Michael Burry shorts Nebius stock as a risky doji emerges after strong earnings

Nebius stock bounced back this week, reaching its highest level since June 30 this year, up by 90% from its lowest point in July. It is slowly nearing its all-time high, helped by the ongoing demand for its products. Despite this growth, Michael Burry has shorted the company, warning that its performance is emblematic of the ongoing AI boom.

Nebius stock jumped after strong earnings

Nebius, a company that Nvidia backs, published strong financial results, with the management pointing to robust demand from hyperscalers and other companies in the AI industry. 

In a statement this week, the company said that its revenue jumped by 454% in Q2 to $582 million. Its six-month revenue soared by 529% to $981 million, making it one of the fastest-growing companies in the tech industry.

Nebius’ growth was driven by its large deals with companies like Meta Platforms, which inked a $27 billion deal with it. It also inked deals with Cohere, Reflection, and a top cop quantitative trading company.

In a statement, the management said that its demand was so strong that it could sell out its 2027 business today. The CEO said:

“We could sell our entire 2027 capacity on these terms today. We are deliberately not doing so because we see higher value in retaining some capacity for immediate customer needs.”

Most notably, the results showed that the company narrowed its losses during the quarter. Its adjusted net loss was $33.2 million from $91.5 million a year earlier. 

Michael Burry has shorted NBIS stock

Still, despite the ongoing Nebius stock surge and its revenue growth, Michael Burry has placed a short sale on the company. He has constantly argued that the AI boom is a bubble that will ultimately burst. In addition to Nebius, he has shorted other companies like Oracle, Nvidia, and Palantir. 

Burry is not the only investor who has shorted the company. For one, the company has a short interest of 25%, much higher than other top companies like CoreWeave and IREN.

One reason for this view is that Nebius is a highly overvalued company trading with a forward price-to-sales multiple of 20. 

Additionally, the company continues its spending, with the cost of its key inputs like memory, servers, and GPUs being on an uptrend. As a result, this capex will push it to increase its debt. Its approach is to use its long-term contracts to borrow more money as collateral. It has $40 billion worth of commitments to get the cash.

The company faces more challenges, including the rising competition from companies like Riot Platforms, CoreWeave, SpaceX, and potentially Meta Platforms. 

Nebius Group stock price technical analysis as doji forms

NBIS stock chart | Source: TradingView

The daily chart shows that the NBIS stock has rebounded in the past few weeks, moving from the August low of $146 to a high of $275. This rebound has pushed it close to the all-time high of $298.9. Also, the stock has remained above the 50-day and 100-day Exponential Moving Averages (EMA).

The risk, however, is that the stock has formed a doji candlestick pattern, which is a common bearish reversal sign in technical analysis. Therefore, the stock will likely pullback in the near term, potentially to the key support level of $200.