Introduction: Betting on the Builders of Tomorrow’s AI Infrastructure

In the gold rush of AI infrastructure, companies that own the tools—GPUs, software stacks, and the data centers that run the models—are not just enabling the future; they are the future. Amidst this surge, Nebius (NBIS) has emerged as one of the most talked-about and controversial players in the market.

Founded by Arkady Volozh, the former CEO and co-founder of Yandex (the so-called “Google of Russia”), Nebius is not your typical startup. It was born out of geopolitical upheaval and reborn in Western Europe with a single goal: to create a vertically integrated AI infrastructure powerhouse. While competitors rely on piecemeal services or resell capabilities from hyperscalers like AWS and Google Cloud, Nebius aims to build everything in-house—software stack, data center management, and custom hardware integration—buying only GPUs from NVIDIA.

The AI infrastructure market is expected to exceed hundreds of billions in annual value over the next decade, driven by the explosion in large language models, autonomous systems, and real-time analytics. Nebius is aggressively placing its bets, attracting high-profile backers such as NVIDIA and Bezos Expeditions, and reinvesting every dollar into growing its core GPU-as-a-service and AI development platform business.

But here’s the real question for investors: Is Nebius the next multi-bagger in the AI arms race or another high-burn, high-hype bet without a moat?

In this article, we’ll take you through a full analysis of Nebius—from its origin story to its business model, financial health, and investment prospects. We’ll also explore the challenges that lie ahead in this fiercely competitive landscape and why timing your entry might be just as important as picking the right horse.

1. Company Origins: From Yandex DNA to European Reinvention

Nebius’s story begins in Russia—but not in the way you might think. After the Russia-Ukraine war escalated, Arkady Volozh and a core team of over 100 software engineers from Yandex left the country to re-establish operations in the Netherlands. These were not junior recruits; they were the elite product builders and system architects behind Yandex’s cloud and AI operations. In effect, they took the brain of Yandex Cloud and rebooted it under a new name—Nebius.

This team became the “soul” of the company, embodying a deep engineering-first culture. As one analyst put it: “We didn’t just bring code—we brought DNA.” This Yandex heritage provided Nebius with a critical early edge in software-defined infrastructure and platform integration.

What makes this founding story particularly compelling for investors is that the company wasn’t born out of opportunism—it was born out of necessity and vision. The core team had already built one of the most sophisticated cloud platforms in Eastern Europe. Now, with the freedom to operate globally and attract Western capital, they are reapplying that expertise in a much larger, more lucrative market.

Since its inception just a few years ago, Nebius has grown rapidly, culminating in a U.S. public listing and attracting strategic investments from NVIDIA, validating its potential from one of the key gatekeepers of the AI age.

This background gives Nebius a compelling “founder edge”—an experienced leadership team, product-market fit awareness, and a proven ability to ship. For growth-stage investors, this is often the intangible quality that separates true compounders from mere hype.

2. Business Model: Focused Power and Vertical Integration

Nebius operates under a focused and aggressive business model summarized by two core principles: concentrate power and vertical integration.

a. Focus on Core AI/GPU Platform

The company has made a clear strategic pivot to double down on its AI infrastructure business, particularly GPU cloud services and full-stack AI platforms. While it originally incubated multiple business lines—ClickHouse (data lake), Toloka (data labeling), TLE10 (education tech), and AVRI (autonomous driving)—Nebius has spun off or reduced control over these units especially after being listed.

Notable examples:

• ClickHouse, now valued at $6 billion, is no longer under Nebius’s control but still represents a major equity investment.
• Toloka, backed by Bezos Expeditions, has also moved into a semi-independent status. Its financials will no longer appear in Nebius’s consolidated statements.

This restructuring allows Nebius to focus capital and talent on its highest-potential growth engine: cloud-based GPU compute and AI platform services. As of 2024, this segment accounted for 55.3% of revenue, projected to hit 70–90% in 2025.

b. Vertical Integration: Building Everything In-House

Unlike competitors like Coreweave, Lambda Labs, or even big clouds like AWS and Azure, Nebius designs its own servers, builds its own data centers, and develops its own software stack—from orchestration to LLM fine-tuning APIs.

This in-house approach allows Nebius to:

• Offer lower GPU pricing (20–25% cheaper than competitors)
• Control latency and performance through tailored server optimization
• Serve developers and AI-native firms with more flexible “bare metal” or platform-level solutions

The only major external dependency is GPUs, primarily from NVIDIA.

Quote from a company insider: “We build it, we own it, we support it.”

