Explore the Emerging AI Star: A Company That Citron Research's Andrew Left Believes Could Double, Yet Remains Under Wall Street's Radar. Nvidia Is One of Its Backers.
Citron Research's Andrew Left has made some headline-grabbing predictions lately. Recently, Left took a bearish stance on Michael Saylor's company, MicroStrategy, claiming that the data firm and major Bitcoin buyer is now detached from Bitcoin's fundamental values. The call is noteworthy given that Citron and Left four years ago believed MicroStrategy was the best way to gain Bitcoin exposure, but part of the short thesis is based on increased access to Bitcoin.
Left isn't done making bold calls. He's now hailing Wall Street's next potential artificial intelligence (AI) star. Conveniently, Left made this announcement on the same day Nvidia participated in a $700 million private placement for the company, which also had the backing of venture capital giant Accel and global investment firm Orbis Investments. Let's dive into this new AI contender and see if it's worth the hype.
From Russian Origins
You might not have heard of AI infrastructure company Nebius Group (NBIS) until now. That's because until October, the Amsterdam-based company hadn't traded on public markets for three years. Its former owner, Russian search engine giant Yandex, faced U.S. sanctions following Russia's invasion of Ukraine. As a result, Yandex split off its international assets in a $5.4 billion deal, giving birth to Nebius. The company now features four divisions, including cloud, data labeling, self-driving automobiles, and education technology. Nebius resumed trading on the Nasdaq in October.
Nebius belongs to a growing category of companies that provide infrastructure to other AI developers. Powering AI requires expensive hardware and energy due to data storage and the need for AI language models. Nebius offers computing capabilities, storage, and tools and services for developers, aiming to handle massive AI workloads. Companies looking to develop AI processing capabilities can subscribe to Nebius's infrastructure services.
Swift Discovery
Investors didn't take long to discover Nebius. The stock has surged 55% year-to-date following the Nvidia announcement and Citron's endorsement. In a social media post, Citron called Nebius a "sleeper" stock, with minimal analyst coverage and an undervalued market potential—comparable to CoreWeave, another AI infrastructure company rumored to go public and be valued at $35 billion. If Nebius trades at half CoreWeave's valuation, it could translate to a $60 stock price, according to Citron. Nebius currently trades below $28.
Citron's research also highlighted Nebius CEO Arkady Volozh, who resigned after initial sanctions but has since returned to lead the company. Citron stated that Nvidia had been waiting for Nebius to complete its separation from Yandex to announce the partnership. Interestingly, Nebius's website mentions its customers will be among the first to use Nvidia's next-generation Blackwell platform. Nebius anticipates its revenue to grow 200% to 300% by 2025, reaching a range of $500 million to $700 million. The company also plans to invest between $600 million and $1.5 billion in expanding its data centers in Finland, France, and North America.
It's always fascinating to find untapped investment opportunities before they become mainstream. Wall Street analysts can sway many institutional investor opinions, but Nebius had already garnered significant interest from Nvidia and analysts before Citron's endorsement.
Nebius, however, is yet to turn a profit, but its revenue is increasing rapidly, and it has about $2.3 billion in cash, with minimal debt. Nebius operates in a lucrative segment and already has a partnership with Nvidia. It's also crucial to remember that it falls in one of the hottest sectors in the stock market with considerable valuations. Investors can certainly consider taking a position, although the stock's background might cause some backlash.
Given Citron's endorsement and Nvidia's participation in Nebius's private placement, Left is suggesting that investors consider investing in the AI infrastructure company. Nebius's revenue is projected to grow significantly by 2025, and it has a substantial cash reserve, reaching profitability should be within reach.
With Nebius's latest financials showing rapid revenue growth and a large cash position, left-field investors may find an opportunity to capitalize on the company's success in the lucrative AI sector, despite potential backlash due to its origins.
