Generative artificial intelligence (AI) is still the biggest technology hype cycle of the last few years. And with shares up by 390% since the start of 2025, Nebius Group (NBIS -7.63%) is a clear beneficiary of industry momentum. But is it a millionaire maker? Let's dig deeper into the company's strategy and fundamentals to decide if it's a good buy.
What is Nebius, anyway?
The Russian economy was hit with devastating sanctions after it invaded Ukraine in 2022. This situation made it incredibly difficult for Russian multinationals like Yandex to operate. The company's shares were delisted from the Nasdaq that same year. And in 2024, it inked a deal to divest its entire Russian business to refocus on Western European markets through a rebranded entity called Nebius Group.
But while the old Yandex operated a diversified business model that included search, finance, and other verticals, Nebius focuses on AI infrastructure and cloud computing. It runs large clusters of graphics processing units (GPUs) in order to "rent out" computing power to start-ups and other more consumer-facing enterprise clients.
Business is booming
Nebius Group's recent growth has been explosive, with second-quarter revenue jumping 625% year over year to $105.1 million amid high demand for AI infrastructure. Management plans to accelerate momentum through capital expenditures (capex), which involves increasing its data center footprint around the world (including a big push into the U.S. market) and stockpiling advanced AI chips from suppliers like Nvidia.
Like its American rivals, Nebius is aggressively targeting synergistic opportunities outside its core business. The company's subsidiary, Avride, focuses on self-driving cars and delivery robots and boasts a partnership with Uber Technologies to provide services in several U.S. cities. But while this is exciting, it still looks more like an experimental venture instead of a serious growth driver. Competition in the autonomous mobility space is stiff, with rivals like Waymo and Tesla all vying for a slice of the pie.
Nebius will also compete with U.S. cloud computing providers, which operate a very similar AI infrastructure strategy, while enjoying better brand recognition and bigger pockets. Companies like Alphabet and Amazon can spend tens of billions on GPUs while also leveraging their own in-house chip designs to lower prices for consumers.
Is Nebius a Millionaire-Maker Stock?
Image source: Getty Images.
Nebius is very exposed to the AI infrastructure market, which means its prospects look good as long as the overall opportunity keeps expanding. But as far as risks go, the biggest threat could be overexpansion. The company spent a whopping $808 million in capex in 2024, and it is on track to spend even more this year. If the market doesn't continue to expand as fast as management expects, this strategy could backfire.
Investors should not underestimate this risk. Earlier this month, the International Monetary Fund and Bank of England both issued warnings about the sustainability of AI-related spending and its effect on tech company valuations. They note that global uncertainty related to factors like the volatile U.S. tariff policy could trigger investors to reevaluate their appetite for AI-related risk. Another headwind could come from enterprise clients slowing their adoption of the new technology.
With a price-to-earnings (P/E) multiple of 114, Nebius trades at a tremendous premium over the S&P 500 average of just 3.4. While this makes sense considering the company's epic top-line growth rate, it also means that years of future growth are already baked into the stock price. While Nebius is far from a bad company, investors looking for multibagger returns shop around for a better deal in the AI industry.
