Winning big orders "surge," and after announcing debt issuance, the stock "plummets"—shareholders of "AI cloud newcomer" Nebius are "very conflicted."

On one side are huge orders, and on the other side is reckless spending. Nebius’s actions leave investors feeling “very conflicted.”

On Tuesday, March 17, “AI Cloud Innovator” Nebius announced it will issue $3.75 billion in bonds to support its AI infrastructure development, causing its stock price to drop 10.4%. This news caused Nebius’s stock to give back some of its recent strong gains.

Just on Monday, Nebius announced a $27 billion, five-year AI infrastructure supply agreement with Meta, which drove its stock up 15%. Additionally, earlier this month, Nvidia announced a $2 billion investment in Nebius, with both parties collaborating on deploying AI infrastructure. This news also triggered a significant stock price increase. Overall, Nebius has gained 25% so far this month.

Analysts believe that the sharp fluctuations in stock price reflect market concerns over the high costs of AI infrastructure. While large orders offer significant growth potential, realizing this potential requires substantial capital investment, catching some new investors off guard.

Issuing $3.75 billion in bonds to boost AI infrastructure

In a press release on Tuesday, Nebius stated it plans to conduct two private placements, issuing convertible senior notes due in 2031 and 2033, totaling $3.75 billion.

The company explicitly stated that the proceeds from this bond issuance will be used to fund data center construction, develop its full-stack AI cloud services, and purchase more graphics processing units (GPUs).

Nebius CEO Arkady Volozh emphasized in Monday’s press release that the deal with Meta is part of the company’s efforts to secure “more large, long-term capacity contracts” to grow its AI cloud business. He said, “We will continue to fulfill our commitments.”

Analysts: Capital needs are not surprising

Despite the market’s negative reaction to the bond issuance, some analysts believe this was expected.

BWS Financial analyst Hamed Khorsand told MarketWatch: “This stock has many new investors, and I don’t think they are ready for the capital demands Nebius is talking about.”

However, Khorsand pointed out that the bond issuance should not be surprising. “Nebius mentioned their capital needs during the last earnings call and said they would look for ways that don’t heavily restrict their stock,” he said. “I interpret this as them seeking the right opportunities.”

Khorsand added that the deal with Meta offers a huge growth opportunity, but Nebius needs to spend money to unlock this potential. Compared to competitor CoreWeave, Nebius currently does not have ‘massive debt.’

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