NBIS stays a Hold, not a buying opportunity: the $225 DCF fair value versus the $186 price leaves only 21% upside, below the 10-20% margin of safety he requires for one of the riskiest stocks, amid negative free cash flow, a $250 billion capital need with dilution risk, and spot-market exposure.

Nebios has an ambitious goal of reaching a capacity of 5 gigawatts by 2030. On the other hand, the management team has indicated that they need $250 billion to achieve this goal.

Therefore, I wanted to discuss some of these developments and what they might mean for investors in the Nebios Group, my opinion on the group's stock at current market prices, and whether this is a buying opportunity when the price drops by more than 10% today.

Look at the price action here for the Nebios Group, which is down 10.4% today amid growing concerns about the interest expenses these companies will need to meet their ambitious goals of increasing data center capacity.

With capital needs of $250 billion, the interest cost on that amount will rise significantly. In addition, available capital may not be available. The problem is not just the high interest expenses, but as lenders become increasingly concerned about these companies' ability to repay their debts, they may restrict some of the available loans they provide.

Therefore, the company may not be able to achieve its 5 GW target by 2030, or it may have to sell shares instead of resorting to debt markets to raise capital.

However, if we look at the bigger picture, the Nebios Group is performing exceptionally well in 2026, with its stock rising by more than 121%. The stock price has only faced headwinds in recent weeks.

It is also important to remember that the Nebios Group is one of the fastest growing companies in the world. In 2026, Wall Street analysts who follow the company expect its revenue to jump from $550 million to $3.34 billion. This represents an increase of over 506%.

Analysts expect these good times to continue, with estimates indicating that its revenue will grow by 268% in 2027 to reach $12.29 billion that year. And the growth won't stop there, as analysts expect its revenues to increase by another 87% in 2028 to reach $22.98 billion.

This is substantial growth for the Nebios Group, and customers are waiting to buy once that capacity is built in the data centers. But question marks arise when we look at long-term demand.

Will long-term demand remain as high as it is today? And where will the supply be in 2030?

Nebius, CoreWave, Iron and others are working to build additional data center capacity, in addition to the hundreds of billions of dollars that Amazon, Microsoft, Meta, Oracle and others are spending to build more data center capacity.

The supply of this category is increasing dramatically, and this is raising questions among investors about the long-term equation.

Compared to CoreWave, the Nebeus Group has a much better balance sheet. It has long-term debts exceeding $10 billion and holds approximately $8 billion in cash and short-term investments on its balance sheet.

Another interesting point about the Nebius Group is that it allocates a larger portion of its capacity to spot market sales. What this means is that it does not contract to sell the entire capacity of its data centers.

It leaves some data center capacity available for sale at the prevailing market prices for that month, quarter, or year.

This is in contrast to other service providers who prefer to secure much of their capacity in advance to ensure greater knowledge of the demand for their products and the average selling price.

The Nebius group chooses uncertainty because the market works in its favor. There is demand that exceeds supply, and as long as this remains the case, Nebius will be able to benefit from higher selling prices per megawatt of data center capacity that it sells.

But if this equation were reversed, the Nebius Group would be more vulnerable to price changes and fluctuations because it sells a smaller portion of its capacity through long-term contracts.

This is an interesting point that investors in this sector should take note of.

Based on these recent developments, I have updated the discounted cash flow valuation account for the "Nebeus" group. Remember that this takes into account the amount of cash flow I expect the company to generate between today and the very distant future.

I anticipate continued losses in free cash flow over the next few years. For the Nebeus Group, I estimate negative free cash flow of $17.5 billion this year, negative $23 billion next year, and negative $25 billion in 2028.

All of this negative impact is due to the company spending too much to build new data center capacity, which outpaces the increased cash flow generated by the company's business operations.

If it continues on its ambitious path to build 5 gigawatts of data center capacity by 2030, this is likely to remain the case.

Of course, money in the future will be worth less to us than the money in our pockets today. Therefore, I discount those future cash flows at a discount rate, which I and the market call the weighted average cost of capital.

This weighted average cost of capital includes the cost of the company’s debt, which has risen in recent weeks as interest rates on risk-free U.S. government bonds have increased, and companies like Nebius Group are trading at a premium to, or at a spread to, U.S. government bonds.

Therefore, if the price of US government bonds rises by 50 basis points, the price of Nebius Group stock is likely to rise by 50 basis points as well, and possibly more depending on the situation.

Despite those high interest costs, I calculated a fair value of $225 for Nebeus Group stock. The current market price is $186. Thus, I calculate a 21% increase for the "Nebeus Group" stock.

Earlier this year, I rated Nebius Group stock as a buy opportunity, but after the stock price rose significantly at the beginning of the year, I downgraded it to a hold. Following these assessments, I will maintain my rating on Nebius Group's stock at "Hold".

Now, I know that we have calculated a 21% increase compared to the current market price. However, I usually maintain a safety margin of 5 to 10% in most of these discounted cash flow valuations.

For a company like Nebius Group, which is one of the riskiest stocks in the market, I increase this margin of safety. Instead of 5 to 10%, keep it at 10 to 20%. Therefore, at a difference of only 20%, it is not a sufficient decrease in value for me to feel confident that the stock is undervalued.

When comparing the stock to the risks, which are almost the highest among any stock in the market, it does not seem to me like an attractive buying opportunity at the moment.