Can Nebius' Data Center Expansion Sustain Growth as Competition Rises?

Core Insights - Nebius Group N.V. (NBIS) is focusing on expanding and monetizing data center capacity in a competitive AI infrastructure market, with customer demand for AI compute remaining strong but limited by available data center capacity [1][9] - The company's expansion strategy emphasizes accelerating data center buildouts and securing long-term power capacity to support AI-driven growth [1][2] Expansion Strategy - Nebius is aggressively investing in expanding its global data center footprint, prioritizing securing power capacity ahead of deployment [2] - Management has contracted substantial power capacity, which provides visibility into future expansion and reduces execution risk [2][3] - Much of the upcoming data center capacity is presold, improving capital efficiency and lowering risks associated with large upfront investments [3] Growth Projections - The company is targeting 2.5 gigawatts of contracted power by 2026, an increase from the earlier projection of 1 gigawatt [4] - Nebius plans to have approximately 800 megawatts to 1 gigawatt of fully built and connected data center power by the end of 2026 [4] - The company aims for $7–$9 billion in annual recurring revenue by 2026 [5] Competitive Landscape - Competitors like CoreWeave are also scaling their data center footprint, with CoreWeave expanding its active power footprint to about 590 megawatts and increasing contracted power capacity to approximately 2.9 gigawatts [7] - Microsoft plans to increase its total AI capacity by over 80% in 2025 and double its data center footprint in the next two years, indicating a highly competitive environment [10][11] Financial Performance - Nebius shares have gained 213% in the past year, outperforming the Internet – Software and Services industry, which grew by 29.4% [12] - However, Nebius appears overvalued with a Price/Book ratio of 5.04X compared to the industry average of 3.92X [13]