By Asa Fitch
Pure-play AI investments are inherently risky, as returns aren't yet close to matching the trillions of dollars being spent on tech's latest craze.
But some bets are riskier than others. And one of them -- AI cloud player Nebius -- has some intriguing upsides.
Nebius isn't as well-known as its nearest competitor, CoreWeave, which became a success story early in the artificial-intelligence boom. CoreWeave started out in cryptocurrency mining, then pivoted to computing for video production during the pandemic, and then shifted focus to AI. It used creative debt financing backed by its customer contracts to scale up quickly and drew an investment from Nvidia, propelling it to an initial public offering about a year ago.
Nebius had a rockier go. It had been the Amsterdam-based holding company that owned Russia's Yandex, a tech conglomerate with a search engine, a cloud-computing arm and a ride-hailing service. Sanctions on Russia following its invasion of Ukraine, however, halted trading of the holding company's shares on Nasdaq in 2022, leaving its future in doubt. The divestiture of its Russian assets in 2024 and a name change to Nebius paved the way for a resumption of trading.
With hundreds of skilled employees and about $2 billion in cash from the Russian asset sale, Nebius was able to quickly jump into its AI pivot. It signed up some of Europe's large AI labs as customers and built up its computing capacity at an existing data center in Finland.
A lightning-speed expansion of its data centers followed. The company now has sites in the U.K., Iceland and New Jersey, with many more on tap. In March, it scored a deal with Meta Platforms valued at up to $27 billion, after reaching a $17.4 billion AI-computing deal with Microsoft last year. Nvidia has amped up its equity investment in Nebius, putting in $2 billion in March.
The company's revenue trajectory has been equally meteoric. On Wednesday, it reported nearly $400 million of sales in its latest quarter -- a far cry from the $25 million it booked in the second quarter of 2024, when it was just emerging from the shadow of sanctions. It expects to exit from the year at an annual revenue run rate of between $7 billion and $9 billion.
Of course, that kind of growth won't come without a lot of spending on the expensive AI chips and computing equipment needed to fulfill big contracts. The company estimates this year's capital expenditures at $20 billion to $25 billion.
But Nebius doesn't have a balance sheet that looks all that stressed. It has financed itself largely using its stock, via equity investments and convertible-note issuances. It had around $8.4 billion of long-term debt on its books at the end of the first quarter, against a cash balance of $9.3 billion.
To be sure, CoreWeave remains a significantly larger player, both in terms of revenue and the scale of its current data-center build-out. It reported more than $2 billion of revenue in the first quarter and nearly $100 billion of expected future revenue from contracts it has yet to fulfill.
But Nebius has other traits that could help it gain ground on those counts in the years ahead. CoreWeave is closely tied to Microsoft, OpenAI and a smattering of other large players, while Nebius seems to view deals with the big players as a springboard to reach a much wider set of customers.
Nurturing the broader corporate adoption of AI could easily work to Nebius's advantage in the long term. That, after all, is likely where the center of gravity for AI will shift in the coming years as AI's use becomes more widespread. AI startups could blossom into larger customers as they grow, too.
Nebius's most important advantage, though, may be the expertise and employee base with which it started its AI race. Unlike most of its competition, Nebius can design data centers and the equipment inside them from the ground up -- from power systems and cooling to servers and the racks they go into.
That gives Nebius a leg up on margins, as well as an uncommon flexibility when the AI world shifts. Instead of relying on server manufacturers like Dell or HPE to help adapt to changing computing demands, Nebius can simply design those servers itself and have contract manufacturers in Asia make them.
Adding to its control over its computing infrastructure, Nebius owns rather than leases a large portion of its data-center footprint -- more than 75% of its contracted power capacity, it said last week. That is an unusually high amount for an AI cloud player.
If the AI boom fizzles, it wouldn't be surprising to see Nebius transform again, adapting to cater to whatever computing demand shifts into. That is harder to see for players like CoreWeave, which doesn't have as many levers to pull should the market change.
As risky AI bets go, Nebius's mix of safety with upside potential makes it one of the better options out there.
Write to Asa Fitch at asa.fitch@wsj.com
(END) Dow Jones Newswires
May 18, 2026 05:30 ET (09:30 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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