Nvidia's newest investment to watch
Toward the end of 2024, the Russian internet conglomerate Yandex divested itself of a number of its subsidiaries. One of those that it spun off is Nebius Group (NBIS 4.44%), a Dutch data center operation that Nvidia took a stake in.
Nebius specializes in outfitting data centers with architectures for AI chipware. It's currently working on equipping facilities in France, Finland, Iceland, Kansas City, and New Jersey with Nvidia's new Blackwell GPU chipsets.
Given the rising levels of investment in AI infrastructure, I'm cautiously optimistic that Nebius is in a good position to continue expanding its footprint across Europe and the U.S.
Comparing Nebius to another hot company
As I pointed out in an article in late February, CoreWeave and Nebius are comparable companies. At that time, there were rumors that CoreWeave was preparing to go public.
Those rumors proved accurate: The company recently filed its S-1, making much more detailed financial information about CoreWeave public knowledge.
In 2024, CoreWeave generated $1.9 billion in revenue -- up 736% from 2023. The company also boasted more than $15 billion in remaining performance obligations (RPO). While this all looks impressive, an investment in CoreWeave will not be without risks. More than three-quarters of its revenue stems from just two customers. In addition, it reported a net loss of $863 million last year.
Nevertheless, CoreWeave is reportedly seeking a valuation of about $35 billion in its initial public offering (IPO). Assuming it reaches this target, CoreWeave would begin trading at a price-to-sales ratio of about 17.5.
Why Nebius stock could skyrocket in 2025
I think the market is granting premium multiples to most companies that are connected to AI in some form or fashion. Furthermore, AI infrastructure players working with cloud hyperscalers and GPU developers are among investors' favorites.
These dynamics make me think CoreWeave could see some major action around its IPO, despite its high level of customer concentration risk and its rising losses. After all, the AI trend's biggest beneficiary, Nvidia, has notable customer concentration as well -- but that hasn't stopped investors from flocking to the stock over the last two years. A successful IPO for CoreWeave would also bode well for Nebius, as it would likely cause more investors to hunt for similar businesses that are still flying under the radar -- much like SoundHound AI was prior to its connection with Nvidia became public.
Nebius provides strategic value to Nvidia -- unlike SoundHound AI. Given the integral part Nebius is playing in the Blackwell rollout, I would not be surprised to see Nvidia tighten its relationship with the company.
For all of these reasons, I think Nebius stock could see some exciting action throughout 2025 as demand for AI infrastructure rises and Nvidia continues to dominate the GPU landscape.
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