Why Nebius Stock Rallied This Week

Core Viewpoint - Nebius Group has experienced significant volatility in its stock price, reflecting broader concerns about the sustainability of AI infrastructure spending, despite a recent rally in its shares [1][2]. Group 1: Stock Performance - Nebius shares have surged 140% over the past six months but are currently trading 30% below recent highs due to fears of overextension in AI infrastructure spending [1]. - This week, Nebius shares rallied by 14%, indicating a potential shift in investor sentiment [2]. Group 2: AI Spending Concerns - Analysts are questioning the long-term viability of AI financing, particularly with deals involving circular financing, where companies like Nvidia invest in peers who then purchase hardware from them [3]. - There are concerns regarding off-balance sheet financing arrangements used by companies like Meta Platforms to fund AI data center projects, leading to skepticism among investors [4]. Group 3: Major Contracts and Risks - Nebius has secured a five-year, $3 billion commitment to provide AI infrastructure to Meta, announced alongside its third-quarter earnings [6]. - If Meta does not achieve returns on its investments, such deals could be jeopardized, contributing to the volatility in Nebius's stock price [7].