Nvidia Just Plowed Nearly $4 Billion Into a Company That's Reshaping the Cloud Industry, Increasing Its Stake by 18-Fold. Investors Should Be Paying Attention.
Nvidia increased its stake in Nebius by over $3.8 billion, raising its ownership to approximately 12%. This move highlights Nvidia's confidence in Nebius as a leading neocloud provider offering GPU-as-a-service for AI infrastructure. CEO Jensen Huang praised Nebius's rapid growth and strategic importance. Despite Nebius not yet being profitable, strong revenue growth projections and analyst support suggest significant potential in the expanding AI cloud market.
For more than three years now, Nvidia (NVDA +2.10%) has been at the center of the most significant technology shift in decades. The company was a linchpin in the early 2023 advent of artificial intelligence (AI) and has been at the heart of the AI boom ever since. The chipmaker has been investing in ancillary products and adjacent industries, thereby expanding its reach. In the latest development, Nvidia significantly increased its position in one area of AI infrastructure: neoclouds.
According to a recent filing with the Securities and Exchange Commission (SEC), Nvidia now has 12% of its investment portfolio in Nebius (NBIS +18.91%), after increasing its stake by more than $3.8 billion. Nvidia previously owned roughly 1.1 million shares of Nebius stock, but boosted its stake by more than 21 million shares and now owns roughly 9.3% of the company.
Let's take a look at what prompted that move and why investors should be paying attention.
Image source: The Motley Fool.
Neocloud 101
To understand why this is a big deal, it's worth taking a step back to review what Nebius does. The concept of cloud computing is well known to most investors. The cloud, as it's commonly called, allows internet users to access applications, data storage, data processing, and AI. Cloud use provides improved security, increased flexibility, and scalability, making it an attractive option for many companies. Furthermore, cloud access to AI models and processing has supercharged adoption.
Neocloud operators fill a special function in the AI boom. These companies have stockpiled the graphics processing units (GPUs) and other infrastructure needed to facilitate AI and other high-performance computing. The offering has been dubbed GPU-as-a-service (GPUaaS).
Nebius is one of the leading providers of these services, offering an "AI-centric cloud platform building large, cost-efficient GPU clusters to service the explosive growth of the global AI industry," according to its website.
The company's financial results are telling. In the first quarter, it generated revenue of $399 million, which soared 684% year over year, albeit from a small base. Perhaps more telling is the annualized run rate for its core AI services of $1.92 billion, an increase of 674%.
NASDAQ: NVDA
Key Data Points
Does Huang know something Wall Street doesn't?
Nvidia CEO Jensen Huang is the architect of this investment, which includes the ownership of 1.19 million shares previously reported and the addition of 21 million shares from a warrant Nvidia acquired in Q1. In the regulatory filing, Nvidia revealed that it was prohibited from selling the newly acquired shares before Sept. 11, 2026.
This increased investment marks a huge vote of confidence from Nvidia. This shouldn't come as a surprise. At the keynote address at the Computex technology trade show in Taipei, Taiwan, last month, Huang lauded Nebius as one of a select group of "world-class AI clouds." He cited the neocloud's impressive customer list and Nvidia's own experience working with the company. "We worked with Nebius, and they are growing incredibly fast," Huang said.
Don't take his word for it. Neocloud revenues are expected to grow from $25 billion in 2025 to $400 billion by 2031, a compound annual growth rate of 58%, according to a report by Synergy Research Group. The report goes on to say, "Neocloud providers are capturing an increasing share of the fastest-growing segments of the cloud market, fundamentally reshaping the competitive dynamics of AI infrastructure."
Nebius isn't yet profitable, as the company scrambles to build out its infrastructure to meet its soaring customer demand. Wall Street expects revenue growth of 541% in 2026 and 238% in 2027, and 63% of analysts rate the stock a buy or strong buy.
At 64 times sales, the stock certainly doesn't look cheap. That said, Jensen Huang has his finger on the pulse of all things AI and just increased Nvidia's stake by more than 18x, which suggests he believes strongly in Nebius’s future.
That's why investors should be paying attention -- and why Nebius stock is a buy.
