Nebius Shares Slide on Convertible Bond Offering

Nebius Group shares dropped sharply on Tuesday after the company announced plans to raise $3.75 billion through a two-part convertible note offering. The money will go toward expanding its data centers. The stock fell 8.5% to $118.60 as investors considered the risk of share dilution against what analysts see as a strong long-term case for AI infrastructure.

The offering includes two series of privately placed notes that will mature in 2031 and 2033. Details like interest rates and initial conversion ratios will be set at the time of sale. This drop in the stock price comes after a 15% jump on Monday, when Nebius announced a cloud-computing deal with Meta Platforms worth up to $27 billion. The stock’s recent swings highlight its volatile trading pattern.

Citigroup started coverage of Nebius with a Buy rating and set a $169 price target. The bank sees the current volatility as normal for a company in this growth phase, not as a major problem. Analyst Tyler Radke described Nebius as a leader among new infrastructure providers focused on building AI computing capacity, pointing to its fast expansion and diverse service offerings.

Nebius stands out from other data-center companies by combining its own hardware designs with cloud software solutions, which Radke says sets it apart. While its software business is still new, it is expected to grow as more companies need AI inference for real-time decisions. Nebius also uses a mix of short-term, long-term, and usage-based contracts, unlike competitors like CoreWeave that focus on long-term deals. Citi believes this flexible approach is better for meeting changing customer needs.

Citi expects global demand for data-center AI power to grow from 18 gigawatts in 2025 to 110 gigawatts by 2030. Nebius ended last year with 170 megawatts of active capacity and aims to reach 5 gigawatts by 2030, which would be about 5% of the total market.

Nebius is funding its growth with money from several sources: a $2 billion investment from Nvidia announced last week, customer prepayments that are used to add new capacity, and now the convertible note offering. The company also has a strong cash position going into this financing.

Citi nonetheless assigned a High Risk designation to the shares. Even so, Citi gave Nebius shares a High Risk rating. The bank pointed to the company’s short track record as a public company—Nebius only started trading independently in 2024 after separating from Yandex’s non-Russian business—the high costs of building large data centers, and the fact that a big share of revenue comes from just two customers. Meta and Microsoft are expected to make up about 40% of Nebius’s recurring revenue in 2026, which Citi sees as a key risk. The stock has risen more than 350% in the past year. The setup remains attractive. The implicit trade-off is accepting outsized day-to-day price swings as the cost of participation in what the bank sees as a structurally growing AI compute market.