Nebius shares rally up to 8%: What’s driving the AI rally?

Nebius Group shares jumped sharply on September 24, even as broader US equities came under pressure. The stock gained 5.7%, while another intraday move saw shares rise around 8%, highlighting strong investor interest in the AI infrastructure company. (Sources: GuruFocus, Traders Union, TradingView)

BNP Paribas upgraded Nebius Group to Outperform from Neutral and raised its price target to $399 from $260. The upgrade came as the company prepares to increase prices for selected AI cloud services from October 1.

Nebius plans to increase prices for selected Nvidia GPU instances by around 17%-21% from October 1. Prices for some AMD EPYC Genoa CPU services are also expected to rise by about 25%, according to GuruFocus.

GuruFocus said Nebius was trading at a price-to-sales ratio of around 49.79x, compared with its historical median of 6.94x. The elevated valuation reflects expectations of significant future revenue growth from AI infrastructure and cloud services.

Nebius received a GF Score of 55/100, with momentum rated particularly strongly while valuation remained a weaker component. The company is still unprofitable and cash-flow negative, making traditional P/E-based valuation less meaningful at present.

Analyst expectations for Nebius vary considerably. Recent targets have ranged from $84 to $410, according to data cited by GuruFocus. The wide spread reflects differing assumptions about AI infrastructure demand, execution, capital requirements and future profitability.

GuruFocus reported that insiders had sold about $179.9 million worth of Nebius shares over the previous 12 months, with no insider purchases reported during that period. At the same time, GuruFocus said seven of eight tracked premium gurus had recently increased their positions, while two had trimmed theirs.

Nebius is focused on AI cloud services and GPU-accelerated computing infrastructure for AI developers, enterprises and research organisations. The latest rally reflects expectations around AI demand, pricing power and future revenue growth, while the company's high valuation and continued cash requirements remain important factors for investors to monitor.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times.)