Nebius stock stalls amid debt, dilution, and depreciation fears

Nebius Group stock price has soared this year and is now hovering near its all-time high. NBIS was trading at $214 after soaring by 192% from its lowest point in February. Still, the stock will likely continue rising, helped by the strong revenue momentum amid the artificial intelligence (AI) boom.

Nebius Group momentum is accelerating

Nebius Group, a top company in the data center industry, where it helps companies flexibly access GPUs. This is a highly competitive industry that has seen companies like IREN, Hive Digital, Mara Holdings, Riot Platforms, and CoreWeave join it.

Nebius has slowly established itself as a duopoly in the industry together with CoreWeave. This is based on the vast size of deals it has reached in the past few years. It has made deals with companies like Microsoft and Meta Platforms, including a recent $27 billion one. 

These partnerships have pushed its revenue growth into beast mode. Its most recent results showed that its revenue jumped by 684% YoY in the three months to March 31. It made $399 million, up from $50.9 million, with its backlog accelerating. 

While Nebius has other businesses, most of its revenue comes from the AI cloud segment, which made over $389 million in this quarter. This growth will likely accelerate in the near term as it continues to deploy its solutions. 

Analysts now expect that the company’s sales will be $3.2 billion this year, up by 549% from the same period last year. It will then accelerate the growth momentum and hit $7.6 billion next year.

Notably, these estimates are based on its announced deals and don’t include future ones. As it continues to deploy its data centers in the US, Finland, and Israel, chances are that it will receive more orders. 

NBIS is facing major challenges

Nebius Group is facing major challenges despite the growing revenue. One of these issues is that its depreciation continues growing, a trend that may accelerate as companies like NVIDIA launches new chips. 

The most recent numbers showed that Nebius Group experienced a depreciation charge of $212 million, up by 332% YoY. It was the fastest-growing part of its expenses, with the management citing the continued investments in GPU-related capital expenditures and related data center hardware. The company predicts that the useful life of its server and network infrastructure to five years.

The other main challenge for Nebius stock is that its debt continues to surge this year. Its debt has surged to over $9.5 billion. At the same time, there are concerns that it will continue to dilute its shareholders using its ATM program. The company said:

“Our financing options include our at-the-market program. We have not utilized this program to date, but are evaluating the program regularly.”

These factors explain why the company’s short interest remains at an elevated level. It has a short interest of 20%, much higher than other companies.

Nebius stock price technical analysis

NBIS stock chart | Source: TradingView

The daily chart shows that the NBIS stock price has soared in the past few months. This surge accelerated after the stock formed a double-bottom pattern at $77.18. It then moved above the crucial resistance level at $140.5, its highest point in October last year, and then retested it.

The stock has now formed a series of higher highs and higher lows. It has also remained above all moving averages, a sign that bulls are in control.

The risk, however, there are signs that the stock is slowly forming a double-top pattern at $233 and a neckline at $182. This pattern could point to a reversal in the near term. A move above the price will point to further gains, potentially to $300.