For the last week, the financial world finally had something to talk about other than Nvidia... well, sort of.
By now, you've probably heard a lot of chatter about a Chinese artificial intelligence (AI) start-up called DeepSeek. DeepSeek built a competing large language model (LLM) to OpenAI's ChatGPT, but claims that it trained the model with old Nvidia processors that aren't widely used anymore. This news has shellshocked technologists and analysts across Wall Street because if DeepSeek's methods of building highly capable AI can be done using legacy hardware, Nvidia's newest architectures could be rendered obsolete.
Unsurprisingly, the DeepSeek narrative has served as a jarring and sobering moment for AI enthusiasts who have been hitting the buy button on repeat for much of the last two years.
Below, I'm going to make the case for why the ongoing sell-off among AI stocks could be a unique buying opportunity, depending on what companies you're looking at. Moreover, I'll make the case for why a little-known data center stock called Nebius Group (NBIS 6.59%) is a particularly compelling opportunity at the moment.
NASDAQ: NBIS
Key Data Points
Looking at big tech's most recent comments can be a clue
It's important to note that the panic selling that's dominated the technology sector over the last several days is rooted in the idea that demand for Nvidia's latest graphics processing units (GPU) could stall. While there is merit to the notion that technology enterprises will normalize their capital expenditure (capex) budgets, I think some recent comments out of big tech can put these fears to rest.
Some members of the "Magnificent Seven" recently reported earnings for the full calendar year 2024, and during the earnings calls management dropped numerous breadcrumbs on their AI roadmaps. Let's dig into what known Nvidia customers such as Microsoft, Tesla, and Meta Platforms had to say.
- Microsoft: Given Microsoft's close alliance with OpenAI and the deployment of ChatGPT across the company's ecosystem, analysts tend to focus primarily on the Azure cloud business. The fact of the matter is that Azure's growth experiences some notable ebbs and flows -- as is the case with other cloud infrastructure operations from hyperscalers such as Amazon and Alphabet. At the moment, Azure is experiencing some decelerating growth. As such, Microsoft's management made it clear that "the growth rate will be lower than FY '25" regarding this year's capex spend.
- Tesla: While Tesla is primarily seen as a car business, investors shouldn't underestimate the company's place in the AI landscape. Two of Tesla's biggest growth initiatives include developing a fleet of autonomous cars known as robotaxi, as well as humanoid robots called Optimus that can be deployed in factories and other work spaces. In order to build these products, Tesla has invested billions in AI infrastructure. During the company's fourth-quarter earnings call, Tesla Chief Financial Officer Vaibhav Taneja said "accumulated AI-related capex, including infrastructure, so far has been approximately $5 billion. And for 2025, we expect our capex to be flat on a year-over-year basis."
- Meta Platforms: In early January, Meta announced that it is planning to spend up to $65 billion in capex in 2025 -- representing a more than 60% increase year over year compared to 2024 levels. The caveat here is that Meta made this announcement prior to the DeepSeek saga. But during the company's fourth-quarter earnings call, Meta's management doubled down on its capex plan this year -- signaling the company remains committed to investing heavily into several areas across the AI spectrum, including infrastructure items such as data centers, servers, and chipware.
My interpretation from big tech's commentary is that some companies may not be required to invest as much into infrastructure this year. While this looks look bad news for Nvidia on the surface, I think it actually makes sense. After all, at some point the billions of dollars that big tech has already shelled out should start to bear fruit. In other words, I actually think it would be alarming if capex budgets continued to rise consistently in a linear fashion.
Image source: Getty Images.
How is Nebius related to Nvidia?
Nvidia is actually an investor in Nebius; hence, the two AI companies have a close relationship.
Nebius plans to break ground on a GPU cluster in Kansas City, MO, this quarter, which will be comprised of "primarily NVIDIA Hopper GPUs in the initial phase" and be augmented with Nvidia's newest architecture, dubbed Blackwell, later this year.
On top of that, Nebius is also building out data centers in Finland and Paris that are equipped with a combination of Nvidia's H100, H200, and Blackwell GPUs.
Is Nebius stock a buy?
The chart below shows the price action between Nvidia and Nebius so far in 2025. The glaring commonality between the two stocks is that they both took a nosedive as the exact same time -- namely, when DeepSeek came into the spotlight.
The nuance from the comments made by leaders at big tech is that capex spend shouldn't decline in terms on absolute dollars. What they are saying is that the growth of their spend may slow down, but these companies still plan on spending significantly on infrastructure.
This is important because data center companies such as Nebius work closely with Nvidia. As I outlined above, Nebius' services are already in high demand -- and Nvidia appears to be at the root of these dynamics. While capex habits are going to remain in flux from AI's biggest players, the subtle theme here is that Nvidia's chipsets are still going to be a primary feature. So long as this is the case, I see Nebius continuing to benefit.
Following the precipitous decline in Nvidia, Wedbush Securities analyst and longtime technology sector bull Dan Ives called the moment a "golden" opportunity to buy the dip. I agree with Ives, and would take his comments a step further and encourage investors to consider the dip in adjacent opportunities such as data centers. To me, Nebius is still well-positioned for the long run and shares look tempting given their sharp declines.
