Winning big orders leads to a “surge,” but after announcing a bond issuance there’s a “plunge”—shareholders of the “AI cloud rising star” Nebius are “very conflicted.”

Winning big orders leads to a “surge,” but after announcing a bond issuance there’s a “plunge”—shareholders of the “AI cloud rising star” Nebius are “very conflicted.”

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On one side are massive orders, on the other side is frantic spending; Nebius’s moves make investors feel "very conflicted".

On Tuesday, March 17, the “AI cloud rising star” Nebius announced it would issue $3.75 billion in bonds to support its AI infrastructure construction, causing its stock to plunge 10.4%. This news wiped out part of Nebius’s recent strong gains.

Just on Monday, Nebius announced it had reached a $27 billion, five-year AI infrastructure supply agreement with Meta, pushing its stock up 15%. In addition, earlier this month, Nvidia announced a $2 billion investment in Nebius, with the two parties cooperating to deploy AI infrastructure—this news also triggered a sharp stock rise. Overall, Nebius is still up 25% so far this month.

Analysts believe that the drastic volatility in stock price reflects the market’s concerns about the high costs of AI infrastructure. Although large orders bring huge growth potential, realizing this potential requires massive capital investment, catching some new investors off guard.

Issuing $3.75 billion in bonds, boosting AI infrastructure

Nebius stated in Tuesday’s press release that it plans two private placements, issuing convertible senior notes maturing in 2031 and 2033, for a total size of $3.75 billion.

The company clearly pointed out that proceeds from this bond issuance will be used to fund the construction of data centers, develop its full-stack AI cloud services, and purchase more graphic processing units (GPUs).

Nebius CEO Arkady Volozh emphasized in Monday’s press release that the deal with Meta is part of the company’s efforts to seek “more large, long-term capacity contracts” to grow its AI cloud business. He stated, “We will continue to deliver on our promises.”

Analyst: Capital needs should not be surprising

Despite the market’s negative reaction to the bond issuance news, some analysts believe this was expected.

BWS Financial analyst Hamed Khorsand told MarketWatch: “This stock has a lot of new investors, and I think they are not yet ready for the capital needs Nebius has been talking about.”

However, Khorsand pointed out that the bond issuance move should not be surprising. “Nebius mentioned their capital needs on the last earnings call and said they would look for ways that don’t impose too many restrictions on stock,” he noted. “I interpret this as them looking for the right opportunity.”

Khorsand added that, the deal with Meta provides a huge growth opportunity, but Nebius needs to spend money to unlock this potential. Compared to its competitor CoreWeave, Nebius currently does not have 'massive debt.'"

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