Key Points A key Nebius peer saw positive analyst coverage today, boosting the whole AI neocloud sector. Another Wall Street analyst idetified Nebius as a potential acquisition target in 2026. These stocks have had tremendous years, but have seen large pullbacks over the past two months or so. 10 stocks we like better than Nebius Group › Shares of European AI "neocloud" Nebius Group (NASDAQ: NBIS) rallied on Friday, up 13.7% as of 2:54 p.m. EDT. One of Nebius' neocloud peers received an analyst ...

Company Insights - Oracle announced a need to raise capital expenditure by an additional $15 billion for its current fiscal year and increase lease commitments for data centers, turning to debt for financing [2] - CoreWeave's shares dropped around 8%, while Broadcom retreated about 5.6% due to concerns over margin compression [2] - The stock performance of AI infrastructure companies indicates a shift in investor sentiment away from these stocks [1][2] Market Performance - Major indexes like the S&P 500, Dow Jones Industrial Average, and Nasdaq Composite experienced minor declines of 0.16%, 0.09%, and 0.59% respectively, suggesting that fears are primarily contained within the AI infrastructure sector [3] - Despite the declines in AI-related stocks, investors are rotating into sectors such as consumer discretionary and industrials, indicating a broader market resilience [3] Investment Outlook - The head of late-stage growth at Wellington Management emphasized the importance of return on investment (ROI) for continued funding in AI investments, noting that the ROI is currently favorable [4] - There is a bullish sentiment in the AI sector, with companies asserting that increased computing resources will lead to higher revenues, highlighting the need for financial stability among AI infrastructure providers [4]

Core Insights - Oracle is experiencing significant capital expenditure (capex) growth this year, primarily driven by the increasing demand for AI computing [1] Company Updates - The surge in Oracle's capex is indicative of a broader trend in the technology sector, particularly among companies focused on artificial intelligence [1] - Nvidia and other AI-related stocks are also impacted by these developments, suggesting a strong market interest in AI technologies [1]

Group 1 - The demand for AI compute is a positive indicator for the AI infrastructure market [1] - Recent updates have been discussed regarding Advanced Micro Devices (AMD) and CoreWeave (CRWV) along with other AI stocks [1] - Stock prices referenced are from the after-market on December 3, 2025 [1]

Core Insights - Nebius Group N.V. is significantly expanding its global data center capacity, aiming to more than double it by 2026 due to increasing demand for AI compute [1][2] - The company reported a remarkable 237% year-over-year revenue increase, reaching $146.1 million, driven by its core AI compute business [4] - D.A. Davidson maintains a Buy rating on Nebius with a price target of $150, highlighting its strong growth potential and operational efficiencies [9] Capacity and Revenue Projections - Management projects contracted power of 2.5GW by the end of 2026, with an annualized revenue run-rate expected to be between $7 billion and $9 billion [2][6] - Revenue is anticipated to grow from $571.8 million in 2025 to $5.38 billion in 2026, with GAAP earnings per share expected to rise from $1.00 in 2025 to $6.11 in 2026 [10] Strategic Partnerships - Nebius has secured a $3 billion, five-year deal with Meta Platforms, in addition to a contract with Microsoft, which is expected to reach full capacity by the fourth quarter of 2026 [4][5] - The company is expected to achieve additional capacity through expansion at its New Jersey site and is likely to secure more mega-deals, potentially expanding existing contracts [7] Operational Efficiency - Nebius employs an ODM model for NVIDIA racks, which reduces compute costs by 15-20% compared to OEM alternatives, contributing to its competitive edge [8] - The company is positioned to generate double-digit returns on capital, significantly higher than peers like CoreWeave, which currently posts a 4% return [9]

