The Curious Case of Nebius: Unraveling the Story of a Publicly Traded AI Infrastructure ‘Startup’
On October 21, the Nasdaq welcomed a new ticker: NBIS, representing Nebius, a nascent player in AI cloud infrastructure. The company’s debut was remarkably low-profile, lacking the typical fanfare that accompanies most IPOs—there were no roadshows, no celebrations, and little awareness of its existence leading up to the listing. This anomaly arises from the fact that Nebius is both a public company and a startup.
Interestingly, Nebius has been public for over a decade. It initially launched as Yandex N.V. in May 2011, the Dutch holding company for Russia’s Yandex, often referred to as "the Google of Russia". Following a peak valuation of $31 billion in late 2021, the company faced grave challenges after the Russian invasion of Ukraine in early 2022. This event triggered a suspension of Yandex N.V.’s shares on Nasdaq due to sanctions. A year later, Nasdaq announced it would delist Yandex entirely, however, the company managed to appeal successfully, claiming it was restructuring—a process that took 16 months.
As part of the restructuring, Yandex offloaded its Russian assets, where much of its value resided, leaving behind an assortment of international assets that included the foundation for Nebius. The transition concluded in July, with Yandex N.V. transforming into Nebius AI, an AI cloud platform boasting a new data center in Finland.
The newly formed Nebius is led by Arkady Volozh, the co-founder and former CEO of Yandex, who had previously been removed from a sanctions list after publicly condemning the war. Nebius offers GPU resources as a service, catering to businesses requiring substantial processing power for tasks like running machine learning algorithms. Recently, the company launched a comprehensive cloud platform designed to support the entire machine learning lifecycle, from data processing to model deployment.
After restructuring and Volozh’s relocation to the Netherlands, Nasdaq authorized Nebius to resume trading. Remarkably, it is a public company returning to the market with a radically different business model after nearly three years.
Nebius’s journey back has been modest, as it’s seen a significant decline in its market cap from the $18 billion value before trading was halted. Currently, it fluctuates between $3.5 billion and $4.75 billion. Volozh remarked on the unpredictability of market reception, confirming that the stock remains volatile yet has stabilized above the cost of its assets, suggesting investor confidence in the potential for growth.
Competing in a crowded cloud marketplace, Nebius faces off against major hyperscalers and startups such as CoreWeave, which has successfully raised substantial capital this year. In contrast, Nebius is expanding its presence in the U.S., with plans for a new GPU cluster in Kansas City set to launch in early 2025. Additionally, it has initiated “customer hubs” in major cities like San Francisco and Dallas.
The company comprises three main business segments: its core cloud infrastructure, an autonomous vehicle venture named Avride, a generative AI company called Toloka, and an edtech platform TripleTen.
Avride evolved from Yandex’s self-driving initiative and has secured a partnership with Uber for delivery services using its robots, though its goal is to develop a fleet of autonomous vehicles, a capital-intensive endeavor that will require further investment and partnerships.
Toloka specializes in data labeling for large language models, targeting corporate entities like Amazon, while Nebius focuses on serving generative AI startups. There is potential room for collaboration between Toloka and Nebius, leveraging their respective strengths in AI infrastructure.
TripleTen offers coding bootcamps, providing a direct-to-consumer model that stands apart from Nebius’s infrastructure focus. Volozh sees TripleTen as an ancillary revenue source rather than a primary driver, yet valuable in positioning Nebius as a comprehensive service provider for the AI sector.
Looking ahead, Nebius plans a significant increase in capacity at its Finnish data center while simultaneously building additional facilities to reduce latency for customers. This hybrid approach of self-owned and co-location facilities aims to expedite expansion.
In summary, Nebius stands as a unique case in the startup landscape—transitioning from a sanctioned Russian tech entity to a European public company in the competitive AI cloud infrastructure market, underlining the unpredictable nature of tech investments and the complexities of navigating geopolitical impacts.
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