Forget Nebius Group: This Hyper-Growth Cloud Platform Is a Far Better Way to Play the AI Boom

Nebius (NASDAQ: NBIS) has been one of the market's hottest artificial intelligence (AI) stocks. It was once known as Yandex, which owned Russia's top search engine and other popular apps, before sanctions against Russia led it to suspend trading of its U.S.-listed shares in 2022.

Yandex subsequently divested its Russian assets, relocated to the Netherlands, and rebranded itself as Nebius, a cloud-based provider of AI infrastructure services. It resumed trading under its new ticker at $14.29 per share on Oct. 21, 2024, and it now trades at about $97.

Nebius's stock soared as it dazzled the market with its explosive growth rates. Its revenue surged 462% in 2024, and jumped another 437% year over year in the first nine months of 2025. Analysts expect its revenue to rise 373% for the full year, and grow at a CAGR of 274% over the following two years as it opens more data centers. With a market capitalization of $23 billion, it still looks reasonably valued at less than seven times this year's sales.

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Nebius might initially seem like a no-brainer play on the booming AI market. It's already secured major deals with Microsoft (NASDAQ: MSFT) and Meta Platforms (NASDAQ: META), and demand for its cloud-based services will grow as the AI market expands.

However, Nebius operates only one first-party data center in Finland and leases additional data centers through colocation agreements in Missouri, France, Iceland, and the U.K. To continue expanding its data center footprint, it needs to significantly ramp up its spending. That's why analysts expect it to rack up steep losses in 2026 and 2027. Its overwhelming dependence on Microsoft, Meta, and other hyperscalers could also make it difficult to negotiate favorable prices, especially as it faces stiff competition from other AI infrastructure providers.

While Nebius might still be a good speculative play, investors looking for some exposure to the same secular trend with less risk should consider another stock: DigitalOcean (NYSE: DOCN). This oft-overlooked cloud infrastructure company isn't growing as rapidly as Nebius, but its business model looks more sustainable, and it's reasonably valued.

Why could DigitalOcean be a better AI play than Nebius?

DigitalOcean operates a cloud infrastructure platform, similar to Amazon (NASDAQ: AMZN) Web Services (AWS) and Microsoft Azure, which rents out its computing power and storage. Yet unlike AWS and Azure, which primarily serve large enterprise clients, DigitalOcean carves up its servers into more affordable "droplets" for smaller businesses and individual developers. It also added cloud-based, AI-oriented GPUs to its platform by acquiring Paperspace in 2023.

When DigitalOcean went public in early 2021, the bears claimed it would struggle to expand in the shadow of AWS, Azure, and other cloud infrastructure giants. Nevertheless, it carved out a defensible niche, locked in smaller customers, and now operates 15 data centers worldwide. From 2021 to 2024, its revenue grew at a CAGR of 22%. It also turned profitable on a generally accepted accounting principles (GAAP) basis in 2023 and more than quadrupled its GAAP net income in 2024, which indicated economies of scale were kicking in.

DigitalOcean thrived because it offered flat monthly pricing, competitive CPU performance per dollar compared to hyperscalers like AWS and Azure, low bandwidth costs, and a clean user interface geared toward developers. It's also helping smaller businesses develop and launch their own generative AI apps without relying on big cloud infrastructure platforms.

For 2025, analysts expect DigitalOcean's revenue to rise 15% as the costs of expanding its infrastructure keep its adjusted earnings per share (EPS) flat. From 2025 to 2027, they expect the company's revenue and adjusted EPS to grow at CAGRs of 19% and 15%, respectively.

That growth should be driven by small-to-medium-sized businesses (SMBs) migrating more of their data and software from on-premise clouds to public clouds, its rising revenue per customer as it integrates more services into its platform, and the ongoing expansion of the AI market.

With a market cap of $5.4 billion, DigitalOcean still looks reasonably valued at 5x this year's sales and 29x forward-adjusted earnings. So if you're looking for a more stable alternative to Nebius in the AI infrastructure market, which is still growing at an impressive rate, DigitalOcean checks all of the right boxes.

Leo Sun has positions in Amazon and Meta Platforms. The Motley Fool has positions in and recommends Amazon, DigitalOcean, Meta Platforms, and Microsoft. The Motley Fool has a disclosure policy.