By now, investors are familiar with the best-known artificial intelligence (AI) winners, such as the "Magnificent Seven" stocks, but there are other lesser-known AI stocks that have even outperformed some of the Magnificent Seven in the last few years.
One of them is Nebius (NBIS 7.96%), one of two fast-growing "neocloud" stocks along with CoreWeave. These companies are building data center infrastructure full of Nvidia graphics processing units (GPUs) for the specific purpose of powering AI computing. Much like traditional cloud computing services like Amazon Web Services (AWS) that allow businesses to scale up and rent computing power as needed, Nebius and CoreWeave do the same but specifically for AI applications.
Nebius emerged from the shell of Yandex, the Russian search giant that was delisted from the Nasdaq after Russia invaded Ukraine. Nebius was started as an internal cloud computing program inside Yandex, building data centers full of GPUs to run AI applications. After the invasion of Ukraine, the company divested its Russian assets, rebranded as Nebius, moved its headquarters to Amsterdam, and, following those moves, was allowed to start trading again on the Nasdaq on Oct. 21, 2024. The stock has soared since then as you can see from the chart below.
What's behind Nebius' rise?
Much like the growth of Nvidia and other explosive AI stocks, Nebius' growth is yet another testament to the surging demand for AI computing power, and it has positioned itself as a winner as capex spending on data centers soars and demand to run applications like ChatGPT rises.
In fact, the company is currently experiencing exponential growth. In the third quarter, revenue jumped 355% to $146.1 million, though that was actually short of analyst estimates at $155.7 million. That miss was one of the factors pushing the stock down in November in addition to concerns about a possible AI bubble and the broader pullback in the market.
As you might expect for a company this new and growing this fast, Nebius isn't profitable, but it nearly reported an adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) loss of just $5.2 million, though the company benefited from $99 million in depreciation, which is becoming a real cost for the company as it builds out its infrastructure.
On a generally accepted accounting principles (GAAP) basis, the company reported a net loss of $119.8 million.
Image source: Getty Images.
Is it sustainable?
Nebius and CoreWeave are both making a bold bet that future demand for AI computing power will be strong enough to make them profitable. Currently, they're both seeing extraordinary demand and are rapidly building out capacity to serve it. That has led to a risky business model as both companies have taken on debt to fund their expenditures.
Nebius has taken on $4.1 billion in debt this year, primarily through convertible debt, and it's likely to take on more to fund its expansion. If its growth suddenly slows, it could struggle to pay back that debt.
Another risk that hedge fund manager Michael Burry, known from The Big Short, pointed to is that companies like Nebius may be underestimating depreciation on the GPUs they're using to power their data centers. Indeed, obsolescence is a risk for any company relying on tech infrastructure, and cloud computing companies need to update their hardware. It's unclear, though, if Nebius is underestimating depreciation. Through the first three quarters of 2025, it recorded $223.3 million in depreciation and amortization expense, which compares to a balance of $3.31 billion in property and equipment and just $302.1 million in revenue through the first three quarters.
Overall, Nebius is a high-risk stock, but its growth potential is undeniable given its triple-digit growth rate, long runway in AI, and partnerships with companies like Microsoft and Meta.
Is Nebius a buy, then? For risk-tolerant investors looking for exposure to the AI boom, owning some shares of Nebius makes sense. However, investors should expect the stock to be highly volatile, especially as the broader market seems unsure if the AI bull run still has legs.