Core Viewpoint - CoreWeave's stock experienced a nearly 10% decline in pre-market trading despite better-than-expected quarterly results, indicating a negative investor sentiment influenced by operational challenges [1][4]. Financial Performance - CoreWeave reported third-quarter revenue of $1.36 billion, exceeding Wall Street's forecast of $1.29 billion [3]. - Adjusted operating income reached $217.15 million, surpassing expectations of $177.2 million [3]. - The adjusted EPS loss was narrowed to $0.22 per share, better than the anticipated loss of $0.40 [3]. Operational Challenges - A third-party developer partner is behind schedule in building new data center capacity, creating uncertainty regarding CoreWeave's ability to meet increasing AI demand [4]. - The company's full-year 2025 revenue guidance of $5.05 billion to $5.15 billion is below analysts' consensus of $5.3 billion, indicating caution [4]. Strategic Partnerships - CoreWeave secured significant contracts, including a $14 billion AI compute agreement with Meta, an expanded partnership with OpenAI, and a $6.3 billion deal with Nvidia for unused cloud capacity [5]. - The backlog of contracted work surged to $55.6 billion, nearly doubling from the previous quarter, although delays in data center buildout may slow revenue recognition [5]. Analyst Sentiment - DA Davidson reiterated an 'Underperform' rating with a $36 price target, citing ongoing unprofitability and projected losses of -$1.24 per share for 2025 [6]. - JPMorgan downgraded CoreWeave from 'Overweight' to 'Neutral', lowering its price target to $110 from $135, reflecting mixed signals from the quarterly results [6]. - Morgan Stanley's analyst noted that large contracts validate CoreWeave's position in the GPU market but highlighted execution challenges as a key risk [8].

Energy Markets - U.S. crude oil inventories decreased by 6.858 million barrels, significantly more than the previous week's drop of 961,000 barrels and contrary to expectations of a 1.203 million barrel increase, indicating strong demand or supply tightening [2][3] - The key storage hub at Cushing, Oklahoma, saw an increase in crude oil inventories by 1.334 million barrels, reversing the prior week's decrease of 770,000 barrels, suggesting potential volatility in crude oil prices [3] Central Banks - The Bank of Canada cut its benchmark interest rate by 25 basis points to 2.25%, marking the second consecutive cut, and revised down its economic growth forecasts for 2025 to 1.2% (from 1.8%) and for 2026 to 1.1% (from 1.8%), primarily due to U.S. trade policies and tariffs [4] - The European Central Bank is expected to maintain its interest rates unchanged, with inflation around the 2% target, as policymakers await new data [5] Technology Sector - BofA Global Research raised price targets for major tech companies: Tesla (TSLA) to $471 from $341, Apple (AAPL) to $320 from $270, and Nvidia (NVDA) to $275 from $235, citing lower cost of equity capital and advancements in AI initiatives [6][7] E-commerce Sector - Wix announced a strategic partnership with PayPal to become a key partner for PayPal's new agentic commerce platform, enabling AI-powered product discovery and checkout for Wix merchants [8][9] Real Estate Market - U.S. Pending Home Sales remained flat month-over-month in September at 0.0%, missing the estimated 1.2% increase, although year-over-year sales increased by 1.5% [11] Geopolitical Developments - The U.S. Treasury issued a license for Rosneft's German arm, providing a temporary reprieve from sanctions, with a six-month deadline for Germany to resolve the ownership status of the Russian oil company's assets [12]

Partnership & Strategy - AMD and OpenAI are embarking on a massive buildout of 6 gigawatts of AI compute, representing a significant milestone for both companies and the AI industry [3] - The partnership between AMD and OpenAI is an "all-in" commitment, involving hardware, software, and supply chain collaboration to meet OpenAI's AI compute needs [9] - The initial target is 1 gigawatt of compute in the second half of 2026 using the next-generation MI450 chip [4][8] - AMD views this deal as a win for AMD, OpenAI, and its shareholders, expecting it to be accretive to AMD's earnings from day one [19][21] Market Demand & Compute Landscape - The world is underestimating the demand for AI compute, with an explosion of demand driven by products like ChatGPT, which has 800 million weekly active users [5] - The industry is heading towards a "compute desert" due to the exponential improvement of AI models and the increasing reliance of the economy on AI [6] - OpenAI sees compute as a limiting factor for launching new features and products due to a lack of computational power [5] - The AI accelerator total addressable market (TAM) is estimated to be over $500 billion in the next few years [39] Supply Chain & Manufacturing - The industry requires an industry-wide effort to increase compute capacity, involving energy, cloud providers, and the entire supply chain [11] - AMD is prioritizing building in the United States to create a strong US AI stack and is working with global partners to meet the expected demand [25][26] - OpenAI is deploying AMD in its own data centers and with cloud providers, including Oracle, emphasizing the need for as much compute as possible [12][13] Technology & Competition - AMD's MI450 series is viewed as an incredible chip with a good balance of memory and computational power, suitable for inference workloads [28] - The deal with AMD is incremental to what OpenAI is already doing with NVIDIA, with AMD technology offering specific benefits for inference [27] - There is a diversity of workloads across customers, models, and use cases, positioning AMD well in the market [31]