Nebius Group (NBIS -3.35%) has been one of the most exciting stock market stories of the year so far. The company operates in the red-hot growth space of artificial intelligence (AI), offering AI customers something they need more than anything else right now: access to compute to run their workloads.
These customers have rushed to Nebius, and that's resulted in soaring revenue in recent times. The stock price has followed, with Nebius surging more than 300% this year. You might worry, though, that after such an increase, the most lucrative part of this story for investors may be in the past. Still, we're in the early stages of AI growth as players continue to build out infrastructure and are just getting started when it comes to actually applying AI to real world situations.
Against this backdrop, is Nebius stock a buy now? Let's find out.
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From Yandex to Nebius
So, first, let's take a closer look at Nebius' business. The company, in its current form, hasn't been around for very long. Its origins are in Yandex, a company that sold off its Russian businesses last year, renamed itself Nebius, shifted its headquarters to Amsterdam, and refocused from general technology and internet to offering neocloud services.
Neocloud specializes in infrastructure for AI, so it stands out from general cloud providers that offer a wide variety of cloud-based services. And this business also offers customers the ability to rent its graphics processing unit (GPU)-powered compute as needed. This saves them time and money because they don't have to invest in expensive GPUs and build out infrastructure. They can simply turn to a player like Nebius.
Nebius' growth so far shows customers appreciate this sort of offering. The company in the most recent quarter reported a 625% increase in revenue and, based on the demand it's observed, increased its annualized revenue run-rate guidance to the range of $900 million to $1.1 billion from an earlier forecast for $750 million to $1 billion. It's important to keep in mind that analysts expect today's billion-dollar AI market to reach beyond $2 trillion a few years from now. So Nebius could be very early in its growth story.
Nebius and CoreWeave
Nebius, in the neocloud space, faces competition from CoreWeave, but Nebius' business is a bit different because it also offers managed services for AI customers, while CoreWeave focuses on renting out compute. So, it's very possible that both of these players can continue to carve out market share and win. Demand for capacity is strong, and customers require a variety of services. All of this is great news for companies like Nebius and CoreWeave because it means there will be more than one winner in this AI revolution.
Another sign of both companies' potential: AI leader Nvidia has invested, holding shares in both of these cloud companies.
Of course, Nebius stock has climbed quite a bit this year, but it's important to keep in mind that though the company's revenue growth percentage is enormous, the level of revenue -- at $105 million this past quarter -- still is low enough to leave plenty of room for growth. All of this supports the idea that the stock may have room to run in the years to come.
Should you buy Nebius?
Now let's get back to our question: Is Nebius stock a buy right now? This depends on your investment strategy and comfort with risk. If you're a cautious investor and you want to get in on the AI theme, buying shares of a bigger cloud player like Microsoft or Amazon might be a better choice for you. Though they are heavily involved in AI, their cloud businesses offer many other services, and these companies also have long track records of earnings growth.
If you're an aggressive investor who doesn't mind the risks linked to newer technologies like AI -- for example, any potential slowdown in spending or a technology setback -- then now still is a great time to get in on Nebius. If the AI story unfolds as analysts predict, the company could see more explosive revenue growth ahead, and this may lead to winning stock performance in the years to come.
