Saint-Non, *Ancient Ruins: Ancient Aqueduct* (1756), Cleveland Museum of Art. CC0.
Issue 001 · AI infrastructure
Nebius: the AI cloud build-out, priced as if it already works
NASDAQ: NBIS
▼ 20% from high
$222
52-wk $43.89–$278.84 mkt cap ~$56B · node L6.1.2 neocloud
In 60 seconds
Every company building AI, from a two-person startup to Microsoft, needs large clusters of Nvidia chips to train and run its models. Most cannot build that capacity fast enough on their own. Nebius builds the data centres, fills them with GPUs, wires up the power, and rents the capacity out. Think AWS, but built specifically for AI.
It was carved out of Yandex, Russia’s dominant search and technology group, in 2024. It kept the engineers and has scaled fast: run-rate revenue went from $121M to $1.92B in six quarters, and it holds close to $50B of contracts with Microsoft and Meta. The question is not whether AI demand is real. It is whether Nebius can build and fund fast enough to justify a ~$56B valuation.
Each issue of this newsletter examines one point in the AI build-out where demand has run well ahead of supply, and asks which companies benefit. Nebius Group sits on one of those points. It rents out GPU capacity at gigawatt scale, and on its first-quarter call management described the bottleneck plainly.
For every GPU coming online, roughly four customers are competing for capacity. Time-to-power is critical for both revenue conversion and contract momentum. Paraphrasing Nebius management, JMP Securities, 20 May 2026
That quote holds both the bull case and the central risk. Demand is secured: Nebius has signed close to $50bn of contracts with Microsoft and Meta. What remains open is execution: can a company whose last data-centre build finished over a decade ago in Finland turn contracted power into connected, revenue-earning power fast enough, while funding a $20–25bn capital programme without heavy dilution? This issue is our first pass at that question.
The signal Hold Conviction Medium
A strong business, priced as if the build already works. We like the idea: investment-grade demand is already contracted and the unit economics work once capacity fills. But the stock prices in most of the good news, ~83% of receivables sit with one customer, and the 2026 targets lean on power that is not yet connected. Back the thesis, but wait for proof that contracted power is turning into connected, revenue-earning power before paying up.
Horizon 18–36 months · the number we track from here is connected megawatts
Run-rate revenue
$1.92B
Q1 revenue
$399M
Gross margin
74%
Backlog
~$48–50B
Cash
$9.3B
Connected now
~0.2 GW
01 Where Nebius sits in the stack
AI runs on a physical supply chain. The layers below are the chokepoints atlas: L0 at the base (raw materials) up to L8 (the apps people pay for). Red layers are real chokepoints, meaning one or two suppliers, one region, or multi-year lead times. Nebius sells at L6 (neocloud, segment L6.1.2) and builds down into L3, where it owns its sites as a facility operator. That position shapes both its opportunity and its risk: it depends on every bottleneck beneath it and holds no monopoly of its own.
L8
Applications and inference
Where users and businesses pay for AI.
ChatGPT, Copilot, AI agents
Demand
L7
Models and foundation labs
The models being trained and served.
OpenAI, Anthropic, Google, Meta
Competitive
NEBIUS · YOU ARE HERE
L6
Cloud and infrastructure software
Renting GPU compute as a service, plus the software to run it.
L6.1.2 Neocloud / GPU-specialist cloud platform
Nebius, CoreWeave, AWS, Azure, GCP
Competitive
L3
Data centre physical
Nebius builds here
Buildings, cooling and fit-out that house the chips.
L3.2.4 Neocloud facility owner/operator; L3.4 power distribution; L3.5 cooling
Nebius (owned sites), Equinix, Digital Realty
Constrained
L2
Transmission, grid and interconnection
Getting power from the grid to the site.
Utilities, grid operators, PJM queue
Chokepoint
L1
Power generation
Generating the electricity itself.
Gas, nuclear, Bloom Energy fuel cells
Chokepoint
L4
Compute hardware
The GPUs and gear in the rack.
Nvidia (dominant), AMD, networking
Chokepoint
L5
Semiconductor manufacturing
Fabrication, lithography, packaging, memory.
TSMC, ASML, SK Hynix, CoWoS
Chokepoint
L0
Raw materials
Gallium, rare earths, ultra-pure silicon.
