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1 Nvidia-Backed Artificial Intelligence (AI) Stock to Buy Hand Over Fist in 2025 (Hint: It's Not SoundHound AI)
NBISNebius Group N.V.(NBIS) The Motley Fool·2025-01-06 13:15

Nvidia's Investment Strategy - Nvidia has invested in an Amsterdam-based AI infrastructure company, Nebius Group, as part of its strategy to expand its portfolio in the AI sector [1][3] - Nvidia holds ownership positions in six publicly traded companies, including SoundHound AI, which has seen a 950% increase in share price over the last 12 months [2] Nebius Group Overview - Nebius Group, previously affiliated with Yandex, became an independent entity after Yandex divested its non-Russian assets due to sanctions imposed after Russia's invasion of Ukraine [4][5][6] - Nebius raised 700millionthroughaprivateplacement,issuing33.3millionsharesat700 million through a private placement, issuing 33.3 million shares at 21 each, with Nvidia and venture capital firm Accel as key investors [7] Nebius Group's Business and Financial Performance - Nebius operates in AI infrastructure, generative AI, autonomous driving, and technology-based education through subsidiaries Toloka, Avride, and TripleTen [8] - The company reported a 766% year-over-year revenue increase to 43.3millioninQ32024,withAIinfrastructureaccountingfortwothirdsoftotalsales[9]Nebiuscloudbusinessgrewalmostthreefoldquarteroverquarter,reachinganannualizedrunrateof43.3 million in Q3 2024, with AI infrastructure accounting for two-thirds of total sales [9] - Nebius' cloud business grew almost threefold quarter-over-quarter, reaching an annualized run rate of 120 million [9] - The company projects its annual recurring revenue (ARR) run rate to reach up to 1billionbytheendof2025,supportedby1 billion by the end of 2025, supported by 2.3 billion in cash and equivalents as of Sept. 30 [10] Nebius Group's Growth Prospects - Nebius is positioned to benefit from the projected 1trillionspendingonAIinfrastructureanditsroleinNvidiasBlackwellGPUrollout[11]ThecompanyisexpandingitsdatacenteroperationsacrossParisandFinland,drivenbydemandforNvidiaGPUclusters[13]NebiuspotentialpartnershipswithotherchipplayerslikeAdvancedMicroDevicesandcloudhyperscalerssuchasOracle,Microsoft,Amazon,andAlphabetcouldfurtherenhanceitsgrowth[14]InvestmentConsiderationsforNebiusNebiussharepriceof1 trillion spending on AI infrastructure and its role in Nvidia's Blackwell GPU rollout [11] - The company is expanding its data center operations across Paris and Finland, driven by demand for Nvidia GPU clusters [13] - Nebius' potential partnerships with other chip players like Advanced Micro Devices and cloud hyperscalers such as Oracle, Microsoft, Amazon, and Alphabet could further enhance its growth [14] Investment Considerations for Nebius - Nebius' share price of 31 is near the midpoint of its high and low points since its Nasdaq listing, making it an attractive option for AI investors [12] - The company's international presence and ties to Nvidia provide diversification and growth potential, making it a compelling opportunity for patient investors [15]