On one side are huge orders, and on the other side is a crazy burn of cash, Nebius's actions have left investors feeling &#34;very conflicted.&#34;
On Tuesday, March 17, the &#34;AI cloud newcomer&#34; Nebius announced it would issue $3.75 billion in bonds to support its AI infrastructure development, causing its stock price to plummet by 10.4%. This news led Nebius's stock to give back some of its recent strong gains.
Just on Monday, Nebius announced a $27 billion, five-year AI infrastructure supply agreement with Meta, which drove its stock price up by 15%. Additionally, earlier this month, NVIDIA announced it would invest $2 billion in Nebius, and the two companies would collaborate on deploying AI infrastructure, which also triggered a significant stock price surge. Overall, Nebius has still accumulated a 25% increase so far this month.
Analysts believe that the sharp fluctuations in stock price reflect the market's concerns about the high costs of AI infrastructure. While large orders bring tremendous growth potential, realizing that potential requires massive capital investment, which has caught some new investors off guard.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/88d82088-840a-4d08-a863-4c8351b9ec4d.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/88d82088-840a-4d08-a863-4c8351b9ec4d.png"/>
<h2>Issuing $3.75 billion in bonds to enhance AI infrastructure</h2>
In a press release on Tuesday, Nebius stated that it plans to conduct two private placements, issuing convertible senior notes maturing in 2031 and 2033, with a total scale of $3.75 billion.
The company clearly pointed out that the proceeds from this bond issuance will be used to fund the construction of data centers, develop its full-stack AI cloud services, and procure more graphics processing units (GPUs).
Nebius CEO Arkady Volozh emphasized in a press release on Monday that the deal with Meta is part of the company's efforts to secure &#34;more large, long-term capacity contracts&#34; to grow its AI cloud business. He stated, &#34;We will continue to deliver on our commitments.&#34;
<h2>Analyst: Capital needs should not be surprising</h2>
Although the market reacted negatively to the bond issuance news, some analysts believe this was expected.
BWS Financial analyst Hamed Khorsand told MarketWatch: &#34;This stock has a lot of new investors, and I think they are not yet prepared for the capital needs that Nebius is talking about.&#34;
However, Khorsand pointed out that the bond issuance should not come as a surprise. &#34;Nebius mentioned their capital needs in the last earnings call and indicated they would look for ways that impose less restriction on the stock,&#34; he noted. &#34;I interpret this as them looking for the right opportunities.&#34;
Khorsand added that the deal with Meta provides a huge growth opportunity, but Nebius needs to spend money to unlock that potential. However, compared to its competitor CoreWeave, Nebius currently does not have &#34;massive debt.&#34;

NVDU

Nebius secured a $2 billion investment from NVIDIA and a five-year deal worth up to $27 billion from Meta this month, causing its stock price to surge. However, a $3.75 billion bond issuance announcement led to a single-day drop of over 10% in its stock price. Analysts pointed out that behind the large orders is significant capital consumption, and many new investors are not yet prepared, as they remain concerned about the high costs of AI infrastructure

- Nebius announced a $3.75 billion bond issuance to support its AI infrastructure, causing its stock price to drop 10.4%.  
- This followed a $27 billion supply agreement with Meta, which had previously led to a 15% stock increase, and a $2 billion investment from Nvidia earlier this month.  
- Analysts suggest that the stock's volatility reflects market concerns about the high costs of AI infrastructure, as significant capital investment is needed to realize the potential from large orders.

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NVIDIA

Secured a big order and "surged," announced bond issuance and "plummeted," shareholders of "AI cloud newcomer" Nebius are "very conflicted."