Nebius' (NBIS) shares rallied on June 8 after the company disclosed that it would spend roughly 1.7 billion British pounds to develop three new UK sites, which will utilize Nvidia's (NVDA) “AI factory platform technology.” But given the U.K.'s relatively small, slow-growing economy, the project may not move the needle much for Nebius' financial results. Moreover, the stock's valuation is extraordinarily high, especially because the firm's core business may easily become commoditized and very competitive in the longer term.
In light of these points, I would avoid buying the company's shares at their current levels.
More Top Stocks Daily: Go behind Wall Street’s hottest headlines with Barchart’s Active Investor newsletter.
About Nebius
The company's graphics processing unit (GPU) chips and other hardware, obtained from partners such as Nvidia (NVDA) and based in data centers, are used by major hyperscalers, including Microsoft (MSFT) and Meta Platforms (META), to develop AI. Nebius also has other customers in several different sectors, including robotics, healthcare, finance, and government. Founder Arkady Volozh serves as the CEO of the company, which has also moved into launching and servicing supercomputers. Although headquartered in Amsterdam, Nebius has offices in Israel and the U.S. Volozh holds Israeli citizenship and has called himself “an Israeli businessman.”
www.barchart.com The U.K.'s Economy Is Not Especially Large and Its Growth Is Anemic
The U.K.'s economy is not exactly in a great spot right now and makes for a questionable host country. GDP is $4.26 trillion, versus the United States's $32.4 trillion, China's $20.85 trillion, and Germany's $5.45 trillion. Further, the U.K.'s economy typically expands at annual rates of just 1%-1.4%.
If the sites were going to power the EU, whose GDP was $21.3 trillion in 2025, Nebius' news might be something to get excited about. But the U.K. is no longer part of the EU, and Nebius' press release does not indicate that the sites will be utilized by the EU.
Nebius Is Likely to Face Tough Competition, and Its Offerings May Become Somewhat Commoditized
Nebius specializes in building data centers and renting out Nvidia's GPU chips, which are used to create AI. One commentator pointed out that “Nebius does not simply rent GPU capacity. It builds vertically integrated infrastructure, pairing Nvidia silicon with proprietary software layers tuned specifically for intensive AI workloads.”
Still, my research did not indicate that Nebius' “proprietary software” has any significant, tangible, competitive advantages over other software. And the construction of data centers, though undoubtedly very complex, is being tackled by a wide array of companies, including SpaceX (SPCX). Speaking of SpaceX, which is looking to build space-based data centers, Nebius could be in trouble in the longer term if such data centers turn out to be much cheaper and more efficient than their terrestrial counterparts.
The Valuation of NBIS Stock Is Still Extremely High
In the five days that ended on the afternoon of June 9, NBIS stock had pulled back 22%. However, the shares, which had risen 285% in the preceding year, were still changing hands at a gigantic forward price-sales ratio of 109x. Even based on analysts' average sales estimate for 2026, the stock has a very high price-sales ratio of 14.5x.
In light of the steepening competition that the firm is likely to face from SpaceX and others, that appears to be too expensive.
On the date of publication, Larry Ramer did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
More news from Barchart
Weakness May Be an Opportunity for CrowdStrike Stock Albemarle Stock In Focus as Citi Issues Bullish Note on Lithium Stocks Wix Is Set to Slash Its Workforce by 20%, But It May Not Be Enough to Stop the Slump in WIX Stock Dear Alibaba Stock Fans, Mark Your Calendars for June 30