In the realm of data center stocks backed by Nvidia, investors are increasingly drawn to CoreWeave. However, another formidable contender is quietly gaining traction.
Since OpenAI’s commercial launch of ChatGPT on November 30, 2022, Nvidia’s shares have skyrocketed by over 900%. As of July 16, Nvidia’s market capitalization reached an astounding $4.2 trillion, cementing its status as the most valuable company globally.
These developments highlight Nvidia’s dominance in the artificial intelligence (AI) landscape. This growth is not solely due to its technological prowess but also its strategic alliances that have significantly contributed to its ascent.
Nvidia’s Investment Portfolio
According to Nvidia’s latest 13F filing, the company has investments in several businesses, including:
– CoreWeave
– Arm Holdings
– Applied Digital
– Recursion Pharmaceuticals
– WeRide
Among these, CoreWeave and Nebius are key players in the data center infrastructure market. While each has its merits, Nebius emerges as a hidden gem with significant potential.
Understanding Nebius
Nebius has carved a unique path in the AI sector. The company made its debut on the Nasdaq Stock Market in late 2024 following a spin-off from Russian internet giant Yandex. Subsequently, Nebius raised $700 million through a private placement, with Nvidia among the participants.
Nebius, like CoreWeave, can be described as a neocloud. It offers access to Nvidia’s GPUs via a cloud-based infrastructure services platform, with data centers across Europe and the U.S. While it competes with CoreWeave and Oracle in the infrastructure-as-a-service domain, there is ample room for multiple winners.
The Surge in AI Infrastructure Spending
This year, cloud hyperscalers Microsoft, Alphabet, and Amazon are projected to allocate approximately $260 billion in capital expenditures, much of which will be directed toward AI data centers and enhanced chip access.
Additionally, Meta Platforms recently invested $14.3 billion into data labeling start-up Scale AI. The social media and metaverse giant is also aggressively hiring top researchers from OpenAI and other platforms to establish Meta Superintelligence Labs (MSL).
These investments underscore the necessity for high-performance compute power and integrated infrastructure services, aligning with the growing requirements of AI developers.
Nebius: A Lucrative Investment Opportunity?
By the end of the first quarter, Nebius’ AI infrastructure business achieved an annual recurring revenue (ARR) run rate of $249 million, marking a 684% year-over-year growth. Management projects an ARR run rate between $750 million and $1 billion by year-end, indicating its strong positioning amid rising infrastructure spending.
Goldman Sachs analyst Alexander Duval recently set a price target of $68 for Nebius, implying a 28% upside from the July 16 closing price. Arete Research’s Andrew Beale is even more optimistic, with an $84 price target suggesting a nearly 60% discount.
While Nebius’ 139% share price increase might raise concerns of being overbought, its prospects remain promising. CoreWeave’s public debut earlier this year and Oracle’s success in infrastructure services underscore the credibility of the neocloud sector.
Nebius, though smaller than CoreWeave and Oracle, has largely been influenced by macroeconomic trends. However, considering its robust financial growth, its current valuation appears more grounded and could be undergoing a long-overdue correction.
Nebius stands as a compelling opportunity compared to its peers, with considerable upside potential as Wall Street analysts suggest. It holds the potential to emerge as a disruptive force in the cloud infrastructure and AI data center markets.
Note: This article is inspired by content from https://www.fool.com/investing/2025/07/20/could-this-monster-nvidia-backed-artificial-intell/. It has been rephrased for originality. Images are credited to the original source.