Nebius Group (NASDAQ: NBIS) rallied nearly 15% on Wednesday after the artificial intelligence (AI) infrastructure company received a massive $2 billion follow-on investment from Nvidia.
The agreement ostensibly accelerates NBIS’s goal to become the premier European “AI factory”, yet a closer look reveals a circular capital flow that may be inflating the firm’s valuation.
A circular deal or round-tripping is when a hardware provider invests capital into a customer, who then immediately uses that same capital to buy the provider’s hardware.
Here’s why such a transaction with NVDA may not be as bullish for Nebius stock as the market believes.
Dependency risk could hurt Nebius stock
While early access to Nvidia’s cutting-edge Rubin platform and Vera CPUs, as part of the $2 billion agreement, is being marketed as a competitive edge, it effectively transforms NBIS stock into a monoculture.
The announced investment essentially “locks” Nebius into a single hardware roadmap for the next decade.
In the fast-growing world of semiconductors, this “all-in” bet on Nvidia limits its agility.
Should a more energy-efficient or cost-effective architecture emerge from competitors like AMD or bespoke silicon from hyperscalers, Nebius will find it nearly impossible to pivot.
For a company trading at a rather “stretched” 45x sales multiple, this lack of hardware optionality introduces a “key-partner risk” that the market seems to be overlooking currently.
Capex remains an overhang on NBIS shares
The Nvidia deal isn’t just a cash infusion – it’s a commitment to an enormous infrastructure build-out, with Nebius targeting a massive 5 gigawatts of capacity by the end of this decade.
This scale of ambition requires extraordinary, long-term capital expenditure that could keep NBIS in the red for years to come.
Even with Nvidia’s billions, the sheer cost of building and maintaining these AI factories threatens to cannibalize margins.
For a pre-profit business, the path to free cash flow is now littered with the high costs of specialized real estate and cooling technology.
Investors buying Nebius shares at these levels are betting on a perfect execution of a high-burn model that provides little margin for error if data center demand hits even a minor speed bump.
Nvidia deal may not be validation of Nebius tech
Finally, skeptics are increasingly vocal that this investment is less about market validation of NBIS’s proprietary software and more about a strategic “subsidy” from Nvidia.
By funding “neocloud” players, NVDA ensures a guaranteed home for its chips outside the “Big Three” (AWS, Google, and Azure), which are all busy developing their own internal silicon to reduce Nvidia’s reliance.
This circularity – where Nvidia provides the capital that Nebius then uses to buy its chips – creates a synthetic demand loop that masks true organic market interest.
At a 45x multiple, investors are paying a premium for what might essentially be a hardware-reseller model disguised as a high-growth cloud platform, making NBIS shares a risky proposition for disciplined investors at current levels.
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