enhancing Nebius’s competitive edge. The company’s forecasts indicate revenues could reach between $750 million and $1 billion in annual recurring revenue (ARR) by 2025, bolstered by extensive plans to scale GPU capacity dramatically from 20,000 to 240,000 units by 2027.
Nebius’s strategy includes a commitment to aggressive capacity expansion, energy-efficient operations, and a tailored market approach focused on specialized AI services, targeting the 30% of enterprise clients seeking high-performance solutions beyond the offerings of major cloud providers. With approximately $3 billion in cash reserves and $1.5 billion in other assets, Nebius is well-positioned for robust growth as it capitalizes on the projected 35% Compound Annual Growth Rate (CAGR) in the AI market through 2030.
Interestingly, while some analyses suggest an overvaluation at current prices, contrasting results from discounted cash flow (DCF) models indicate that the stock might actually be undervalued, estimating a future cash flow value of approximately $1,972.35 per share. This discrepancy raises questions on which assessments might be more reliable as investors weigh their options.
As the debate over Nebius’s valuation continues, the company’s strong fundamentals, proven leadership, and unique positioning within the AI infrastructure market present a compelling case for its future growth. For investors looking for potential opportunities in the expanding AI sector, Nebius Group stands out as a noteworthy player in a market ripe with possibilities.