Morgan Stanley Initiates Nebius (NBIS) at Equalweight, Flags Long-Term AI Infrastructure Upside

Nebius Group N.V. (NASDAQ:NBIS) is one of the AI Stocks Making Waves on Wall Street. On January 15, Morgan Stanley analyst Josh Baer initiated coverage on the stock with an “Equalweight” rating and a price target of $126. The analyst highlights AI infrastructure scale-up potential for NBS, urging investors to focus on long-term metrics for valuation instead of near-term earnings.

Nebius is well-positioned to benefit from the build-out of AI infrastructure, said Baer, noting its potential to bring significant capacity online and scale rapidly. While the company holds significant value through its AI compute business, its broader software platform, diversified customer base, non-core assets with valuable equity and stakes, and exposure to new AI infrastructure demand are also seen as long-term value drivers.

In the near term, however, financial performance will remain pressured due to heavy capital expenditure and rising depreciation. Free cash flow is also expected to stay deeply negative given the substantial capital expenditure required to deliver 2.5 GW of AI infrastructure by the end of 2026.

There has also been some skepticism regarding Nebius Group’s $7-9 billion annual recurring revenue target for Q4 2026. Analysts have described it as "optimistic" and questioned what the company would need to do to outperform expectations, particularly as EBIT is likely to remain pressured in the coming years due to increasing depreciation.

Nebius Group N.V. (NASDAQ:NBIS), headquartered in Amsterdam, develops and operates AI cloud infrastructure designed for training and inference of advanced machine learning models.

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