Nvidia Just Gave Incredible News to Nebius Stock Investors
Key Points
Nvidia is going to invest $2 billion in Nebius to help the latter accelerate the deployment of AI data centers.
Nebius has a solid backlog and can quickly convert it into revenue with Nvidia's funding.
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Shares of Nebius Group (NASDAQ: NBIS) were soaring on March 11 after news emerged that Nvidia (NASDAQ: NVDA) plans to invest $2 billion in the neocloud infrastructure provider to help accelerate the build-out of the latter's dedicated artificial intelligence (AI) data center infrastructure.
Nebius stock has surged impressively over the past year, driven by the company's exponential revenue growth as it plays a key role in the AI infrastructure ecosystem. It builds dedicated AI data centers equipped with Nvidia's chip systems and then rents out the capacity to customers for a fee. Importantly, Nebius' full-stack AI infrastructure platform also gives users access to managed software services, which explains why its platform is in great demand.
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Let's see what the latest investment from Nvidia means for Nebius.
Image source: Getty Images.
Nvidia said it will help Nebius quickly build more data center capacity
The demand for AI-focused computing capacity in data centers is exceeding supply. Goldman Sachs estimates data center demand will exceed the available supply by an average of 10 gigawatts (GW) over the next three years. Nebius is trying hard to fill this gap.
It added 170 megawatts (MW) of data center capacity in 2025, well ahead of its 100 MW target. What's more, Nebius expects to end 2026 with 800 MW to 1 GW of active data center capacity. Importantly, the company aims to increase its contracted data center capacity, which refers to the amount of electricity it has secured from utility companies to power new data centers, to 3 GW by the end of 2026.
The funding from Nvidia will enable Nebius to purchase more equipment to power additional data centers. Even better, Nvidia points out that Nebius will get early access to the former's upcoming generation of Vera Rubin AI chips, which are expected to have significantly lower inference costs. Nvidia said it will also help Nebius put more than 5 GW of data centers into operation by 2030.
That would be a significant increase over Nebius' active capacity at the end of 2025.
Nebius' growth could get a nice shot in the arm after this move
Analysts expect a whopping 531% increase in Nebius' revenue in 2026 to $3.35 billion. Importantly, the forecast for the next couple of years is quite solid.
Data by YCharts.
However, the latest funding boost from Nvidia could help Nebius outpace analysts' expectations. That's because it can now accelerate data center deployment, which will allow it to convert its backlog into revenue at a faster pace.
It is worth noting that Nebius already has more than $20 billion in orders from two leading hyperscalers in the U.S. Moreover, the capacity constraints suggest that any additional power that it brings online is likely to be consumed quickly by customers. So, it won't be surprising to see this AI stock sustain its impressive momentum and fly higher following the latest investment from Nvidia.
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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Goldman Sachs Group and Nvidia. The Motley Fool has a disclosure policy.
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