Cloud Infrastructure
Nebius: Mega Microsoft Deal, 5x Growth in Power Fueling AI Cloud Hypergrowth, But High Risk Remains
The trend toward neoclouds is a high risk/high reward opportunity for investors. Nebius is similar to CoreWeave, dubbing itself as AI native cloud infrastructure, which means the infrastructure was built specifically for AI workloads with architectures built on bare metal servers instead of hypervisor layers, for example. As pointed out in our CoreWeave analysis, this along with a few other optimizations can result in significantly faster training. The stock surged earlier this month off the announcement of a mega deal with Microsoft worth $19.4 billion. This deal signals just how supply constrained the market is, given Microsoft is willing to partner with a neocloud to scale quickly. Even with the big moves in neocloud stocks we’ve seen recently, they remain high risk and they are not in the “quality” bucket given their financials are messy. Nebius is high-risk given its success depends on how much capital the company can raise, and the likelihood it remains in CoreWeave’s shadow is high. Below, we discuss the puts and takes for Nebius, and why ultimately we feel that other AI stocks are better in terms of participating in the upside while protecting to the downside.
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