Nebius Group (NBIS 2.43%) has been a stock market darling over the past year, with the shares soaring more than 160%. This is because the company is delivering something artificial intelligence (AI) customers want right now, and that's capacity for their workloads. And this has been driving explosive revenue growth.
The AI market is booming, and analysts expect it to reach into the trillions of dollars by the end of the decade. This sounds like great news for Nebius. But it's important to look at the complete picture, which may not result in every AI stock soaring. After Nebius' enormous gain, could the stock possibly stumble -- and maybe even go to $0? Let's find out.
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Compute for AI workloads
So, first, a quick note on the Nebius story up until this point. The company sells its customers access to compute for their AI workloads, and it also offers managed services. This has been popular with AI customers because it's helped them gain speed and keep their costs in check. It's often faster and cheaper to turn to a player like Nebius than to build out one's own infrastructure.
As a result, Nebius has generated amazing growth, as we can see in the latest quarter when revenue surged more than 300%. At the same time, Nebius has attracted the business of market giants such as Microsoft and Meta Platforms. Both have signed billion-dollar deals for capacity with the company in recent months.
NASDAQ: NBIS
Key Data Points
All of this could result in significant growth for Nebius. But before you rush to get in on the stock, it's important to keep a couple of things in mind. In order to serve this great demand, Nebius must take on debt -- this always represents a risk -- and we don't yet know if the growth we're seeing will equal strong profitability down the road.
Nebius' competition
Second, Nebius faces competition from other AI cloud specialists such as CoreWeave, as well as big cloud service providers like Amazon and Microsoft (so Microsoft is a customer and a rival). Once these giants fully build out AI infrastructure, their resources and customer base may push them ahead -- and limit Nebius' growth potential.
So, does all of this mean Nebius' stock is going to $0? I don't think that's likely. But I do think that it's important to consider your investment strategy and feelings about risk before you invest in this highflier. While aggressive investors may like Nebius' explosive growth, the company still faces some uncertainty. And any disappointment could weigh heavily on the stock. That's why cautious investors may want to skip Nebius and watch any action from the sidelines right now.
