@flyingelephant1 That’s a legit concern about the net income profitability of $NBIS. The reason why they could not be profitable in short-term is because they have to invest in GPUs first at the current stage.
I once found the following rough estimation about Nebius’s potential ROI on GPU investments. It’s based on assumptions from public data, so take it with a grain of salt.
Let’s assume we build a data center in the US with 10,000 H200 GPUs. Cap expense of the hardwares will be $435 million, $43,497 per GPU:
- GPU: unit price is $30,000, total cost → $300 million
- servers: OEM HGX H200 (excluding costs of GPU), unit price is $70,000, quantity is 1250, total cost → $87.5 million
- Switches: Unit price is $35,000, quantity is 156, total cost → $5.5 million
- Optical Transceivers / Cables: Unit price is $600, quantity is 20,000, total cost → $12 million
- Storage related cost: $30 million
Let’s assume we also construct the data center rather than lease, the estimated one-time cost will be $146.6 million including 10% on land purchase, 25% on construction costs, 45% on power infrastructure, 20% on cooling system.
So the total capex from data center will be $582 million, or $58,159 per GPU.
Now, let’s turn to Operation Expense of running the data center:
- We assume Power Usage Effectiveness (PUE) is 1.2 (though Nebius reports 1.13, the lower the better), the power required per server is 10.2kW, total power consumed will be 10.2kW x 1025 x 1.2 = 15,300MW. Assuming a relative low power price of $0.05 / kWh, then the power cost per year is about $6.7 million.
- Assume cost of IT operations staff salary is $5.2 million per year.
- Assume a maintenance cost of 2% of the hardware costs, which is $453million * 2% = $8.7 million per year.
- Total OpEx is $20.6 million per year. OpEx per GPU per hour is $0.24.
Nebius has different pricing tiers, so let’s just assume a rough average price of $2.50 per GPU hour. Then margin per GPU hour is $2.26. And let’s assume the utilization rate of the capacity is 70%. The margin per year will be about $139 million, payback period is about 4.2 year. (I don’t know how long can a GPU’s service life be, but I’m guessing a longer period than this as CoreWeave is using a 6-year schedule to depreciate their GPU assets, though Nebius is using a more conservative 4-year schedule.)
I think Nebius’s payback period will turn out to be much lower than this number because of the following:
- The above assumptions were mostly based on industry data and did not consider Nebius’s cost saving from optimizations like self-manufactured servers and so on, Nebius’s CapEx and OpEx could be considerably lower than industry standards.
- Nebius is developing end2end software solutions which will have much higher margin than leasing bare GPU hardwares.
To conclude, I think it’s legit to have negative earnings for the initial few years as that’s the period when Nebius deploys significant amount of capital on building the data centers. I believe as the business scales up and the payback period of the GPU investments is reached, the company will become very profitable.
Cheers,
Luffy