Nebius shares soar by 220%. Now the 'Big Short' star is opening a position against it
The server farm provider, operating from Alon Towers, leases facilities and space to cloud giants and has become a market leader. The stock has surged, but Michael Burry claims that accounting calculations make it look too good.
In just two years, Nebius, a company founded in the Netherlands by a group of Israelis, has positioned itself at the top of one of the fastest-growing niche markets in artificial intelligence: the neo-cloud market.
Alongside giants like CoreWeave and Crusoe, Nebius is investing billions of dollars in building server farms across the US, equipping them with servers and processors based on Nvidia's technology, and leasing entire facilities or space within them to cloud giants like Meta or Microsoft, or to companies interested in renting AI processing services like Shopify and Israeli companies such as Voka or Decart — which may be sold in the coming days to Anthropic.
The company, which was established in Amsterdam and maintains a development center in the Alon Towers in Tel Aviv, was founded by an experienced Israeli team including Yandex founder Arkady Volozh and his former senior executives, including Roman Chernin and Elena Bunina — all of whom currently reside in Israel. They were joined as COO by Adv. Ofir Nave, a former partner at the Arnon law firm, who was particularly active in the field of mergers and acquisitions. The company's board of directors also includes the Israeli serial entrepreneur Dr. Kira Radinsky.
Phenomenal reports
In recent months, Nebius's status as the undisputed leader of the neo-cloud market has been established, at least among investors who until now viewed the American competitor CoreWeave as the leading company: CoreWeave received a massive $2 billion investment from Nvidia last January, promising to provide AI services to American companies at a scale of 5 gigawatts.
Nebius
-
Field of activity: neo-cloud, leasing of GPUs and servers to technology companies.
-
History: founded in 2024 based on the cloud operations of Yandex that were sold to Arkady Volozh, who founded the company with Roman Chernin.
-
Employees: 1,540 in Amsterdam and Tel Aviv.
-
Something else: the Israeli branch is based mostly on Yandex employees who emigrated from Russia.
However, CoreWeave's stock has disappointed: while Nebius has already reached a valuation of $70 billion and is traded on Nasdaq at a value of about $68 billion — an increase of 220% since the beginning of the year, CoreWeave's stock has risen only by 48% and its value stands at only $58 billion. If it seemed that Nvidia preferred CoreWeave at the beginning of the year, two months later the chip giant made a similar $2 billion investment in Nebius, in exchange for 8% of the shares.
Last week, Nebius presented its results for the second quarter of the year and stunned investors, and the stock jumped by 35% in trading that day. The company, which is marking two years of operation, beat analysts' forecasts with a report of $582 million in revenue, an increase of 454% compared to the same quarter last year, and the estimated annual revenue run rate (ARR) reached $9 billion, compared to the $1.9 billion the company had projected just a quarter earlier.
During the quarter, Nebius closed four huge contracts with an average volume of over $1 billion each with clients such as Cohere, a company competing with Anthropic in the institutional market; with the open-source model company Reflection and two other companies whose names it did not publish. 70% of the deals signed in the quarter included payments that covered 50%-60% of the construction costs of the server farms associated with them in advance, while the EBITDA in the company's AI business soared to 50%, an increase compared to the figure in the same quarter — 45%.
Also dependent on Nvidia
Despite this, there are those who are not quick to be impressed by the optimistic data. Investor Michael Burry ("The Big Short"), known as someone who identified the subprime crisis in 2008 in advance and became famous for his gloomy forecasts, has added Nebius to his list of short positions in recent days. While Nebius stock is traded at about $268, Burry increased his position on the price to $212. This is different from the average target price of the company's stock, which stands at $286 according to analysts surveyed by the Wall Street Journal — where there is also an absolute majority in favor of a buy recommendation.
Burry, who also holds short positions on Micron, Palantir, and Applied Materials, noticed Nebius's depreciation expenses, which stand at about $260 million, above the company's EBITDA, which stands at $236 million.
According to him, Nebius extended the depreciation life on servers and hardware equipment from 4 to 5 years. Burry believes that the real lifespan of GPUs is shorter than 5 years, which changes the way depreciation should be calculated, and at the same time dictates higher expenses for upgrades. He also added that Nebius, like its competitor CoreWeave, is dependent on purchasing expensive hardware from Nvidia and is exposed to a slowdown in demand for processors.
Despite the impressive rise in Nebius stock, it is a highly volatile stock, which earlier this year managed to crash by 45% and has a high P/E ratio (57) that makes it one of the most expensive in the market, compared to a P/E ratio of 13 for CoreWeave stock.