China (~90% of gallium)
Chokepoint
LX
Cross-cutting enablers
Capital, talent, water and cooling across all layers.
Project finance, power engineers, water rights
Enabler
Top: closer to user and revenue
Bottom: scarcer and harder to replace
Stack layers adapted from the chokepoints.ai value-chain map.
02 What Nebius is
Nebius is what was left of Yandex once the Russian search business was carved off; it re-listed on Nasdaq in late 2024 and reinvented itself as a neocloud: a specialist that does nothing but rent AI compute, vertically integrated from the concrete and the power contract up through Nvidia GPUs to its own software and inference stack. Growth since the relisting has been rapid: AI-cloud revenue grew 841% year on year to $390m in Q1 2026, 98% of the group total, and annualised run-rate revenue hit $1.92bn, up 674%.
Management guides to full-year 2026 revenue of $3.0–3.4bn and, more ambitiously, an exit run-rate of $7–9bn. That exit number is where bulls and bears diverge: hitting it means compounding the run-rate roughly 54–67% every quarter for three more quarters, the bulk in Q4. The growth so far supports the trajectory, but the implied step-up is far larger than anything the company has yet delivered in a single quarter.
Background
2000
Yandex founded
by Arkady Volozh. Russia’s dominant search engine, then a full cloud, ads and ride-hail group.
2011
Lists on Nasdaq
as Yandex N.V., a Dutch holding company.
FEB 2022
Trading suspended.
Sanctions after Russia’s invasion freeze the shares.
JUL 2024
The split.
Russian businesses sold to local investors. The group keeps its non-Russian assets and over 1,000 engineers, renames itself
Nebius Group
. Volozh returns as CEO.
OCT 2024
Relists on Nasdaq
(NBIS), moves fully into AI cloud.
2025–26
Scale arrives.
A $17.4B Microsoft deal, up to $27B with Meta, a $2B Nvidia investment, and run-rate revenue through $1.9B.
What the group contains
Nebius AI cloud is ~95% of the story. Around it:
• ClickHouse: ~25% stake marked at ~$15bn round (a ~$780m non-cash gain ran through Q1 2026).
• Toloka: AI data-labelling; Bezos Expeditions invested.
• Avride: self-driving vehicles, partnered with Uber.
• TripleTen: edtech reskilling, ~88% YoY growth.
Headcount ~1,371, HQ Amsterdam, listed New York. Net loss ~$447M in FY2025; Q1’26 profit was a one-off accounting gain, not operating cash.
The bars show the track record; the dashed box is the target, with most of 2026 back-half loaded. Source: Nebius Q1’26 disclosures ; broker estimates (Singular Research, JMP). Chart by chokepoints.ai.
Metric | FY2024 | FY2025 | Q1’26 | FY2026 guide |
|---|---|---|---|---|
Revenue | ~$92M | $530M | $399M | $3.0–3.4B |
Exit ARR | ~$170M | $1.25B | $1.92B | $7–9B |
Adj. EBITDA margin | neg. | +ve from Q4 | 32% | ~40% |
Capex | n/a | $4.1B | $2.5B | $20–25B |
Cash | n/a | $3.7B | $9.3B | n/a |
03 The backlog: Microsoft and Meta
In eight months Nebius signed two of the largest GPU-capacity contracts in the market. Microsoft came first, September 2025: a five-year deal worth $17.4bn, with options to $19.4bn, anchored on the Vineland, New Jersey site. Meta followed with a small $3bn deal late in 2025, then a far larger arrangement in March 2026 worth up to $27bn. The Meta contract is structured unusually.
The $27bn Meta contract includes $12bn of dedicated capacity from early 2027, plus $15bn that Nebius can allocate to Meta at pre-agreed terms or sell to other AI-cloud customers at market prices. Broker synthesis from broker and expert-network research
Add the smaller deals and the backlog lands near $48–50bn: multi-year revenue visibility from investment-grade counterparties, which is rare at this scale. It is already converting to cash: deferred revenue (customer prepayments) jumped to $4.8bn at end-March from $1.6bn three months earlier. Customers are paying up front to hold their place in the queue.
Nebius is the clear number-two neocloud by backlog, with two customers making up essentially the whole book. Source: company disclosures; Evercore ISI, Wolfe Research, United Securities. Chart by chokepoints.ai.
