$NBIS · The Motley Fool · 2026-11-06

I will now move on to another similar company in the field of cloud computing and artificial intelligence, a much smaller company, which is now valued, I believe, at less than $40 billion.

It is a company that one might theoretically say is grossly overvalued, and that is illogical. Why is it valued at nearly $40 billion when it doesn't even generate $1 billion per quarter?

But if we look at what is expected of the company, we can understand the reason for its current value. Its annual recurring revenues are expected to reach $3 billion as of last quarter.

This figure is likely to rise when it announces its quarterly results next week, I think on November 12 before the market opens.

This company is run by a team that previously built a huge company a long time ago, namely Yandex, which was known as "Russia's Google". Now, they prefer not to use the term "new cloud computing" because they do not want to be categorized in the same way as other new cloud computing companies.

They see themselves as players in the field of AI-based cloud computing.

But this is a very efficiently run company that raises money in innovative ways that do not significantly harm the business or shareholders. This helps them to grow at a faster pace than expected.

There are also many advance payments that are made with their large contracts, which helps to reduce their capital expenditures, which are increasing and will increase significantly if they want to add one gigawatt per year from now on.

They expect to add one gigawatt of Nvidia's Vera Rubin processors next year.

I know some will start by saying, "If they are actually going to invest, and if they are going to run one gigawatt of Vera Rubin processors next year, that means they are going to generate tens of billions of dollars in revenue."

But things aren't that simple. Gigawatts of graphics processing units don't fall from the sky and are connected to a data center. They said it would start in the first or second quarter, but in reality it will only be at half capacity.

So, if you want to calculate it, you probably need to look for annual recurring revenue at exit of 27, which might result in revenue of only 28. And then, yes, in my opinion, we may be looking at a business project capable of generating nearly $40 billion in revenue. Their prices are also constantly increasing.

Nabus told us they were able to sell out their entire 2027 capacity, but they don't, because if you have available capacity, you can sell it on demand and take advantage of the higher prices.

Of course, profit margins are constantly increasing, and you can then finance the next phase of expansion.

But here too, I think Nabus stock has fallen 50% from its 52-week high due to concerns that they will have to raise a lot of money. Capital markets are closing. They do not want to lend large sums of money, so they need to find ways to raise funds.

Recently, I think they got around $3.5 billion from Citi, but raising money is getting more difficult these days. You still have to spend a lot because you need to build all these data centers.

You need to acquire all these graphics processing units, and when you don't have a business like social media apps or search engines, how will you find ways to finance this expenditure?

I think Nebius is the best in its class. I am biased because I own shares in it, but when you look at the results, comments, and delivery method, you will find that it is one of the leading names in this field, and it seems to know how to run such a business, which is what it did in its previous experience with Yandex.

I'll have to repeat this in the video, but next week they will announce their quarterly figures. We will then have much more information about the quarter's results, but the quarter is already over.

So, the most important thing is what will happen by the end of the year and the beginning of 2027, and how they view things, but based on their recent statements at the GTC Berlin conference, it seems that demand is not a problem for them.

Therefore, I will have to mention Nebius again here.

Yes, it will be interesting to follow its performance when it announces earnings in just over a week. I think one of the biggest fears we've seen, or rather the collapse of Nebius' stock, stems from the collapse of its main competitor in the field of cloud computing, CoreWeave, isn't it?

Nebius has debts exceeding $80 billion against much less cash.

Therefore, there are a lot of conflicting messages in the market right now. Nebios is working towards its annual goal of $9 billion. If memory serves, its revenues in the second quarter saw a year-on-year growth of 450%.

A small database, a small database, right? The company aims to achieve a goal of $40 billion or more. In terms of customer commitments, they need an inexhaustible cash flow for graphics processing units and data center real estate.

Therefore, I think these are very justified questions for investors about Nebius and some of these other new cloud companies. I'm not saying these companies can't succeed, but it's a high-risk, high-reward model.