This integration could prove crucial as GPU markets tighten and hyperscalers compete for allocation. Nebius’s ability to scale cost-efficiently gives it a potential edge in gross margins and pricing flexibility.

3. Infrastructure and Capacity Expansion

To meet booming demand, Nebius is pouring capital into data center infrastructure across Europe and the U.S.:

• Finland: Core hub with 14,000–20,000 GPUs
• France and Iceland: Additional colocation facilities
• United States: Major growth market
  • Kansas (Q1 2025): Will host thousands of H100 and B200 GPUs
  • New Jersey: Targeting NVIDIA’s newest GB200 chips

Total GPU count is expected to rise from 38,000 in early 2025 to 52,000 by year-end. That’s a 37% growth in just 12 months, outpacing most peers.

Additionally, Nebius has announced plans to invest over $1 billion in European infrastructure in mid-2025—an eye-popping figure that reflects both the ambition and capital-intensity of this market.

However, such growth comes at a cost. CapEx is projected to exceed $1.5 billion in 2025, a staggering increase that requires careful debt and liquidity management. Fortunately, the company currently maintains low debt levels—but this is an area investors must watch closely.

4. Financial Insights: Growth, CapEx, and Revenue Expectations

a. Key Metric: Annual Recurring Revenue (ARR)

Nebius tracks its software business using ARR, calculated by multiplying the most recent quarter’s revenue by 12. According to projections:

• Q1 2025 ARR for the core AI business is expected to reach $220 million
• End-of-year 2025 ARR target: $750 million to $1 billion
• Full-year revenue guidance: $500–700 million

If Nebius hits even the midpoint of its ARR target ($875M), it implies strong sequential revenue growth and validates the high investor expectations. For context, Q1 revenue is estimated at $62.9 million, slightly ahead of the market’s $57.73M consensus.

b. Cost Structure and CapEx

Capital expenditures are ballooning—expected to hit $1.5 billion in 2025. This is driven by GPU purchases, data center expansion, and internal R&D for infrastructure.

• Depreciation/Amortization was 14% of operating expenses in 2024
• These costs will grow as the asset base increases, impacting near-term profitability

Fortunately, the business remains asset-light outside of GPU infrastructure, and most software revenue should scale with minimal incremental cost.

c. The Earnings Watch: Crucial for Stock Price

Nebius missed ARR targets in late 2024, which caused a major dip. Q1 2025 earnings are a make-or-break moment for investor sentiment. Missed guidance could trigger a sell-off; meeting or beating expectations may catalyze a re-rating of the stock.

5. Investment Thesis: High Risk, Hypergrowth Potential

So, should investors jump in?

The bull case:

• High-growth industry: AI infra is one of the highest-value verticals in tech
• Experienced team: Proven operators from Yandex with a global mindset
• Platform strength: Full-stack vertical integration, pricing power, and flexibility
• Early-stage upside: Hypergrowth phase can deliver 3x–5x returns if executed properly

The bear case:

• Lack of moat: Analysts admit that advantages like pricing and flexibility are “vague” and replicable
• High CapEx: Heavy upfront investment with uncertain returns
• Intense competition: From Coreweave, AWS, and other hyperscalers
• Execution risk: One bad earnings report could sink momentum

Should We Invest in NBius? Suggested Strategy:

If you’re an investor with a medium risk tolerance and a long view, this could be a good 3–5% position. For more aggressive investors, consider scaling to 5–8% if Nebius delivers consistently on revenue and ARR.

This is not a long-term hold for everyone, but more of a 2–3 year play during the company’s hypergrowth phase. Exit or reduce position once competition intensifies or growth plateaus.

Conclusion: Watch Closely, Act Strategically

Nebius is not for the faint of heart—but few early-stage growth stories are. It has a unique founding team, a bold vertical integration strategy, and the backing of AI royalty like NVIDIA. Its infrastructure footprint is expanding rapidly, and its revenue trajectory is one of the fastest in the industry.

But it’s also operating in one of the most brutal, capital-intensive markets in tech. The line between “next big thing” and “next big bust” is razor thin. As with all high-beta growth stocks, quarterly performance matters—misses can be punished, while beats are rewarded handsomely.

For discerning investors, Nebius offers a window into the future of AI infrastructure. If it executes well, its valuation may have plenty of upside left. Just remember: in this space, you’re not just betting on technology—you’re betting on operators.

Disclaimer: This article is for educational purposes only and does not constitute investment advice. Investors should conduct their own due diligence before making any financial decisions. We are not responsible for any investment losses incurred based on the information provided in this article.