04 How it makes money
The model is straightforward to describe and very capital-intensive to run: buy chips, house them, rent them. What matters is utilisation, price per chip-hour, and how long the chips stay economically useful.
1 · Raise capital
$20–25B
FY26 capex. Funded by equity, convertibles, customer prepayments and, soon, asset-backed debt.
2 · Build the kit
About
80%
of spend is Nvidia GPUs; ~
20%
is data centre, power and cooling.
3 · Rent it out
Reserved
multi-year capacity (Microsoft, Meta) plus
on-demand
for enterprises and AI-native customers, which carries higher margin.
4 · Earn per MW
Management cites up to
~$20M
of annual revenue per megawatt on optimised inference workloads.
One number decides whether the model works: GPU useful life. At 5 years, the economics are solid. At 3 years, they shrink fast. Nebius extended its assumed life from 4 to 5 years in January 2026, lifting Q1 profit by about $42M. Hyperscalers use 5–6 years; bulls call it reasonable, bears call it the single biggest lever on reported earnings quality.
05 Contracted power versus connected power
Contracted power is enormous: over 3.5 GW secured by May 2026, with management ratcheting the year-end contracted target between 2.5 and 4 GW. Connected power (built, energised, earning) is a sliver: guidance is 800 MW–1 GW by year-end, and the company exited 2025 with only ~0.2 GW live. Roughly a tenth of what’s signed is generating revenue today.
That gap is the centre of the near-term debate, and broker coverage treats it as the main risk. Nebius owns more than three-quarters of its contracted power rather than leasing, which means higher returns if it works and higher execution risk if it slips, across a pipeline of 16–17 sites. The cautions are specific:
We see moderate risk to the timing of planned builds for five of its largest sites… its last data-centre build completed over a decade ago in Finland. We expect the majority of FY26 capacity from colos, with greenfield primarily impacting the FY27 ramp. Sell-side capacity review, May 2026
The gap: only ~5–10% of contracted power earns revenue today. Watch the gigawatt sites in Pennsylvania (1.2 GW) and Independence, Missouri (1.2 GW, first 200 MW late 2026). Also note: Vineland, NJ (the Microsoft anchor site) is facing a community noise lawsuit. One mitigant is a 328 MW Bloom Energy on-site fuel-cell deal that lets Nebius sidestep slow grid interconnection. Source: Nebius guidance; capacity reviews; public filings. Chart by chokepoints.ai.
06 Funding the build
Cash plus customer prepayments do not cover the 2026 build. Nebius carried $9.3bn of cash at end-March (up from $3.7bn) and $4.8bn of prepayments, call it $14bn of resources against a capex guide of $20–25bn, roughly four-fifths of it Nvidia silicon. The gap is filled with debt and equity-linked paper, and that’s the dilution overhang.
Already raised: a $2.0bn Nvidia pre-funded warrant (strike $94.94) and $4.34bn of convertibles, both March 2026, plus an at-the-market equity programme (~$2.9bn unused). Risk: if the gap is plugged with parent-level converts and equity rather than asset-backed project debt, shareholders wear the dilution. One bear scenario in broker research puts it at ~17% a year through 2030 . Source: Nebius filings; financing notes. Chart by chokepoints.ai.
07 Operating leverage, and a flattered bottom line
The operating story is strong. Gross margin went from 51% to 74% in a year; group adjusted EBITDA turned positive and reached $130m at a 32% margin, with the core AI-cloud segment at a 45% EBITDA margin. When the fleet fills, the unit economics work.
The headline $621m of Q1 net income is mostly an accounting effect: a $781m non-cash gain from marking up the ClickHouse stake (which raised at a ~$15bn valuation in January). Strip it out and the underlying operation ran a $128m operating loss. Two more flags worth noting: the GPU useful-life assumption was stretched from four to five years this quarter (which flatters depreciation), and operating cash flow is driven by customer prepayments, not yet by profit.
Every cost line falls as a share of revenue as the fleet fills. This is the core bull point: unit economics work once capacity is used. Source: Nebius Q1’26 6-K; chokepoints.ai calculations. Chart by chokepoints.ai.
08 Competition, and a closing window
Nebius is the clearest number-two to CoreWeave. CoreWeave is bigger and faster on the top line ($2.1bn Q1 revenue, +112%, on a ~$99bn backlog) but carries over $20bn of debt and a US-centric footprint. Nebius is smaller but better-funded for its size, net-cash-ish, spread across the US, Europe and the Middle East, and pushing into software to make the offering stickier than raw GPU rental.
