Nebius Group N.V. (NASDAQ:NBIS) experienced a sharp decline on Wednesday, with shares closing at $229.18, down 17.01%, after a report suggested that Meta Platforms Inc. (NASDAQ:META) is developing its own cloud computing unit to sell unused AI compute capacity. The stock continued to slip in pre-market trading on Thursday, quoted at $228.27, down 0.40%.
The sell-off erased approximately $11.9 billion from Nebius's market capitalization, which stood at $57.67 billion at Wednesday's close, based on 253.9 million outstanding shares. Trading volume surged to 30.68 million shares, or 174% of the 65-day average, indicating significant investor concern.
Meta's Cloud Ambitions and Impact on Nebius
According to a Bloomberg report cited by Reuters, Meta is building a cloud unit to monetize its unused AI computing power. Meta declined to comment, and Reuters noted it had not independently verified the report. D.A. Davidson analyst Gil Luria commented that the move would likely impact neocloud providers like Nebius and CoreWeave (NASDAQ:CRWV) more than the major hyperscalers, as these companies depend on Meta for growth. "Meta may not need them anymore," Luria said.
Nebius's vulnerability stems from its heavy reliance on Meta. In March, Nebius announced that Meta had agreed to purchase $12 billion in AI computing capacity by 2027, with an option for an additional $15 billion if that capacity is not sold to others. This framework, potentially worth up to $27 billion, follows earlier deals totaling $3 billion with Meta and a $17.4 billion agreement with Microsoft (NASDAQ:MSFT). The risk that Meta could become a competitor rather than a customer is a significant concern for investors.
Short Interest and Market Dynamics
Nebius has been a popular short target, with short interest of 50.93 million shares, or 25.21% of the float, as of June 15. This high level of short interest adds to the stock's volatility, as any negative news can trigger sharp declines. The stock was recently added to the Nasdaq-100 Index, alongside CoreWeave, Astera Labs (NASDAQ:ALAB), Rocket Lab (NASDAQ:RKLB), and Teradyne (NASDAQ:TER), which had previously boosted sentiment but now appears to have amplified the sell-off.
Financials and Capex Outlook
Despite the recent setback, Nebius's fundamentals show rapid growth. First-quarter revenue surged to $399.0 million from $50.9 million a year ago, with adjusted EBITDA of $129.5 million. The company ended the quarter with $9.30 billion in cash and equivalents. However, its capital expenditure plans are ambitious: Nebius raised its 2026 capex target to $20 billion to $25 billion, up from $16 billion to $20 billion, with first-quarter capex at $2.5 billion. CEO Arkady Volozh attributed the increase to better visibility into 2027 demand, not rising costs.
The stock's valuation remains elevated, trading at approximately 68 times projected first-quarter 2026 revenue, reflecting high expectations that may now be at risk. Year-to-date, Nebius is still up 173.79%, and up 356.08% over the last twelve months, but Wednesday's drop underscores the precarious nature of its growth story.
Market Context and Outlook
The broader market showed mixed reactions. CoreWeave fell 13.92%, while Meta rose 8.83% on the news. The Invesco QQQ Trust (NASDAQ:QQQ) slipped 1.51%. U.S. exchanges will trade on Thursday, but Nasdaq is closed on Friday, July 3, for the Independence Day holiday, leaving funds and short sellers with one more session to adjust positions.
The key unknowns for investors are whether Meta will continue to use Nebius capacity long-term and whether Meta becomes a direct competitor. Until these questions are resolved, Nebius shares may remain under pressure.
