Nvidia Corporation (NASDAQ:NVDA) saw its shares climb approximately 1.1% in premarket trading on Tuesday, reaching around $205.54, following the disclosure of a significant passive investment in Nebius Group (NASDAQ:NBIS). The move, detailed in a recent SEC filing, reveals Nvidia holds a beneficial ownership stake of 9.3% in Nebius, with the vast majority of the position tied to warrants.
The filing indicates that Nvidia's total position in Nebius is valued at roughly $4.06 billion, based on Monday's closing price. However, this represents only about 0.08% of Nvidia's massive $5.00 trillion market capitalization. The stake is primarily composed of warrant-linked shares, with approximately 21.066 million of the 22.256 million disclosed shares being warrant-related, accounting for 94.7% of the total.
The warrants were originally acquired on March 11, with Nvidia paying $2.00 billion, or about $94.94 per underlying share. As of Monday's close, the warrant shares were valued at $3.85 billion, reflecting a paper gain of $1.85 billion, or 92%. However, Nvidia cannot exercise or sell these warrant shares until September 11, due to lock-up restrictions. The filing's event date of July 13 corresponds with the SEC's 60-day ownership reporting policy, not a new acquisition.
Market reaction was mixed: Nebius shares surged 7.4% to $196.19, significantly outpacing Nvidia's modest 1.1% gain. This suggests investors view Nebius as the primary beneficiary of the investment, which is intended to support the company's AI cloud infrastructure and new data center buildout. Nebius has been described by Nvidia CEO Jensen Huang as "an AI cloud designed for the agentic era."
The strategic value of this investment may outweigh the immediate financial returns. Nvidia's recent quarterly results underscore the importance of the data center segment, which saw revenue jump 92% to $75.2 billion, contributing to overall revenue of $81.6 billion. The company's interest in expanding its customer base beyond traditional cloud providers is evident, with other deals like Bristol Myers Squibb's (NYSE:BMY) recent announcement to acquire a DGX SuperPOD from Vera Rubin.
The broader semiconductor sector remains volatile. The Philadelphia semiconductor index closed Friday more than 20% off its peak in late June, though it is still up 66% for the year. Investors are closely watching upcoming earnings reports from Alphabet (NASDAQ:GOOGL) and Intel (NASDAQ:INTC) this week, as their outlooks on spending and data centers could influence Nvidia's future forecasts.
Key risks for Nvidia include potential reductions in AI investment, additional export restrictions, and increased regulatory oversight of customer financing. The company's $91 billion forecast for the current quarter does not factor in any China data-center compute sales. The Nebius filing does not reflect a new purchase or order but rather indicates Nvidia is allocating excess funds to diversify its buyer base. Short-term results will continue to depend on deployments, profit margins, and earnings performance.
