Is Nebius' $2B Capex Spend on AI Infra a Smart or a Risky Bet?

Core Insights - Nebius Group N.V. (NBIS) is increasing its capital expenditure plan for 2025 to $2 billion from the previous guidance of $1.5 billion, primarily due to a shift in planned spending from Q4 to early Q1 [1][8] - The company is expanding its global footprint with new capacities in the United States, Europe, and the Middle East, including a strategic data center in Israel, to meet the rising demand for AI infrastructure services [2] - Nebius aims to achieve an annualized run-rate revenue (ARR) of $750 million to $1 billion and has reaffirmed its overall revenue guidance for 2025 at $500 million to $700 million, indicating strong momentum in the AI market [3][8] Capital Expenditure Plans - Nebius plans to build a data-center infrastructure pipeline capable of offering over 1 gigawatt (GW) of capacity, which is expected to significantly enhance revenue potential beyond current guidance [3] - Competitors like CoreWeave (CRWV) are also ramping up capital expenditures, with CRWV expecting between $20 billion and $23 billion for 2025 to meet customer demand [5] - Microsoft (MSFT) is heavily investing in AI infrastructure, with $21.4 billion spent on capex in Q3 of fiscal 2025, focusing on long-lived assets to support future monetization [6] Market Performance - Nebius shares have gained 82.5% year to date, outperforming the Internet – Software and Services industry, which grew by 26.6% [7][8] - The price-to-book ratio for NBIS shares is currently at 3.77X, lower than the industry average of 4.2X, indicating potential valuation opportunities [9] Earnings Estimates - The Zacks Consensus Estimate for NBIS' earnings for 2025 has remained unchanged over the past 30 days, reflecting stability in earnings expectations [10]