Nebius Group (NASDAQ: NBIS) has seen its shares climb sharply this week, reaching levels not seen since late June and recovering about 90% from its July low. The rally follows a blockbuster earnings report, but the surge has also attracted the attention of prominent short-seller Michael Burry, who has placed a bearish bet on the stock.
Burry, known for his successful bet against the housing market in 2008, has repeatedly warned that the current artificial intelligence boom resembles a bubble. His latest move targets Nebius, a company backed by Nvidia that provides AI infrastructure and cloud services. Burry has also shorted other AI-related names, including Oracle, Nvidia, and Palantir, as part of a broader bearish thesis on the sector.
Strong earnings, but valuation concerns persist
Nebius reported second-quarter revenue of $582 million, a 454% increase year-over-year, while first-half revenue reached $981 million, up 529%. The company's growth has been fueled by large contracts, including a $27 billion deal with Meta Platforms, as well as agreements with Cohere, Reflection, and a major quantitative trading firm. Management noted that demand is so robust that it could sell out its entire 2027 capacity today, but it is deliberately holding back some capacity for immediate customer needs.
Despite the impressive top-line growth, the company's adjusted net loss narrowed to $33.2 million from $91.5 million a year earlier, indicating improving profitability. However, the stock trades at a forward price-to-sales multiple of 20, a level that Burry and other skeptics consider excessive.
High short interest and rising costs
Nebius has a short interest of 25%, significantly higher than peers like CoreWeave and IREN. This suggests that many investors share Burry's concerns. One key issue is the company's heavy capital expenditure, driven by rising costs for memory, servers, and GPUs. To fund this spending, Nebius plans to use its long-term contracts as collateral to borrow more money, with $40 billion in commitments already in place.
Competition is also intensifying, with rivals such as Riot Platforms, CoreWeave, SpaceX, and potentially Meta Platforms entering or expanding in the AI infrastructure space. These factors could pressure Nebius's margins and growth trajectory over the long term.
Technical signals point to potential pullback
From a technical perspective, NBIS stock has rebounded from an August low of $146 to a recent high of $275, approaching its all-time high of $298.9. The stock remains above its 50-day and 100-day exponential moving averages, indicating a strong uptrend. However, a doji candlestick pattern has formed on the daily chart, which is often interpreted as a sign of indecision and potential reversal. If the stock pulls back, the key support level to watch is $200.
Investors should note that short interest and technical patterns are not definitive predictors of future price movements. The AI sector remains highly volatile, and Nebius's fundamentals are strong, but the valuation and competitive pressures warrant caution.
This article is for informational purposes only and does not constitute financial advice.
