Citron Research's Andrew Left made some big calls as of late. Recently, Left went short on Michael Saylor's company, MicroStrategy, suggesting that the data company and large buyer of Bitcoin is now trading detached from Bitcoin fundamentals. The call is interesting because Citron and Left four years ago said MicroStrategy was the best way to gain exposure to Bitcoin, although part of the short thesis is due to expanding access to Bitcoin.
Left is now making another bold call, claiming he's found Wall Street's next artificial intelligence (AI) darling. The call conveniently occurred on the same day that AI chip king Nvidia participated in a $700 million private placement for the company that also included the venture capital giant Accel and global investment firm Orbis Investments. Let's meet this new potential AI darling and see if it is as promising as Left says.
From Russia with love
Citron's shoutout and Nvidia's investment may have been the first time you heard of the AI infrastructure company Nebius Group (NBIS -3.46%). How is that possible? Well, Nebius has been on an interesting journey.
Until October, the stock hadn't traded on the public markets for three years. That's because the Amsterdam-based company used to be owned by a Russian search engine giant called Yandex. Following Russia's invasion of Ukraine, the U.S. imposed sanctions on Russian-affiliated companies. Earlier this year, the international assets were split off from Yandex in a $5.4 billion deal. Nebius was manifested to bear four divisions including cloud, data labeling, self-driving automobiles, and education technology, and Nebius began trading on the Nasdaq again on Oct. 21.
Nebius is part of a growing list of companies that rent their infrastructure to AI companies. Powering AI is expensive and energy-intensive because it involves storing vast data quantities and hardware that powers AI language models. Nebius provides computing capabilities, storage, and tools and services for developers. The company's core AI platform is intended to handle massive AI workloads. Companies looking to develop AI capabilities can pay a subscription to use the infrastructure offered by companies like Nebius.
A quick find
It didn't take long for investors to discover Nebius -- the stock is up 55% on the year following the Nvidia news and plug from Citron. In a post on X, Citron's account called Nebius "a sleeper with no analyst coverage yet, the market hasn't caught on to its massive potential -- or its undervaluation vs. CoreWeave." CoreWeave is another AI infrastructure company rumored to be preparing a public offering that could value the company at $35 billion. If Nebius trades at a 50% discount to CoreWeave, that results in a $60 stock price, according to Citron. Nebius traded below $28 when Citron posted about it on Dec. 3.
Citron also said that CEO Arkady Volozh, who resigned from the company after the initial sanctions but is now back, "is the real deal." The researcher also said that Nvidia had been waiting for the company to complete the spin-off from its Russian parent to announce the deal. Interestingly, Nebius on its website says its customers will be some of the first to use Nvidia's next-generation Blackwell platform. Nebius projects revenue will grow 200% to 300% in 2025 to a range of $500 million to $700 million. The company plans to spend anywhere from $600 million to $1.5 billion for more capacity at its data centers in Finland, France, and North America.
It's always nice to find stocks you are interested in before they receive coverage on the Street. Wall Street analysts have the ears of many institutional investors at large funds that can move the needle, although the Nvidia investment and attention from Citron preempted some of this.
Nebius is not yet profitable, but is growing revenue rapidly and has about $2.3 billion of cash on its balance sheet and very little debt. Nebius also operates in a huge market and already has some kind of partnership with Nvidia. Let's also not forget that it's in one of the hottest sectors of the stock market receiving huge valuations. Investors can certainly take a starter position. There may be some push and pull given the company's background, but the stock looks cheap compared to other AI names.
