Investors Who Rotated Out of Tech Are Already Regretting It. This Artificial Intelligence (AI) Growth Stock Is Up Double Digits in May.

When tariff anxiety peaked in early April, the rotation out of high-growth technology stocks was swift and decisive. Capital poured into consumer staples, utilities, and short-duration bonds. For those of you who exited positions in Nebius Group (NASDAQ: NBIS) during that period, May has been a difficult month to watch. The stock is becoming somewhat of a darling and has risen more than 35% since May began, closing at $195.09 on May 6 -- up 10% on the day alone. The artificial intelligence (AI) infrastructure build-out did not pause for the macro debate.

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Nebius has been on a tear

Nebius is an AI-native cloud company, not a cloud provider that added AI features, but a company built from the ground up to run GPU clusters for machine learning workloads. That distinction sounds super niche, but it matters more than it sounds. Legacy cloud providers like Amazon Web Services and Microsoft Azure carry decades of infrastructure designed for general-purpose compute. Nebius built its stack entirely for AI training and inference, which means denser GPU configurations, lower node-to-node latency, and a software layer engineered for the way large language models consume compute.

The company operates data centers in Finland, the United Kingdom, Israel, and a new 300-megawatt facility in Vineland, New Jersey. That New Jersey facility is the physical anchor for Nebius' relationship with Microsoft, which signed a multiyear agreement worth up to $19.4 billion to receive dedicated GPU capacity. In March 2026, Meta Platforms added its own five-year deal: $12 billion in contracted capacity, with an option extending total value to $27 billion, built on one of the first large-scale deployments of Nvidia's Vera Rubin platform. Nvidia itself invested $2 billion into Nebius in March, signaling that the chip supplier's largest customers are also its infrastructure partner's customers.

The ARR target that would redefine the company

At the end of 2025, Nebius reported an annualized revenue run rate of $1.25 billion, well above the $900 million to $1.1 billion it had guided to. The guidance for year-end 2026 ARR stands at $7 billion to $9 billion. That means Nebius is targeting a sixfold to sevenfold increase in ARR within a single calendar year. Management has not walked that number back. First-quarter 2026 results arrive on May 13, and consensus revenue expectations sit at $375 million. This is a figure that, if met, puts the ARR trajectory on course.

The contract backlog already exceeds $20 billion. Over 60% of the $16 billion to $20 billion in planned 2026 capital expenditure is funded through customer prepayments -- meaning the growth plan carries significantly less dilution risk than it would for a company raising equity to fund construction. Nebius also holds a 28% stake in ClickHouse, a high-performance database company valued at approximately $6 billion; an 83% stake in Avride, an autonomous vehicle platform valued at $3.4 billion; and a majority stake in Toloka, an AI data company backed by Bezos Expeditions. These represent roughly $5.8 billion in noncore asset value sitting inside the company that the stock price has never fully reflected.

The risks are real -- but long-term investors should stay the course

None of this is without consequence to own. Customer concentration is the most pressing concern: Microsoft and Meta together account for the majority of Nebius' contracted revenue. If either company reallocates AI spending -- toward in-house infrastructure, a competitor, or simply fewer GPUs -- the revenue trajectory breaks. Execution risk on the ARR guidance is equally significant. A sixfold ARR increase demands flawless GPU procurement, power capacity delivery, and data center construction on three continents, simultaneously. Any delay in the New Jersey facility or in the Vera Rubin platform deployment pushes revenue into quarters where investors will not be patient.

There is also the capital structure. Nebius is not yet profitable at the operating line, and while prepayments reduce equity dilution risk, the company has acknowledged it will "approach any additional capital raising opportunistically" if needed. In a volatile rate environment, that language deserves weight.

It's funny -- despite some of this bad news, the ticker doesn't seem to care. Here is the buy case stripped to its foundation: AI compute demand continues to outpace supply, and Nebius has signed contracts that prove it. The company has $20 billion in contracted backlog, the confidence of both its two largest customers and its primary chip supplier, a data center footprint expanding across three continents, and a portfolio of subsidiary businesses that most analysts haven't priced in.

Micah Zimmerman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.