I’ve been spending a ridiculous amount of time digging into the AI data center space. It’s the digital gold rush of our generation, and everyone wants to know who’s selling the picks and shovels.
Naturally, all eyes are on CoreWeave. It’s the rockstar of the AI infrastructure world, backed by Nvidia and hyped to the moon. And honestly, the hype is deserved. But here’s the thing: when everyone is looking one way, I can’t help but look the other. I’ve been hunting for the next big thing, the company that’s quietly building an empire while its flashier rival grabs all the headlines. And I think I’ve found it.
There’s another Nvidia-backed player in this game, a company with absolutely insane growth that’s still flying under the radar for most investors. It’s time we talked about Nebius Group.
⚙️ First, Let’s Unpack Nvidia’s Master Plan
To understand why Nebius is such a big deal, you first have to understand what Nvidia is doing. They aren’t just selling chips; they’re building a fortress. Nvidia’s strategy is to create a whole ecosystem around its hardware. They do this by making strategic investments in companies that are critical to the AI supply chain.
Think about it. If you’re Nvidia, you want to make sure there are reliable, high-performance platforms that can showcase the full power of your GPUs. You also want to lock in major customers for your future chip generations. So, you invest in them.
Nvidia’s 13F filing reads like a who’s who of AI’s future infrastructure:
- CoreWeave: The current heavyweight champion of specialized AI cloud providers.
- Arm Holdings: The blueprint architects for ultra-efficient chips.
- Applied Digital: Another key player in building next-gen data centers.
- Nebius Group: The focus of our story today, and the potential dark horse.
By backing these companies, Nvidia ensures its GPUs have a home and that the AI revolution keeps running on its silicon. It’s a brilliant, self-reinforcing loop. And within this loop, Nebius presents a fascinating opportunity.
🤔 So, What on Earth is a “Neocloud”?
Nebius has a pretty cool origin story. It was spun off from the European tech giant Yandex and hit the Nasdaq in late 2024. Almost immediately, it raised a whopping $700 million, with Nvidia jumping in as a key investor. That’s a serious vote of confidence.
Like CoreWeave, Nebius is what’s called a “neocloud.” It’s a term you’re going to hear a lot more, so let’s break it down.
For years, the cloud has been dominated by hyperscalers like Amazon’s AWS, Microsoft’s Azure, and Google Cloud. They’re like giant, all-purpose department stores: they have everything, but they aren’t necessarily specialized in one high-performance area. They’re built for general-purpose computing.
AI is different. Training massive models like GPT-4 requires thousands of GPUs working together in perfect harmony. It’s an incredibly demanding, specialized task. This is where neoclouds come in.
💡 A neocloud is a cloud platform built from the ground up specifically for high-performance AI workloads.
Think of it like this: A hyperscaler is your trusty family sedan. It can get you to the grocery store, take the kids to school, and go on a road trip. A neocloud is a Formula 1 race car. It does one thing: go insanely fast, and it does it better than anything else on the planet. For AI developers who need every last drop of performance, the neocloud is a game-changer.
Nebius is building these AI-specific data centers across Europe and the U.S., giving companies direct access to the world’s most sought-after hardware: Nvidia’s GPUs.
🌊 Riding the $260 Billion AI Spending Tsunami
This is where it gets really exciting. The biggest companies in the world are throwing unbelievable amounts of money at AI infrastructure. This isn’t a gentle wave; it’s a full-blown tsunami of capital.
Just look at the numbers for this year alone:
- Microsoft, Google (Alphabet), and Amazon are projected to spend a combined $260 billion on capital expenditures.
A huge chunk of that is going directly into building AI data centers and securing more chips. - Meta Platforms is also going all-in, not only poaching top AI talent but also investing billions into everything from data labeling to building its own superintelligence labs.
This isn’t speculative spending. This is an arms race. Every major tech company knows that if they fall behind in AI, they risk becoming obsolete. This creates a desperate, insatiable demand for the exact service that Nebius provides: high-performance compute power.
