Nebius Reaffirms $2B Capex for 2025: Enough to Fuel Expansion?

Core Insights - Nebius Group N.V. (NBIS) has reaffirmed its $2 billion capital expenditure plan for 2025 to expand its capacity in the AI infrastructure market, which is experiencing explosive growth due to increased demand for generative AI and machine learning applications [1][10] - The company reported a remarkable 625% year-over-year revenue increase, reaching $105.1 million, with AI cloud infrastructure revenues growing more than nine times, driven by high demand for GPUs [2][10] - To meet this demand, Nebius plans to secure 220 megawatts of connected power and is expanding its data center capacity significantly, with plans to build over 1 gigawatt of power capacity by 2026 [3][10] Strategic Partnerships - Nebius has closed a significant deal with Microsoft worth $17.4 billion, providing dedicated GPU capacity from a new data center in New Jersey, with potential total value rising to $19.4 billion [4][6] - The cash flow from this deal will be utilized to finance part of the capital expenditures associated with delivering AI infrastructure to Microsoft [4][6] Financial Position and Growth Plans - The company has raised $4 billion and closed a public offering of Class A ordinary shares and a private offering of convertible senior notes, generating nearly $4.2 billion in gross proceeds to fund its capital expenditures [6] - Nebius aims to use some of the proceeds to accelerate business growth, including purchasing additional computing power and expanding its data center footprint [6] Competitive Landscape - The AI infrastructure market is becoming increasingly competitive, with major players like Amazon and Microsoft also scaling their capital expenditures aggressively to capture market share [8][10] - CoreWeave, another competitor, has reaffirmed its capital expenditure guidance at $20-$23 billion for 2025, indicating the high level of investment in this sector [9][10] Market Performance - Nebius shares have gained 40% in the past month, outperforming the Internet – Software and Services industry's growth of 16.4% [14] - The company's shares are trading at a price/book ratio of 5.88X, higher than the industry average of 4.54X [15]