Explore the Lesser-Known Artificial Intelligence (AI) Data Center Corporation that Nvidia Recently Infused with Millions
Last year, the small artificial intelligence (AI) stock, SoundHound AI, saw an unexpected surge in its shares. While SoundHound AI's voice recognition technology is an intriguing prospect in the AI realm, the primary cause of the company's extraordinary price surge was traced back to a strategic investment by tech giant, Nvidia.
Recent 13F filings indicated that Nvidia had wound up its stake in SoundHound AI and invested in a data center stock named Nebius Group (NBIS). If you're unacquainted with Nebius, rest assured that its under-the-radar status may not remain so for long.
I'm going to delve into how Nebius is playing a vital role in the AI revolution, assessing why its current valuation appears quite reasonable.
13F filing. According to Nvidia's most recent 13F, the company exited its position in SoundHound AI and took a stake in a data center stock called
Nebius and Nvidia: A Misfit Duo
Nebius was once part of a Russian internet conglomerate called Yandex. However, following Russia's invasion of Ukraine, the US and the EU imposed sanctions, leading to some captivating corporate decisions.
NBIS
In relation to Yandex, the company spun off non-Russian subsidiaries, including Nebius. The company listed independently on the Nasdaq Composite following this transaction, setting the stage for its independent venture.
Shortly after its Nasdaq debut, Nebius conducted a $700 million equity financing round, with Nvidia participating in this round, eventually becoming public knowledge, mandating a 13F filing.
Yandex. However, following Russia's invasion of Ukraine, the U.S. and European Union (E.U.) placed sanctions on Russia, which resulted in some intriguing business decisions.
Nebius and Nvidia: The Power Couple
Back in September, Nebius announced a $1 billion investment in AI infrastructure across Finland and France. As part of this initiative, the company would establish data centers equipped with Nvidia's Hopper and Blackwell GPUs.
In addition, Nebius is also expanding its presence in the US, planning to launch a new data center in Kansas City, loadened with Blackwell GPUs.
With Nebius' increasing footprint in the US and its close ties to Nvidia, it's not far-fetched to foresee Nebius becoming more integrated with ongoing AI infrastructure undertakings. Hyperscalers like Microsoft, Amazon, and Alphabet could potentially be drawn into Nebius' orbit.
ongoing AI infrastructure projects -- namely from hyperscalers such as
Value Unleashed: Nebius in Focus
According to Nebius' fourth-quarter earning press release, annual recurring revenue (ARR) is projected to hit at least $220 million by March's end, based on contracts already in place. Nebius CEO Arkady Volozh informed investors that the company's December ARR goal of $750 million to $1 billion is within reach, attributing this progress to the Blackwell rollout and expanded customer base.
Bram Berkowitz thoughtfully pointed out that Nebius could be seen as a competitor to
Here's where things start getting interesting. In a recent article, my Fool.com colleague, Bram Berkowitz, pointed out that Nebius could be seen as a competitor to private company CoreWeave, rumored to go public with a valuation of $35 billion this year. Assuming CoreWeave's predicted 2024 revenue of $2 billion, this would imply a price-to-sales (P/S) multiple of 17.5.
If Nebius were subjected to the same ratio, it could imply a valuation of between $13.1 billion and $17.5 billion for the company, depending on where it lands within its ARR guidance. Given its current market capitalization of $10.9 billion, it's reasonable to suggest that Nebius stock has untapped upside.
CoreWeave. While CoreWeave is still private, the company is rumored to be going public at $35 billion valuation -- potentially this year. Assuming reports that CoreWeave's 2024 revenue of $2 billion are accurate, that would imply a price-to-sales (P/S) multiple of 17.5.
Enrichment Insights
- Nebius' AI Advantage: Nebius' investment in advanced AI chips, Nvidia's Hopper and Blackwell GPUs, gives it an edge in the market by offering high-performance computing solutions.
- AI Infrastructure Expansion: The partnership with Nvidia allows Nebius to quickly expand its AI infrastructure across Europe and the US, making it an attractive option for companies involved in intensive AI projects.
- Diversified AI Ecosystem: Nebius' ownership of AI-focused subsidiaries such as Toloka AI for data labeling and Avride for autonomous vehicles adds multiple revenue streams and enhances its position in the AI industry.
- Investment and Funding: Nvidia's $700 million investment in Nebius has provided capital for expansion and development, which is seen as a vote of confidence in Nebius' potential.
- Market Perception: The partnership with Nvidia boosts Nebius' credibility and recognition in the market, attracting investor interest and driving up stock value.
- Growth Potential: Nebius' rapid expansion and strategic partnerships suggest strong growth potential, which could further boost its valuation if revenue targets are met.
- Given Nvidia's strategic investment in Nebius, some financial analysts are discussing the potential gains from investing in this data center stock, as highlighted in an in-line article pitch.2.Interestingly, Nebius' current dividend yield is quite low, leading some investors to question if the company's valuation might collapse on load, a concern that has not been fully addressed in recent financial discussions.
- Despite these concerns, the NASDAQ listing of Nebius following its spin-off from Yandex has attracted significant interest from finance enthusiasts, with many tracking the stock's performance closely on platforms like NASDAQ:NBIS.
- Palantir, a well-known player in the AI field, could potentially compete with Nebius as both companies focus on high-performance computing solutions, with Nvidia's Hopper and Blackwell GPUs playing a key role in Nebius' AI infrastructure.