The Nvidia Signal That Couldn't Silence Nebius's Skeptics

Nebius shares rise 4.8% after Nvidia reveals 9.3% economic interest, but analysts warn of mounting debt, Meta competition, and cash flow challenges.

Nebius shares staged a partial recovery Monday, climbing 4.81 percent to €173.14 in European trading, after Nvidia disclosed a 9.3 percent economic interest in the AI infrastructure company. The bounce, however, only scratches the surface of a deeper story — one where a chipmaker's endorsement collides with mounting questions about leverage, competition, and whether the company's breakneck expansion can translate into cash flow fast enough.

The Nvidia filing revealed the chip giant holds the equivalent of 22.25 million Nebius shares, with 94.7 percent of that exposure coming through a prepaid warrant secured on March 11 at an economic price of $94.94 per share. That warrant cannot be exercised before September 11. In premarket trading on the Nasdaq, Nebius jumped 6.1 percent to $199.30 on the news. Freedom Capital had already upgraded the stock to Buy with a $200 price target following an earlier Nvidia disclosure, and ten of 16 analysts now rate Nebius a Buy, with a consensus price target of $258.71. A more cautious group of houses sees a moderate buy signal at an average target around $222.

Yet the recovery comes after a brutal Friday session that saw the stock shed double digits on the Nasdaq, leaving it 36.7 percent below the all-time high of €261.00 reached on June 22. Over the past month, the shares have dropped nearly 22 percent — a stark contrast to the 260 percent gain they still show over twelve months.

Two Headlines That Broke the Rally

Friday's sell-off had twin catalysts. Bloomberg reported that Meta plans to sell AI computing capacity to external clients through an internal unit called Meta Compute, directly challenging Nebius and rivals like CoreWeave. Nebius shares fell 9.8 percent in premarket trading on that news alone. Evercore-ISI analyst Mark Mahaney estimates Meta could generate $10 billion to $20 billion in additional annual revenue from selling excess GPU capacity — a competitive threat that has weighed on Nebius repeatedly over the past month.

The second blow came from The Motley Fool, which scrutinized Nebius's financing structure. The company is increasingly offering its data center capacity as a standalone product, where clients front the capital costs while Nebius provides design and software. The analysis suggested that Nebius's cost of capital currently exceeds the return it generates on invested capital — a problem that additional competition, including from SpaceX offering surplus GPU capacity, could exacerbate.

The Debt Mountain

The numbers paint a sobering picture. Nebius's debt has more than doubled this year, rising from $4.1 billion to $8.5 billion. In July, the company secured an additional $775 million secured credit facility led by MUFG, backed by already-installed GPU infrastructure and priced at SOFR plus 250 basis points. Short interest stands at roughly 24 percent of the float, while insider sales over the past three months have reached $140.4 million — with the CEO, CTO, and Chief Infrastructure Officer all offloading significant positions in recent weeks.

The Bank for International Settlements recently flagged the circular financing model prevalent in the AI sector as one of the biggest risks to global financial stability. In this pattern, chipmakers like Nvidia invest capital in cloud providers, which in turn commit to multi-billion-dollar purchase agreements — creating a self-referential cycle that the BIS views with alarm.

Growth That Demands Proof

Operationally, Nebius continues to deliver explosive growth. First-quarter revenue hit $399 million, eight times the year-ago figure, with AI cloud revenue alone surging 841 percent to $389.7 million. The annualized recurring revenue run rate is approaching $2 billion, with management targeting $7 billion to $9 billion by year-end. For the full year, the company expects revenue between $3 billion and $3.4 billion.

The investment plans, however, are staggering. Nebius has earmarked $20 billion to $25 billion in capital expenditures for 2026, up from roughly $2.5 billion in the first quarter alone. Much of this new capacity won't generate meaningful revenue until the first half of 2027. Contractual commitments from Microsoft and Meta total more than $40 billion, and as of March 31, remaining performance obligations stood at $33.59 billion, with 29 percent expected to convert to revenue within 24 months.

The company has also rolled out a new capital-light model where infrastructure partners own the data centers while Nebius provides the AI cloud platform, system architecture, and sales. If this model scales, it could ease the balance sheet pressure that has made investors wary of the entire neocloud sector.

The Pivotal Week Ahead

Wednesday brings a triple set of events that could determine Nebius's near-term direction: quarterly results from both Microsoft and Meta, plus the Federal Reserve's interest rate decision. For Nebius bulls, strong numbers from those two key customers could reaffirm demand. For bears, any sign that Meta's own cloud ambitions are gaining traction would reinforce the competitive threat.

The technical picture offers little clarity. The 14-day RSI sits at 42.6 — neither oversold nor overbought — while the stock trades 36.31 percent above its 200-day moving average of €121.19. A break below the 100-day average of €159.14 could signal further downside, while a sustained move above recent resistance would suggest the Nvidia endorsement has found a floor.

The next concrete test will be Nebius's own second-quarter results, expected in late July or early August. Analysts will focus on adjusted EBITDA margin trends — which management has warned will decline before recovering — and updates on contracted power capacity toward year-end targets. For a stock with 119.3 percent annualized 30-day volatility, the margin for error is razor-thin.