The Real Reason This AI Stock Is Falling, and Why It Might Not Matter

Core Viewpoint - Nebius Group has experienced significant stock price volatility, with a nearly 30% decline since mid-October, driven by concerns over AI stock valuations and disappointing financial results [1][6]. Company Overview - Nebius specializes in cloud-based artificial intelligence data center services, focusing on AI model training and inference training, achieving a remarkable revenue growth of 355% to $146.1 million in Q3 2024 [4][6]. Financial Performance - The company reported a loss of $119.6 million for the three months ending in September, a significant increase from a loss of $43.6 million in the same quarter the previous year, and worse than analysts' expectations of a $97 million loss [6][11]. - The stock's market capitalization is currently $24 billion, with a current price of $93.41 [5]. Market Dynamics - The initial surge in Nebius's stock price was fueled by a multiyear, multibillion-dollar service contract with Microsoft, which attracted significant investor interest [8][9]. - The subsequent sell-off was influenced by broader market concerns regarding the overvaluation of AI stocks, leading to profit-taking among investors [9][10]. Future Outlook - Despite current losses, the company is positioned for potential growth due to its contract with Microsoft and the increasing demand for specialized AI data center solutions [11].