Nebius Stock Analysis — Full Breakdown & Transcript

[00:01] glorious price target for Neveah stock, which is also the company that just partnered with Nvidia on releasing their ultra-fast token inference chips via Groq. They'll be one of the first actually providing

[00:16] be one of the first actually providing access to those chips to compete with the ultra-fast token generators of Cerebras for that low latency, almost imperceptible latency artificial intelligence that you can get from these

[00:31] SRAM chips. Just kind of cool. But, Goldman Sachs' target and their note is pretty neat. Let's go through what their forecast is. It is higher than my forecast, our Stock AI forecast. Our Stock AI forecast right now has Neveah

[00:45] Stock AI forecast right now has Neveah sitting at a fair value of about $238. That represents about a 7 and 1/2% upside at the time of this recording. So, let's go through some of their notes

[00:59] on this. So, this is a Goldman note. Neveah as I noted here is providing the first Groq production chips for ultra-fast tokens in competition with They indicate that deals closed, and I think this is one of the most important

[01:12] for for artificial intelligence right now. It's the spot pricing for these data centers. Deals closed in the second quarter closed at $20 million a megawatt, that's $20 billion a gigawatt, right? Just multiply by 1,000.

[01:25] And a sub-two-year payback period are expected to be contributing starting in late Q4. That's great. If you can sign deals like that regularly and have a sub-two-year payback for all the hardware, really, really good. That's

[01:37] hardware, really, really good. That's anti-AI bubble narrative. That's pro chip build-out. That's pro Nvidia. That's like just good. That's the easiest way to put it. It's good. It's almost as good as that delicious,

[01:51] delicious coupon code that expires Friday. Get to see our buy, sell alerts. We just added three stocks to our 10-year portfolio. Go check those out and join us over at meetkevin.com. Massive price increase on Friday after

[02:05] the Jackson Hole speech where we're going to be providing some extra that time. So, it's going to be a really good day to get in before. But, what you uh sort of gigawatt deployments and this 20

[02:22] billion dollars per gigawatt in these sub-two-year payback periods is the entire AI frontier ecosystem is looking at AI frontier ecosystem is looking at these numbers because Elon Musk sits at

[02:35] this forecast of hey, we're going to make 30 billion dollars to 50 billion dollars. That one's dead. In artificial intelligence

[02:47] compute revenue. And that's kind of the gold standard for getting to your gold standard for getting to your maximum pricing on compute that really gives SpaceX and Nebius and Coreweave a big upshot. The problem with this is

[03:02] this is sort of your short-term spot pricing. So, we'll call it short spot pricing short-term. And the idea here is hey, like we need compute now. the data centers to come online. Whoever's got compute will pay a premium

[03:18] for it right now. We don't actually think that that sort of pricing will last. And so, it's not a surprise to me that we're seeing contracts for longer-term agreements being priced at lower than that, which in this case is

[03:32] about 20 billion dollars. That's actually even better than I thought though. I thought we'd be closer to about 15, 14 billion dollars per gigawatt per gigawatt. So, Nebius signing contracts above 20 billion is

[03:45] pretty good. But, it does also reiterate that in the long term this 30 to 50 might not be mega sustainable, but we'll keep an eye on it because there is talk that Nevius per Goldman is also quote-unquote negotiating shorter-term

[04:00] agreements in the 40 to 50 billion dollar or million per megawatt range, which should serve as a meaningful top-line contributor in 2027 beyond. Yeah, if you can price over here regularly, great.

[04:15] But, right now that's only talk of being negotiated. I mean, those are the words here, right? We're closing deals over 20 bill, but we're talking about deals above the 40 to 50 or in the 40 to 50 range. Okay,

[04:30] fine. We'll see. Nevius obviously a much smaller company than SpaceX or you know, even Google. Google, for example, raised 86 billion dollars in the last few months. SpaceX raised 80 billion dollars. Nevius has like 8 billion

[04:44] dollars of cash, right? Like and and the size of the company is is less than 80 dollar company. So, much much smaller company and player compared to these big guys, but it's good to see this for what's that what's pricing doing on the

[04:59] edge, right? And this will help with the price target for Nevius from Goldman Sachs. So, preparations are underway for materially higher deployment in 2027. 2027 capacity, some of it is being deliberately retained

[05:16] rather than contracting it today reflecting management's confidence in future pricing. I actually don't like that idea. I don't like the idea that they're holding back inventory on purpose to squeeze pricing

[05:29] holding back supply to squeeze pricing up. I get it for wanting to lock in higher earnings driving contracts, but I think misleading spot price that you're negotiating

[05:44] supply that you potentially have. And we're not actually getting a real prices should be or what we should expect those longer term contracts to as much. What I do think is kind of cool is that

[05:58] they did make a switch to joining the Bloom Energy fuel cell movement. We made a big video on Bloom Energy and Nancy Pelosi buying it. And this is kind of Bloom Energy was their customer concentration risk with Oracle and now

[06:11] you got Nebia's joining in as well, which is actually great. So, this is fantastic news. Uh in addition to that, they have secured access to hundreds of megawatts of behind the meter power generation.

