Can New Era Energy & Digital Become the Next Nebius Group?
Key Points
New Era Energy & Digital has limited capital to build out its 8.4-gigawatt portfolio.
Hyperscaler deals could unlock additional lending capital and lead to prepayments, making the build more financially feasible.
The critical 7-gigawatt New Mexico site is secured through an option that must be exercised by Nov. 5, 2027, to remain in the company's possession.
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Nebius Group (NASDAQ: NBIS) stock has more than doubled this year. The neocloud company has attracted plenty of buzz as hyperscalers seek to expand their artificial intelligence capacity. While some investors believe Nebius has more room to run, others are looking for the next Nebius.
One possibility is New Era Energy & Digital (NASDAQ: NUAI), whose stock has been very volatile as investors temper long-term hopes with the current reality. New Era stock is up more than 120% this year.
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The company isn't as far along as Nebius. Perfect execution could indeed turn it into the next Nebius, but it's a big bridge to cross.
Image source: Getty Images.
The 8.4 gigawatt pipeline
One of the reasons why I like New Era Energy & Digital is that it has an estimated total capacity of 8.4 gigawatts, which is more than the 5 GW Nebius expects to have this year. If New Era Energy & Digital realizes $25 million per megawatt, that pipeline could eventually command $210 billion per year.
The crown jewel is an option on a New Mexico site that can support a 7-gigawatt data center. If New Era Energy & Digital exercises the option and builds a data center on that land, it could command substantial revenue.
New Era Energy & Digital is also developing a 1.4 gigawatt site in Texas. The company has construction permits for this site and will launch it in phases, with the first 200 megawatts expected to be delivered by the fourth quarter of 2027.
The path to realized revenue is filled with execution risks
Nebius has a market cap of over $60 billion and multiple deals with hyperscalers. Nebius is already generating revenue from some of its facilities and is much closer to energizing and delivering parts of its 5-gigawatt portfolio than New Era Energy & Digital is.
That type of setup makes it a lot easier for Nebius to borrow capital at attractive rates. Meanwhile, New Era Energy & Digital has not secured any hyperscaler deals for its sites. Without a deal, it's much harder for the company to secure additional capital from lenders.
It has $270 million undrawn from a Macquarie Facility loan with a three-year term and $84.8 million in cash. Nvidia CEO Jensen Huang said that a 1-gigawatt data center costs between $50 billion and $60 billion to build, so New Era Energy & Digital will need a lot more capital.
These numbers make it easy to wonder whether the company can actually exercise its option on the 7-gigawatt New Mexico site and turn it from dirt into a completed facility.
New Era Energy & Digital needs a deal with a hyperscaler
Nebius and other neocloud providers have been using a prepayment model to secure deals and raise capital. These prepayments have covered 50% to 60% of Nebius' capital expenditures. They make the company less reliant on shareholder dilution, and GPU financing acts as another funding source.
Most customers are willing to prepay because Nebius has a proven record of delivering compute to the largest tech companies. New Era Energy & Digital lacks that history, which limits its funding options. Securing a hyperscaler deal for its Texas site could give it much more leverage when it approaches lenders, but it's easy to doubt whether New Era Energy & Digital will start with terms like those in Nebius' current deals.
The company doesn't have much time to sign big deals. Its option contract for the critical New Mexico site expires on Nov. 5, 2027. New Era Energy & Digital also needs a big tech contract to secure more financing for its Texas site, which remains the priority.
New Era Energy & Digital stock could surge quickly if it exercises the option on the 7-gigawatt site and announces a massive hyperscaler commitment for that location, especially if it comes with a generous prepayment. However, its current capital and ability to raise funds are limited compared to the long-term vision bullish investors have in mind.
It's a stock worth monitoring because its price can swing sharply in either direction as updates emerge about its options contract, capital requirements, and hyperscaler deals.
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Marc Guberti has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
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