Companies like Nebius are essentially the ultimate GPU landlords in a world with a critical housing shortage. Demand is exploding, and supply is tight. That’s a beautiful position to be in.
📈 The Financials Are Just Bonkers
Okay, so the story is great. But what about the numbers? This is where my jaw really hit the floor.
At the end of the first quarter, Nebius was operating at an Annual Recurring Revenue (ARR) run rate of $249 million. That’s already impressive.
But the growth is what’s truly mind-bending. That $249 million figure represents 684% growth year-over-year. Read that again. Six hundred and eighty-four percent. That’s not growth; that’s an explosion.
And it’s not slowing down. Management is guiding for an ARR run rate of $750 million to $1 billion by the end of this year. If they hit that, it means the company will have nearly quadrupled its recurring revenue in just three quarters. This signals that they are grabbing market share at an incredible pace, perfectly timed with Nvidia’s rollout of its next-gen Blackwell GPU architecture, which will only pour more fuel on this fire.
Wall Street is starting to wake up, too:
- Goldman Sachs slapped a $68 price target on the stock.
- Arete Research is even more bullish with an $84 price target, implying nearly 60% upside from recent prices.
Even though the stock has already run up over 130%, I don’t think this is just speculative hype. I think the valuation is finally starting to catch up to the company’s staggering fundamental growth.
✨ My Final Take: This Is the Sleeper Pick
Look, the success of CoreWeave and Oracle in the AI infrastructure space has proven that the neocloud model is not just viable; it’s essential. The market is more than big enough for multiple winners, and Nebius is positioning itself to be a major force.
While CoreWeave has been soaking up the spotlight, Nebius has been in the background, executing flawlessly and putting up numbers that are simply too good to ignore. It’s smaller, nimbler, and has been largely swept up in broader market movements rather than being appreciated for its own incredible story.
To me, this is a classic opportunity to invest in a disruptive force before it becomes a household name. When I put all the pieces together, the bull case for Nebius is crystal clear.
Here’s the TL;DR on why I’m so excited:
- 📌 Nvidia’s Seal of Approval: Nvidia didn’t just invest cash; they made a strategic bet. They need Nebius to succeed.
- 📌 Off-the-Charts Growth: A 684% YoY growth rate with a clear path to a $1 billion ARR run rate is simply phenomenal. The business is on fire.
- 📌 Riding a Megatrend: The AI infrastructure spending boom is a multi-year, secular tailwind that will lift all the key players. Nebius is perfectly positioned.
- 📌 The Underdog Advantage: It’s still relatively unknown compared to its peers, which I believe creates a valuation disconnect and a massive opportunity for investors who get in early.
This isn’t just another tech stock. This is a potential monster in the making, a key player in the single most important technological shift of our lifetime. I think Nebius is a bargain right now, and it could quickly become one of the most disruptive stocks in the entire AI market.
- Nvidia’s Role as an Investor: Beyond being a dominant chip supplier, Nvidia is a strategic investor in the AI infrastructure ecosystem. Its stakes in companies like CoreWeave, Applied Digital, and Nebius Group provide them with capital, credibility, and a competitive edge in the market.
- Growth vs. Profitability: The emerging AI data center market is characterized by a high-growth, high-loss financial model. CoreWeave, for example, saw its revenue grow 737% to $1.9 billion in 2024 but remained unprofitable with an $863 million net loss, primarily due to massive investments in infrastructure.
- Interconnected Competition: The relationships between these companies are complex. For instance, Applied Digital, a competitor to CoreWeave, recently signed a 15-year, $7 billion deal to lease data centers to CoreWeave, illustrating the deep interdependencies and coopetition within this specialized market.
- The Broader Landscape: While Nvidia-backed specialists are gaining traction, they compete in a crowded field that includes established hyperscale cloud providers like Amazon Web Services (AWS), Google Cloud, and Microsoft Azure, all of which offer their own powerful GPU instances for AI development.