[06:23] This is really important so you can get faster permits for your data centers. Uh what kind of behind the meter power generation, so like not considering the utilities you're using, you might still have to get clean air permits. So,

[06:37] really think permitting's going to stand too much in the way. I know it's a uh topic that comes up a lot, but I don't think like David Sachs says, "Oh, deployment of data centers and that'll actually hedge uh data centers expanding

[06:53] too quickly." I don't think so. They'll be able to expand just just fine. But anyway, they're expanding uh and adding to their CPU um fleet as well for agentic workloads. This is kind of the range that I think I

[07:06] I wrote this earlier. I think if you get sub eight billion dollars per gigawatt, things get scary. If you start falling below that, signing at 20 is great, especially since I think mostly we're at like 14 to 15 on longer contracts.

[07:21] Uh and if you could get anywhere over 30, that's fantastic. If you could get 30, that's fantastic. If you could get to 50, scaled up, not shortage pricing, requires AGI and robotics, but it would be such a boon for all of these data

[07:35] center providers, SpaceX, Nebia's, uh you name it. Uh Goldman Sachs here suggests that their operating cash flow is doing well. I wrote probably because of deposits. It turns out just the very next line

[07:47] Goldman then says that 70% of deals closed in Q2 included upfront payments. a risk including $9 billion of upfront funding because when you actually go companies, they could look really exciting

[08:01] there's just there's so much cash coming in. This is great. Look at this. We've in. This is great. Look at this. We've got $4.5 billion of cash over here. Wow. Yeah, we spent $8 billion on hardware but we brought in 4.5. Yeah, well 4.4 of

[08:15] but we brought in 4.5. Yeah, well 4.4 of that was upfront deposits, deferred we have to be careful that in the future those deposits won't come in so those numbers won't look as good. And so as long as you're aware of that then I

[08:28] lot of these also have pretty high cancellation costs. So you know, it's uh companies really want to walk away from the secure

[08:40] because the cancellation costs are probably over 50% but we're not sure. There's not a lot of color on exactly what all of these cancellation costs are Uh but I do think that Nebius has pricing power and how they can handle

[08:55] want to get left holding the bag although they still might. Right? So it depends. It all depends on that number. What's that megawatt number, right? The gigawatts. Okay.

[09:09] Uh selling out compute as it comes online, we see uh pricing remains constructive for Blackwell GPUs. Pricing's actually been moving up uh quite a bit. So I have a note that I saved in the Meet Kevin app. I remember

[09:25] you can download that for free and get the Alpha Wire free right now but there are obviously things inside of the Meet Kevin uh courses that you can get through the Meet Kevin app uh that you just can't get um outside of the course

[09:40] membership. So, what I think is really interesting is this chart right here. This is under our course member stock tab right now. These are rental rates What you could actually find is in this red box I added, you really have the

[09:53] Claude A Gentic coding pop. And so you can see kind of that excess demand that came in for chips at that time. And if you look at the trend line and you draw a trend line on GPU pricing before the A Gentic pop, you get this

[10:06] lower line right here. And after the A Gentic And after the A Gentic Claude pop, you can actually see that we are climbing on rental rates at a faster rate of growth than we were

[10:21] before that moment. So, we are now creating this wedge here if you will of GPUs. And it's probably why we're seeing like the RTX 6000 went up 35% MSRP you know, for for

[10:35] a retail buyer it's gone up like that was just in the last quarter. For a retail buyer it's gone up like 2x over the last year. So, you know, some of because they are being used in so many different inference applications and

[10:48] it's a good thing. The sustainability is obviously what we So, Goldman Sachs, their price target is $328. their price target is $328. So, they see a 50% upside in the stock.

[11:02] I will say if I look at their balance sheet, their balance sheet is actually cash. They've got $1.4 billion of bills and they have long-term debt of about eight. It's yellowish, right? Like it's not

[11:17] super perfect, but it's not like Broadcom or Oracle where you're like, "Oh my gosh, that's a lot of debt." Or worse like UPS, right? Okay, then if I look at this projected yield by 2030. So, this is sort of like

[11:30] a forward pricing model. I get to a you know, projected future yield of about 13.9 on a PE basis. And that's 2030. That's mostly because we

[11:44] don't expect them to be profitable until 2028. So, you kind of have to use some forward numbers to really price this. Goal again is to be profitable in 2028 and and there's some significant growth expected between now and the end of the

[11:57] if they can go profitable. So, biggest risk factors in my opinion profitability and that the markets get misled by upfront deposits. You know, they get confused by that. And the

[12:10] balance sheet is okay. And I'm most concerned in the sustainability of these negotiations. Even at 20 million per megawatt, that's great, but once we really start scaling, are we going to be able to maintain that

[12:23] are we going to be able to maintain that pricing? I hope so. I hope this is more sustainable than just a temporary bounce that we're seeing a temporary bounce that we're seeing because of a genetic coding and once we

[12:35] trend. Because if we go back to trend, all of these prices have to come down at least. Going to take you to about Yeah, probably about 20% reduction in GPU

[12:50] payback periods. These are some of the things to watch for, but that's an overall breakdown on Nevius and why there's about a $330 price target from >> [music] >> as well as some of the risk factors to

[13:04] >> Why not advertise these [music] things that you told us here? I feel like advertising and see how it goes. >> Congratulations, man. You have done so >> Kevin O'Leary right there, financial analyst

[13:17] >> and YouTuber. Meet Kevin. Always great to get your take.