Nebius is viewed as a key player alongside CoreWeave, Lambda and Crusoe. It differentiates by investing in software and inference platforms to increase stickiness and avoid commodity GPU-reseller status. Expert Insight, 16 Apr 2026
The category’s pricing power has a time limit. It exists because hyperscalers are short of compute, and Bernstein and others expect that shortage to ease toward 2030 as AWS, Microsoft and Google bring their own capacity online. At that point raw compute commoditises, and the neoclouds that survive will be the ones that moved up the stack in time. CoreWeave targets 8 GW of active power by 2030; Nebius is pursuing the same scale with materially less debt.
09 Valuation
At roughly $222 a share the equity is worth about $57bn, already down ~20% from its $279 high. On enterprise value over run-rate revenue, you pay about 29× today’s ARR, or about 7× the exit-2026 target if the build lands on guide. The valuation is a bet that the power gap in section five closes on schedule.
83% of gross receivables sat with Microsoft at 31 March, up from 59% a year earlier. That gives multi-year visibility, but also binary concentration and renewal risk. Source: Nebius 20-F / 6-K; EV from public market data; multiples are chokepoints.ai’s own. Concentration corroborated via broker research.
10 Three scenarios
Bear
Exit ARR
~$4–5B
Sites slip, capacity lands late, dilutive raise arrives without project debt. Growth multiple de-rates hard. Capital at risk.
Base
Exit ARR
~$7B
Hits low end of guide; funding comes via a mix that includes some asset-backed debt. Fairly valued; range-bound until execution is proven.
Bull
Exit ARR
~$9B
Capacity lands on time, project financing closes cheaply, software attach rises. Re-rates higher from here.
11 The two-sided case
Bull
+684% YoY revenue, ~15× ARR: demand real and accelerating; ~4 customers per GPU.
74% gross margin, 45% AI-cloud EBITDA margin: unit economics work at scale.
~$48–50bn backlog from Microsoft and Meta, investment-grade and multi-year.
$2bn Nvidia investment plus early Vera Rubin silicon access.
$9.3bn cash; ClickHouse stake marked at ~$15bn adds optionality. Founder owns ~12%.
Bear
54–67% compound q/q for 3 quarters to hit $7–9bn ARR: extreme back-half risk.
~5–10% of contracted power is live; gigawatt sites land 2027+.
83% of receivables from one customer: binary concentration.
$20–25bn capex vs ~$56bn cap; ~17% annual dilution to 2030 if equity-funded.
Earnings quality: NI flattered by a $781m one-off; GPU life 4→5yr; cash flow prepayment-driven.
12 Scorecard
# | Assessment | Verdict |
|---|---|---|
01 | How it makes money. GPU cloud plus emerging managed inference; $399M rev at 74% GM. | Strong |
02 | Industry and cycle. Acute demand now; capacity-glut and price-compression risk post-2028. | Mixed |
03 | Moat durability. Scale, Nvidia access and a software push, but it owns no chokepoint. | Mixed |
04 | Growth credibility. Demand is contracted, but the 2026 target is heavily back-half loaded. | Mixed |
05 | Returns and capital. Margins strong; $20–25B capex, dilution and ROIC unproven. | Weak |
06 | Valuation. ~7× exit-ARR fair if hit; ~29× current ARR rich; off 21% from high. | Mixed |
07 | Risks. Concentration, execution chasm, funding, earnings quality. | Elevated |
08 | Team and alignment. Founder owns ~12%; proven operators; young entity, recent insider selling. | Strong |
13 What moves the signal
▲ Moves to buy if
H2 prints show connected power tracking to the 0.8–1.0 GW guide and ARR on a path to a $4–5bn run-rate.
Asset-backed or project financing closes, lowering cost of capital and dilution risk.
A third anchor customer joins Microsoft and Meta.
▼ Moves to reduce if
FY26 guide is cut, or a major site (Vineland, Pennsylvania) slips.
A large dilutive equity raise lands without asset-backed debt.
Any crack in the Microsoft or Meta commitment.
GPU economic life proves under 5 years in practice.
The number we will track from here is connected megawatts.
Read the full deep-dive with live charts at chokepoints.ai.