Neocloud provider Nebius Group (NBIS +3.77%) was one of the hottest stocks on the market in 2025, rising an incredible 223% as of this writing. The stock’s terrific surge is a result of the rapidly growing demand for artificial intelligence (AI) data center infrastructure, a market where demand is outpacing supply by a big margin.
The good part is that shares of Nebius have more upside to offer in the coming year, as per Wall Street. However, the stock has experienced a significant pullback of late. Let’s see why that has been the case.
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Concerns about debt-fueled AI infrastructure spending are weighing down Nebius stock
Nebius has shed nearly a third of its value since hitting a 52-week high on Oct. 10. That may seem surprising at first considering that Nebius is growing at an incredible pace. It also has a massive backlog that should allow it to sustain its momentum.
NASDAQ: NBIS
Key Data Points
The company’s revenue has shot up by a phenomenal 437% in the first nine months of 2025 to $302 million. It is worth noting that Nebius has rented out all of its available data center capacity. It expects to increase its connected data center power capacity to a range of 800 megawatts (MW) to 1 gigawatt (GW) by the end of next year, representing a significant jump from its current capacity of 220 MW.
This aggressive ramp should help Nebius convert a sizeable chunk of its $20 billion-plus revenue backlog into revenue next year, and in the long run. However, the stock may still be prone to significant volatility for a couple of reasons.
First, Nebius is currently very expensive. The stock trades at 64 times sales, which is significantly higher than the Nasdaq Composite index’s price-to-sales ratio of 5.5. Of course, Nebius has a big enough backlog that could help justify that valuation, but it will need to secure enough funding to bring more capacity online.
This brings us to the second reason why Nebius appears to be a risky investment at present. The company was sitting on $4.8 billion in cash at the end of the previous quarter, while its debt stood at $4.6 billion. It will need more funding next year to support its data center buildout. After all, constructing a 1 GW data center costs an estimated $10 billion, with another $20 billion to $30 billion required for the chips that go into such a data center.
Nebius management points out that it “will utilize at least three sources of financing: corporate debt, asset-backed financing, and equity” to meet its funding requirements for the next couple of years. This opens up Nebius investors to the possibility of share dilution and a higher debt load, as well as increased interest expenses.
These factors are likely to weigh on Nebius stock, especially considering that investors are concerned about the viability of debt-fueled AI infrastructure financing. Investors, however, can still capitalize on the massive AI infrastructure investments by investing in Dell Technologies (DELL 0.20%), a significantly cheaper and safer bet on this space.
Dell’s server dominance could send the stock soaring in the long run
Dell is renowned for its personal computers, laptops, workstations, and peripherals; however, its server business has received a massive boost thanks to the adoption of AI. The company manufactures servers and storage solutions that are deployed in data centers by companies such as Nebius, along with networking infrastructure to help run AI workloads in the cloud.
More importantly, Dell is the leading player in the global server market with a market share of just over 8%. Moreover, its share of the fast-growing AI server market is estimated at 20%, according to ABI Research, surpassing second-placed Hewlett Packard Enterprise’s 15%.
The strong share explains why Dell is anticipating a whopping 150% jump in its AI server revenue this year to $25 billion. That number is likely to keep rising as Dell reported a record backlog of $18.4 billion at the end of the third quarter of fiscal 2026 (for the three months ended Oct. 31). Management pointed out on the earnings call last month that its potential AI server order pipeline for the next five months is in “multiples of our backlog,” suggesting that its revenue from this segment is poised to soar even higher.
Investors should note that the AI server market could clock an annual growth rate of 39% through 2030, generating $854 billion in revenue at the end of the forecast period. Dell’s AI server business is growing at a much faster pace right now, which means that its share of this space is improving. Assuming Dell manages to corner a quarter of the AI server market by the end of the decade, its revenue from this segment could jump to more than $213 billion (based on the $854 billion market size estimate).
That would be nearly 10x the revenue it is on track to generate from selling AI servers in the current fiscal year. Throw in additional catalysts, such as generative AI personal computers (PCs), and it is easy to see why buying Dell while it is trading at just 0.8 times sales is a no-brainer right now. Of course, it isn’t growing as fast as Nebius is, but its leading position in the AI server market, along with the steady growth in its earnings and revenue, makes it a safer bet for investors looking for a mix of growth and value.
