NBIS vs. GOOGL: Which AI-Infrastructure Play is the Better Buy Now?

Core Insights - The AI revolution is shifting investment focus towards infrastructure rather than applications, with compute capacity, GPU clusters, and hyperscale cloud platforms being critical for AI growth [1][2] - Nebius Group N.V. (NBIS) and Alphabet Inc. (GOOGL) are two companies attracting investor interest for different reasons, with Nebius focusing on AI-first infrastructure and Alphabet leveraging its scale and proprietary technology [1][2] Nebius Group N.V. (NBIS) - Nebius operates in a supply-constrained AI infrastructure market, with demand for GPU capacity significantly exceeding available resources [3] - The company aims to expand its infrastructure to 2.5 gigawatts of contracted power by 2026, up from an earlier projection of 1 gigawatt, with major contracts secured from Meta ($3 billion) and Microsoft ($17.4–$19.4 billion) [3][4] - Nebius is launching new enterprise offerings, including the Aether 3.0 cloud platform and Nebius Token Factory, and plans to expand data centers in the U.K., Israel, New Jersey, and new sites in the U.S. and Europe [4] - The company targets $7–$9 billion in annual recurring revenue (ARR) for 2026, with expectations of $900 million to $1.1 billion by the end of 2025 [4] - However, Nebius faces macroeconomic challenges, rising operating costs, and increased capital expenditure projections from $2 billion to $5 billion for 2025, which could impact revenue growth [5][6] Alphabet Inc. (GOOGL) - Alphabet has established itself as a leading AI infrastructure provider, focusing on custom hardware and cloud-scale data centers, with Google Cloud revenues increasing by 33.5% year over year in Q3 2025 [7][8] - The company is expanding its cloud footprint through strategic partnerships, including collaboration with NVIDIA, and is introducing advanced AI technologies like Gemini and new GPU offerings [9][10] - Alphabet's initiatives in Generative AI and enhancements in search capabilities are expected to drive advertising revenue growth [10][11] - Despite strong growth, Alphabet's capital expenditures are projected to rise significantly, with estimates for 2025 between $91 billion and $93 billion, raising concerns about margin strain [12] Price Performance and Valuation - Over the past month, NBIS shares have decreased by 24.3%, while GOOGL stock has increased by 16.6% [13] - Valuation analysis indicates that Alphabet appears undervalued with a Value Score of B, whereas Nebius is considered overvalued with a Value Score of F [14] - In terms of Price/Sales ratio, NBIS is trading at 65.15 compared to GOOGL's 10.13, indicating a significant disparity in valuation metrics [15] Earnings Estimates - Analysts have revised earnings estimates downward for NBIS, while GOOGL has seen significant upward revisions [16][19] - Current earnings estimates for NBIS show a downward trend, with substantial negative revisions over the past 60 days [19] Investment Ranking - Currently, NBIS holds a Zacks Rank of 4 (Sell), while GOOGL has a Zacks Rank of 3 (Hold), suggesting that GOOGL may be a more favorable investment option at this time [20]