Why Nebius Stock Fell Today
Key Points
Nebius is raising capital to finance its expansion initiatives.
Investors are concerned about the costs.
- 10 stocks we like better than Nebius Group ›
Shares of Nebius Group (NASDAQ: NBIS) pulled back on Tuesday after the cloud platform operator disclosed its plans to issue debt to fund its massive infrastructure build-out.
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Supplying the AI giants with vital computing resources
Prior to Tuesday, Nebius' stock price was up more than 350% over the prior 12 months, following blockbuster deals with multiple artificial intelligence (AI) leaders.
In September, Nebius reached an agreement to supply Microsoft with computing capacity valued at up to $19 billion over five years.
Last week, Nebius announced a $2 billion investment from Nvidia to accelerate the development of high-performance computing infrastructure.
And just yesterday, Nebius' shareholders celebrated news of another 5-year deal valued at up to $27 billion to supply AI capacity to Meta Platforms.
Data centers are expensive
However, today, investors cringed as the costs of building these facilities became more apparent.
Nebius said it plans to issue $3.75 billion in convertible senior notes in a private offering. It intends to use the proceeds to fund the construction of data centers and the advanced AI chips required to power them.
Shareholders are likely concerned about the potential dilution of their equity stakes in Nebius if debt holders convert their notes into shares.
Ultimately, the debt sale is a reminder that Nebius' enormous infrastructure expansion plans won't be cheap -- and that it's not certain that the projected benefits will outweigh the costs.
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Joe Tenebruso has 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.
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