Nvidia (NVDA -1.55%), which is led by CEO Jensen Huang, is the most influential company in the artificial intelligence (AI) ecosystem and currently the largest company in the world by market cap. Given its prevalence in AI, the company also uses its own capital to invest in other AI stocks, some of which are partners that purchase the company's chips and other hardware necessary to power the technology.
One company that Nvidia invests in is the AI infrastructure company Nebius Group (NBIS -1.68%). At the end of the second quarter, Nvidia owned close to 1.2 million shares of Nebius, which, at the time, were valued at roughly $65.8 million.
Recently, Nebius struck a blockbuster deal, sending shares soaring, and investors can't seem to get enough of the stock.
Recent deal with Microsoft
For those who haven't followed Nebius, the assets owned by the company used to be owned by the Russian search giant Yandex. Following Russia's invasion of Ukraine, many Russian stocks were delisted by American exchanges. In 2024, a group of assets was split off from Yandex and into Nebius, which is now headquartered in Amsterdam and also owns data centers in Finland, France, Iceland, and the U.S. (in New Jersey and Missouri).
Image source: Getty Images.
Nebius began trading on the Nasdaq in October 2024 and secured a financing round from several prominent venture capital firms and Nvidia. Its data centers are specifically modeled for running AI applications and also equipped with Nvidia's latest graphics processing units (GPUs). While the company is positioned similarly to CoreWeave, another AI data center play that has done well, Nebius also provides cloud customers with developer tools that help customers fine-tune and enhance large language models.
Recently, Nebius announced a multiyear deal with Microsoft to provide capacity to the company from its data center in New Jersey, which isn't yet operational. The deal will reportedly be worth $17.4 billion to $19.4 billion through 2031. The news sent shares of Nebius soaring by close to 50% the day after the announcement on Sept. 9.
It makes sense why investors are excited. During Nebius' most recent earnings update, management said to expect the company to achieve an annual revenue run rate of $900 million to $1.1 billion by the end of this year. Assuming the Microsoft deal runs from 2026 to 2031, that would result in annual revenue of $2.9 billion, assuming it's generated evenly each year, and a total deal value of $17.4 billion. Perhaps equally exciting was that Nebius CEO Arkady Volozh said in a statement that he expects more deals like this to materialize.
Following the deal, BWS Financial analyst Hamed Khorsand reiterated his buy rating on the stock in a research note and hiked his price target from $90 to $130 per share, still implying significant upside, even after the big run. With the new contract, Khorsand said the company will likely speed up GPU installations and open its New Jersey data center as soon as possible. Furthermore, the new deal now makes previous 2026 earnings estimates "obsolete" and could lead to deals from other hyperscalers.
Is Nebius a buy after the big run?
Like many AI companies, Nebius is still early in its life cycle. In the first half of 2025, the company reported an adjusted net loss of $175 million. But if we assume the company is able to generate $2.9 billion in revenue from Microsoft in 2026, the company's revenue run rate by the end of the year would jump to about $4 billion. At close to a $23 billion market cap, as of this writing, Nebius would trade at a very rough estimate of 5.75 times revenue.
In the fast-growing world of AI, that's certainly not that demanding, and it's also great to see Volozh floating other potential deals. The other nice thing about Nebius is that it has a very solid balance sheet, with $1.68 billion cash and equivalents and about $986 million of debt, giving it a debt-to-equity ratio of 26%.
Nebius also owns a majority position or has a stake in other interesting businesses with potential, like an autonomous driving and robotics subsidiary, a database management system, a data labeling business, and an edtech platform. Despite the big move, I think long-term investors should buy the stock at these levels. There appears to be plenty of runway for Nebius stock.
