Overlooked and Undervalued: 1 AI Stock Worth Considering

Nebius Group (NASDAQ: NBIS) may be the biggest technology company you didn't even realize you already knew. The artificial intelligence (AI) infrastructure company has only been public in that name since last October. But it was a major global player in internet search before that.

A restructuring that came after Russian search engine company Yandex was forced to break up may now be giving investors an early investment opportunity. The Russian invasion of Ukraine led to a trading halt on Yandex shares. The company subsequently sold off all Russian assets to a Russian group.

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A legacy in search

The restructured company resumed trading on the Nasdaq stock exchange last October as Nebius Group. Nebius founder and CEO Arkady Volozh resigned from all his positions at Yandex at that time.

Volozh has spearheaded the company's focus on its core AI infrastructure business. It also holds three other adjacent, growing segments. Those are Toloka, a data partner for AI development including training and evaluation; an educational technology business; and autonomous driving and delivery robot maker Avride.

Each of these segments supports Nebius Group's overall revenue model by utilizing technology solutions to grow a diverse pool of clients and markets. And each is also growing quickly. Avride has a new partnership with Grubhub to deploy robot delivery on U.S. college campuses. As of January, it had almost 100 robots already operating on U.S. college campuses starting with Ohio State University. Avride also has pilot services operating with Uber Technologies' delivery platform, Uber Eats.

How Nebius is growing fast

The company has made big progress with recent expansions. That includes setting up a new graphics processing unit (GPU) cluster in the U.S. and increasing capacity in Europe in the fourth quarter. It also launched a new AI-focused cloud software platform and an AI inference tool called AI Studio. AI Studio enhances AI capabilities by simplifying and optimizing the deployment of AI models. It allows developers to quickly create and test AI applications.

Nebius also spent recent months building out its sales group to enhance customer growth. Increasing client count and diversifying its customer base have given the company more confidence to guide investors for impressive upcoming revenue growth.

Volozh said that contracts already in place mean the current quarter should see revenue of at least $55 million. That would represent more than 45% sequential growth over the last quarter. He added that the company also has new potential deals already in the works. That additional business will utilize its added data center capacity as well as new Nvidia (NASDAQ: NVDA) Blackwell GPUs coming online later this year.

The company sees quarterly revenue soaring to an annualized run rate (ARR) of between $750 million and $1 billion by the fourth quarter of this year. On the company's recent quarterly conference call, Volozh said: "So we feel very good that we are well on track to hit the ARR guidance for the end of '25. And actually, in reality, we believe that the scale opportunity could be even much, much bigger."

The buy case for Nebius

That's a bold statement that implies fourth-quarter revenue alone could hit or exceed $250 million. The Nebius cloud platform has plenty of competition from major global tech players including Microsoft, Amazon, Alphabet, and Alibaba. Those major competitors are one obvious risk for Nebius to accomplish its growth targets.

Nebius is in a strong position after its separation from Yandex, though. It was sitting on a cash pile of $2.45 billion as of Dec. 31, 2024, along with negligible debt. Its relationship with AI powerhouse Nvidia is more than a simple supplier-and-customer connection, too. Nvidia was a participant in a $700 million private funding round in December. It also disclosed that it owns more than 1 million shares of Nebius stock in its most recently released 13F filing.

The stock's valuation has also recently improved. Shares surged higher earlier this year, but have given up those gains recently. If management hits even the low end of its estimated annualized revenue run rate in the fourth quarter, its forward enterprise-value-to-revenue multiple would be below 5 for next year.

Considering management's confidence surrounding its growing market and business segments, that's a cheap valuation. Shares may not stay inexpensive, though, if investors begin to take notice of this overlooked AI company.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Howard Smith has positions in Alphabet, Amazon, Microsoft, Nebius Group, and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Microsoft, Nebius Group, Nvidia, and Uber Technologies. The Motley Fool recommends Alibaba Group and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.