Investor Michael Burry, known for his prescient bet against the housing market in 2008, has disclosed a short position in Nebius Group (NASDAQ: NBIS), the Nvidia-backed AI cloud company. The news, combined with anticipation of the company's upcoming earnings report, has sent the stock down for two consecutive sessions, with shares now trading around $187, roughly 37% below their year-high of $299.
Burry's short is part of a broader bearish stance on the artificial intelligence sector. He has also shorted Oracle and previously held a short position in Palantir, though he recently exited some of those bets. His central thesis is that the AI bubble will eventually burst, and he sees companies like Nebius as particularly vulnerable.
Nebius is not alone in attracting bearish sentiment. Data shows that short interest in the company stands at 27% of its float, significantly higher than that of peers like CoreWeave (15%) and IREN (25%). This indicates that nearly a third of the available shares are held by traders betting on a price decline.
Earnings expectations: strong growth, but persistent losses
Despite the bearish positioning, the upcoming earnings report could show robust growth. Analysts expect Nebius to report second-quarter revenue of $576 million, a 446% increase year-over-year. That would be a substantial jump from the $529 million the company generated in all of 2024. The growth is largely attributed to a major partnership with Meta Platforms, a deal valued at $27 billion.
Looking ahead, the company's revenue is projected to reach $3.38 billion for the full year, a 537% increase, and then more than triple to $11.4 billion in the following year. These figures suggest that the company's top-line momentum is not slowing down.
However, profitability remains elusive. Analysts forecast a loss per share of $2.80 this year, widening to $5.83 next year. Free cash flow is expected to remain negative as the company invests heavily in data centers and other infrastructure. This is a common pattern among high-growth AI companies, but it also raises concerns about long-term sustainability.
Valuation and competitive pressures
Valuation is another point of contention. Nebius currently has a market capitalization of $47.7 billion, which is roughly four times its expected 2027 revenue. That multiple is steep even for a high-growth tech company, and it leaves little room for error.
Competition is intensifying. Major tech companies like Meta and SpaceX are entering the AI cloud space, and Google is reportedly considering selling its excess computing capacity. This could pressure pricing and margins across the industry.
There is also the risk of dilution. Nebius may need to raise additional capital through debt or its at-the-market (ATM) equity program, which could dilute existing shareholders. The company's borrowing is expected to increase substantially in the coming years.
Technical analysis: bearish signals
From a technical perspective, the stock has been in a clear downtrend. It has fallen below its 50-day exponential moving average (EMA), a signal that bears are in control. It has also broken below a key support level on the Murrey Math Lines indicator. The next major support is seen at the psychological $150 level, while resistance is at $225.
Options traders are also bracing for volatility. As noted in a recent analysis, the options market is pricing in a significant post-earnings move. This suggests that the stock could see a sharp reaction in either direction.
For investors, the key question is whether the company's explosive growth can justify its valuation and overcome the bearish sentiment. The earnings report will provide critical data points, but the broader AI trade remains a battleground between bulls and bears.
This article is for informational purposes only and does not constitute financial advice.
