Nebius Stock Is Down Over 20% From Its High. Is Now the Time to Buy?

Nebius Group (NASDAQ:NBIS) has been one of the hottest artificial intelligence (AI) stocks to own this year, as it has more than doubled in value. Entering this week, it was up over 170% since the start of 2026. The company rents out AI compute power to its customers, and demand has been through the roof.

However, the hype around the neocloud stock has cooled a bit, as it's down more than 20% from its 52-week high of just under $300. Could now be a good time for investors to buy this promising AI stock?

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The stock's valuation has come down, but it remains expensive

When a stock surges quickly, its valuation can quickly become bloated, which is the case with Nebius. While it has fallen from its high, the stock still remains priced at a significant premium. Currently, it's trading at a forward price-to-earnings (P/E) multiple of around 45. That's based on analysts' expectations of its future profits. By comparison, the average stock on the S&P 500 trades at a forward P/E of 20.

At this kind of premium, investors are pricing in a lot of future growth, which can be dangerous if it doesn't end up materializing. While AI spending remains feverish these days, calls for a slowdown in AI development could drastically change that.

If Nebius' growth doesn't remain incredibly high, it may be difficult for the stock to continue to command such a high forward P/E multiple. In its most recent quarter, its revenue skyrocketed an incredible 454%, to $582 million. As impressive as that is, that kind of growth isn't sustainable over a long time frame. A bigger concern may inevitably be on the bottom line; the company incurred a net loss of $190 million during the June quarter, despite its rapid growth.

Nebius is promising, but the stock has a lot of downside risk

At a market cap of around $60 billion, Nebius isn't a small stock anymore. It's increased significantly in value, and with that come high expectations. If the company falls short of them, then there can be considerable room for its shares to decline.

Between the Fed raising interest rates last week and there being calls for a slowdown in AI development, there are multiple reasons why investors may want to scale back their assumptions on AI spending, as companies may have more incentive to cut back than they did before. If that results in less demand for Nebius' products and services, the stock could give back even more gains.

While it has been a top AI stock to own this year, I'd hold off on buying it, as it could end up going lower in the weeks and months ahead.

David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.