Unveiling the AI Investment Opportunity Blessed by Nvidia in 2025: This Time, It's Not SoundHound AI Taking the Lead
In the realm of business, when companies boast excess profits, they often funnel those funds into areas like research and development, beefing up marketing budgets, or strengthening certain departments by hiring more personnel. Occasionally, they may choose to invest in other businesses by acquiring a small equity stake.
In 2024, a 13F filing unveiled that semiconductor juggernaut Nvidia had a stake in six publicly traded companies, such as Applied Digital, Arm Holdings, Nano-X Imaging, Recursion Pharmaceuticals, Serve Robotics, and SoundHound AI. Among these, SoundHound AI has been the talk of the town, with its shares skyrocketing by an astounding 950% over the previous 12 months. Attractive as this might seem for AI investors, it's advised to consider other prospects rather than jumping into this stock.
Enter Nebius Group (NBIS 6.69%), a lesser-known AI stock that caught my attention due to a shared investment with Nvidia. In this piece, we'll delve into the partnership between Nebius and Nvidia, highlighting why this under-the-radar stock could present a lucrative opportunity for 2025 and beyond.
Nebius: A Brief Overview
It's likely you haven't heard of Nebius. However, you might associate it with Yandex, a Russian-based internet conglomerate that operates in a similar capacity to Alphabet's Google in the United States and other Western nations. Post-Russia's invasion of Ukraine in February 2022, Yandex divested from its non-Russian assets in response to the sanctions imposed by the U.S. and EU.
This transaction led to Nebius, now a separate Amsterdam-based entity, becoming an independent entity and listing on the NASDAQ Stock Market back in October. In December 2022, Nebius conducted a private placement, issuing 33.3 million shares at a price of $21 each, ultimately raising $700 million through investments from Nvidia and venture capital firm Accel.
Nebius' Impressive Growth and Future Prospects
Primarily, Nebius operates in the AI infrastructure sector, focusing on building GPU clusters and cloud-based platforms. Further, the company has ventured into other areas, including generative AI, autonomous driving, and technology-based education, through subsidiaries Toloka, Avride, and TripleTen.
In the third quarter of 2024, Nebius reported significant growth, with revenue soaring by 766% year over year to $43.3 million. Its cloud business saw a rise of nearly threefold quarter over quarter, operating at an annualized run rate of $120 million. Despite its smaller-than-expected figures, Nebius' forward guidance is particularly captivating, with management projecting the company's annual recurring revenue (ARR) run rate to reach up to $1 billion by the end of 2025.
This nearly tenfold increase from current levels need not raise concerns regarding liquidity, as Nebius boasts an impressive $2.3 billion in cash reserves as of September 2024. Moreover, the company's strategic partnership with Nvidia, coupled with its involvement in Nvidia's Blackwell GPU roll-out, sets an intriguing stage for 2025 and beyond.
Is Nebius Stock a Buy in 2025?
With just a few months of trading history under its belt, investors may be apprehensive about investing in an unknown AI stock such as Nebius. However, if you examine its share price of $31, you'll find that it is still close to its high and low points since listing on the NASDAQ.
Considering the measures Nebius has taken to ensure adequate financial backing for near-term goals, such as a $1 billion data center expansion in Paris and Finland fueled by the demand for Nvidia GPU clusters, the lucrative opportunity with Nebius lies in its prospects of forming partnerships with other key players in the AI market, such as Advanced Micro Devices and cloud hyperscalers, including Oracle, Microsoft, Amazon, and Alphabet.
Not only does Nebius present an opportunity for diversification due to its international presence, but its alliance with Nvidia strengthens its position for long-term success. At this point, I believe Nebius is both intriguing and worthy of being watched throughout 2025.
- Nebius' partnership with Nvidia, as well as its significant cash reserves, position it well for potential investments in the future, particularly in partnerships with other key players in the AI market by 2025.
- SoundHound AI's impressive share price increase of 950% over the previous 12 months has caught the attention of investors, but it's advisable to consider other investment opportunities beyond this stock.
- In the realm of finance, companies often reinvest their profits into areas like research and development, marketing, or personnel, or choose to invest in other businesses by acquiring equity stakes.
- Nvidia, a leading semiconductor company, revealed in a 2024 13F filing that it had a stake in six publicly traded companies, including SoundHound AI, which has seen remarkable growth in its share price.
