Nebius Group (NBIS 1.75%) has emerged as a potential superstar in one of the world's biggest growth industries: artificial intelligence (AI). The AI market has grown into the billions of dollars and is forecast to reach beyond $2 trillion within the coming years. And companies offering AI tools and services, as well as those applying AI to their businesses, are set to benefit.
Nebius may be one of the first to win since it offers something that tech leaders are scrambling to get ahold of right now, and that's the capacity to run AI workloads. The company sells access to compute, and just recently it signed a multibillion-dollar deal to provide AI infrastructure to tech giant Microsoft. Revenue is already taking off at Nebius, as it surged more than 600% in the recent quarter -- and the company's shares are on track to gain more than 350% this year.
Considering all this, is Nebius your ticket to becoming a millionaire? Let's find out.
Image source: Getty Images.
The infrastructure buildout
So, first, let's take a look at the current AI market and what may unfold in the coming years. Right now, tech powerhouses such as Microsoft, mentioned above, and others, like Alphabet and Meta Platforms, are pouring investment into building out AI infrastructure. They, and even smaller AI customers, need more and more AI compute -- the graphics processing units (GPUs) or AI chips that power AI tasks.
Nebius offers this, allowing customers to rent access to it as well as a variety of managed services to support their AI platforms. Some companies, such as Microsoft, for example, may own their own GPUs and data centers but may also turn to Nebius for additional infrastructure. Smaller players might not invest in GPUs but instead rent from Nebius as needed. This means Nebius could attract a broad range of companies during this infrastructure scale-up and beyond.
And moving forward, as AI is applied to real-world situations, compute continues to be necessary to power models as they do their job of solving problems. All of this suggests Nebius could see ongoing demand for its services as the AI story unfolds, and that should support significant revenue growth.
An increased forecast
In the latest quarter, Nebius forecasted an annualized revenue run rate for its AI business of $900 million to $1.1 billion by the end of this year. That's up from an earlier estimate of $750 million to $1 billion. Nebius operates two other units, one specializing in autonomous driving technology and another focused on tech career training, but its core AI cloud business is driving growth and has even reached positive adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) ahead of schedule.
Of course, Nebius faces some challenges moving forward, such as funding the necessary scale-up to meet the needs of customers and potential customers. For example, Nebius recently closed a public offering of shares and a private offering of convertible senior notes, raising more than $4 billion to support such spending.
So, investing in Nebius involves some risk because the company must build up debt to grow, and at the same time, any potential slowdown in tech spending could weigh on revenue and the stock's performance. This means Nebius stock may not be the best choice for cautious investors, at least at the moment, but could be an interesting option for investors who don't mind these risks.
An opportunity for aggressive investors
Now, if you're an aggressive investor and decide to buy Nebius, could the stock be your ticket to becoming a millionaire? Let's say you invest $10,000 in the stock, and it becomes a 10-bagger -- if demand continues to soar and earnings climb, this is possible. Such an increase would bring Nebius to a $267 billion market cap, which also could happen in such a scenario. This would bring the value of your investment to $100,000, which is great, but far from $1 million.
And all this brings me to the following conclusion: It's unlikely that one stock, on its own, unless you invest a massive amount -- and that's way too risky -- will make you a millionaire. But the good news is that a promising stock like Nebius could help you along the path to millions if you add it to a portfolio that's well diversified across quality stocks and hold on for the long run.
