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Why Nebius Stock’s 200% Rise Is Only The Beginning

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Nebius (NBIS) stock surged 10% on January 12th after receiving an analyst upgrade and news about early adoption of the NVIDIA Rubin platform. More notably, it has risen 200% over the past twelve months. So, should you cash out? We believe not. This rally likely has considerably more potential, and seeing another 2x from this point wouldn’t be surprising.

However, before we explore further, if you’re looking for upside with less volatility than investing in an individual stock, you might want to look into the High Quality Portfolio. It has consistently outperformed its benchmark – a mix of the S&P 500, Russell, and S&P MidCap indices – and has realized returns exceeding 105% since its inception. Why is that the case? As a collective, HQ Portfolio stocks have delivered superior returns with reduced risk compared to the benchmark index; a smoother ride, as illustrated in HQ Portfolio performance metrics. Additionally, see – Can Amazon Stock Hit $300?

Isn’t the Valuation Insane For NBIS Stock?

Yes, it does appear outrageous at first glance. NBIS is trading at:

  • 63.1x sales (compared to 3.3x for the S&P 500)
  • 105.2x earnings (as opposed to 24.2x for the S&P 500)

Such multiples are exceedingly high. So, what explains them?

The Growth Story Is Exceptional

Take into account what Nebius has accomplished:

  • 3-year average revenue growth: 126% annually (S&P: 5.6%)
  • Last 12 months: Revenues skyrocketed 462%, rising from $65M to $363M (S&P: 6.4%)
  • Most recent quarter: Increased 355% year-over-year to $146M (S&P: 7.3%)

This is not just incremental growth – it’s exponential. When you’re anticipated to increase revenues by 370% this year and another 520% the next, a high P/S multiple becomes relatively justifiable.

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What About Profitability?

This is where matters can get complicated. The operating margin is dismal at -148.4% (operating loss of $539M over the past four quarters). The company is spending cash to expand its operations.

However, here’s the counter-argument: Net margin stands at 60%. How is this possible? The company experienced significant non-operating gains from revaluing its investments in equity securities, which increased net income to $218M despite the operating losses.

Although this is certainly non-recurring, the underlying business model could prove to be very profitable once the infrastructure is established. Analysts generally concur that Nebius will achieve positive operating profit in the last quarter of 2026, with expectations of reaching a 25% operating profit margin by late 2027.

Is the Balance Sheet Strong Enough to Support This Growth?

Absolutely. The financial foundation is robust:

  • Debt-to-equity under 1% (only $50M in debt against a $27B market cap)
  • Cash constitutes 71% of total assets ($2.5B cash out of $3.5B total assets)
  • S&P 500 averages only 7.2% cash-to-assets

However, there is more to this story. Nebius has raised $4.3 billion following its Q3 report through public and private offerings to finance GPU clusters. This means that in their Q4 report, the debt-to-equity ratio will likely be around 17%. The company needs to support its aggressive data center expansion, but its leverage is still not at concerning levels.

What’s Driving the Optimism?

Two key catalysts are notable:

  • First, the NVIDIA partnership. Being one of the first cloud providers to implement NVIDIA’s Rubin platform (Vera Rubin NVL72) in H2 2026 gives Nebius a competitive advantage in the AI infrastructure battle.
  • Second, the capacity is sold out. Multibillion-dollar contracts with Microsoft and Meta have essentially pre-sold the company’s current and near-future capacity. When demand significantly surpasses supply, pricing power ensues.

But Can It Handle a Downturn?

Historically, not well. During the 2022 inflation shock, NBIS fell 78% from peak to trough (compared to a 25% decline in the S&P). During COVID, it decreased by 41% (versus 34% for the S&P). Recovery was robust both times, yet the volatility is significant.

What Could Go Wrong?

There are several potential issues:

  • Capital intensity: Constructing data centers involves high costs, and any delays or budget overruns could severely impact margins.
  • Execution risk: Scaling at this pace is challenging. Can management deliver?
  • Customer concentration: Heavy dependence on a few major clients creates exposure.
  • Competition: Amazon, Microsoft, and Google are not stagnant, while Coreweave and Iren are also expanding.

While there are many favorable aspects to NBIS stock, investing in a single stock without thorough analysis can be precarious. Consider the Trefis Reinforced Value (RV) Portfolio, which has outperformed its all-cap stocks benchmark (a mix of the S&P 500, S&P mid-cap, and Russell 2000 benchmark indices) to provide significant returns for investors. Why is that? The quarterly rebalanced mix of large-, mid-, and small-cap RV Portfolio stocks offered a responsive method to capitalize on favorable market conditions while minimizing losses during downturns, as explained in RV Portfolio performance metrics.

The Bottom Line

NBIS receives a “Strong” overall rating: very strong growth, very strong balance sheet, weak profitability, and weak downturn resilience. The valuation is exceptionally high, and that carries real risk. However, with revenue growth exceeding 400% and sold-out capacity along with partnerships with NVIDIA, Microsoft, and Meta, that risk could be accurately reflected in the price.

This investment is not for everyone. If you can’t handle drawdowns of 50% or more, it’s best to refrain. But for long-term investors with a high risk tolerance, NBIS presents a compelling argument indicating that another 2x gain is feasible. The AI infrastructure buildout is still in its early stages, and Nebius is at the heart of it. Interestingly, the average of analysts’ projections for Nebius is $163, suggesting a solid 50% upside.

Could we be mistaken? Certainly. However, the potential upside seems favorable here.