The dog days of summer had nothing on Nebius Group (NBIS -2.19%). Shares of the hyperscaler soared more than 25% in August, and the momentum continued.
With the company inking an agreement with a notable name in the tech industry -- and Wall Street providing some bullish takes on Nebius stock -- investors found sufficient cause to buy shares. According to data provided by S&P Global Market Intelligence, Nebius stock rose 64.3% in September.
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A multibillion-dollar agreement has a funny way of grabbing investors' attention
After jumping higher in August, Nebius stock didn't do much through the first week of September. In the second week, however, the fireworks began. On Sept. 8, Nebius announced that it will provide Microsoft with dedicated capacity to support its artificial intelligence (AI) workloads from its data center located in New Jersey starting later this year and lasting for five years. In total, the contract is valued at $17.4 billion through 2031.
Nebius also hinted that the deal with Microsoft is a harbinger of things to come. Arkady Volozh, CEO of Nebius, stated in the accompanying press release:
Nebius's core AI cloud business, serving customers from AI start-ups to enterprises, is performing exceptionally well. We have also said that, in addition to our core business, we expect to secure significant long-term committed contracts with leading AI labs and big tech companies. I'm happy to announce the first of these contracts, and I believe there are more to come.
Another catalyst for the stock's outperformance came in the form of analysts' optimistic outlooks.
- BWS Financial hiked its price target to $130 from $90, maintaining a buy rating on the stock.
- DA Davidson raised its price target to $125 from $75.
- Maintaining an outperform rating, Northland boosted its price target 158% to $206 from $77.
Is it too late to nab shares of Nebius?
For investors waiting on the sidelines for an opportunity to buy Nebius stock during a pullback, the stock refuses to slow down. As of this writing, Nebius stock is already up almost 20% in October. With the stock's tremendous performance, shares are now trading at 122 times sales. For comparison, CoreWeave, a prominent hyperscaler competitor, trades at a considerably lower valuation of 14.8 times trailing sales.
While value investors may want to skip over Nebius stock, those committed to holding on to it for several years -- at least -- may be rewarded as the company provides leading cloud computing solutions uniquely suited for AI applications. Of course, those looking to mitigate risk may also want to consider an exchange-traded fund like the Roundhill Generative AI ETF, in which Nebius has a 2.8% weighting.
