Up More Than 400% in 1 Year, Is This Nvidia-Backed, Red-Hot AI Stock a Buy?

There's a corner of the artificial intelligence (AI) infrastructure trade that just keeps getting hotter -- and Nebius Group (NASDAQ: NBIS) is right in the middle of it. The Amsterdam-based AI cloud company has spent this past year stringing together one validating announcement after another, including a $2 billion strategic equity investment from chipmaker Nvidia (NASDAQ: NVDA) and multibillion-dollar capacity deals with two of the world's largest tech companies. After a blowout first-quarter report last week, shares are now up more than 400% over the last 12 months, trading near all-time highs.

The underlying business is undeniably growing at a staggering rate. And the neocloud appears to be in the early innings of a multi-year build-out aimed at servicing surging AI demand. But after a run like this, the stock arguably already prices in a great deal of future success -- leaving little margin for error.

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A business growing at a breathtaking pace

To be fair to the bulls, Nebius's recent results are nothing short of staggering. The company's first-quarter revenue rose 684% year over year to $399 million -- an acceleration from 547% growth in the fourth quarter of 2025. Even better, the core AI cloud business, which now accounts for 98% of group revenue, grew 841% year over year and 82% sequentially to $390 million. Showcasing how big the business has become, annualized run rate revenue hit $1.92 billion at the end of March -- up more than 50% from $1.25 billion just three months earlier.

Profitability is moving in the right direction, too. Nebius's adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) swung to a $130 million profit in the period from a $54 million loss a year ago. And the AI cloud segment's adjusted EBITDA margin nearly doubled to 45% from 24% in the fourth quarter. That kind of margin expansion is unusual -- and notable.

Then there's the company's impressive customer roster.

Earlier this year, Nebius signed an agreement with Meta Platforms (NASDAQ: META) valued at up to $27 billion, structured as a $12 billion fixed compute commitment plus a $15 billion flexible capacity option over five years. That sits on top of a deal with Microsoft inked last September, valued at $17.4 billion and potentially up to $19.4 billion. And Nvidia recently took a $2 billion equity stake -- a striking endorsement of where Nebius sits in the AI ecosystem.

"Everything we build, we sell, and we are still in the very early days," said Nebius founder and CEO Arkady Volozh during the company's first-quarter earnings call.

A stock priced for perfection

But all the strong demand in the world doesn't make this stock a buy at any price.

With its torrid year-to-date gain, Nebius now commands a market capitalization of about $55 billion. Even at the midpoint of management's 2026 revenue guidance of $3 billion to $3.4 billion, the company trades at roughly 17 times forward sales -- and that assumes Nebius hits its already ambitious targets.

The bigger concern is what it will cost to keep the story going. Management recently raised its 2026 capital spending plan to a range of $20 billion to $25 billion -- up from a prior range of $16 billion to $20 billion. That is an enormous outlay for a company still posting losses on an adjusted basis. Nebius's adjusted net loss in the first quarter widened to $100 million, and capital expenditures in the period were nearly $2.5 billion -- easily outstripping the $2.3 billion in operating cash flow -- a figure that itself was boosted significantly by customer prepayments.

How does the company plan to fund the rest?

During its most recent earnings call, Nebius chief financial officer Dado Alonso pointed to asset-backed debt secured against the Microsoft and Meta contracts, potential corporate debt, and an at-the-market equity program for up to 25 million Class A shares. Capital-raising at this scale carries execution risk and the potential for shareholder dilution.

Then there's customer concentration.

The Meta agreement is transformational, but it also tethers a meaningful slice of future revenue to a single hyperscaler -- and to a build-out that doesn't begin delivering capacity until early 2027.

So is the stock a buy after this run?

I would prefer to stay on the sidelines. Nebius's execution has been exceptional, and the long-term opportunity in AI infrastructure remains significant, no doubt. But at this valuation, investors are paying for years of near-flawless execution as the company scales into a backlog that will require tens of billions in additional spending to fulfill.

With so much optimism already baked into the price, I'd rather wait for a more attractive entry point.

Daniel Sparks and his clinets have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Meta Platforms, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.