Nebius at the UBS conference today

[drew1618t]

@jonathan1

To reach its goals, I am guessing that the company might spend about $12–15 billion between 2025 and 2027, mainly on data centers and GPUs. I too asked AI about how much 1GW of data centre power costs. It said “About $12–15B capex. This comes from Nebius’ plan to reach about 1 GW of data center power, multiplied by typical AI data center costs of roughly $13–15 million per megawatt for buildings, power, cooling, and GPUs. After that, yearly spending should drop to around $1–1.5 billion just to maintain what it has.”

I find that really cheap because IREN spent 5.8B for 200MW of GPU or 1/5 of the compute your talking about. IREN total cost for 1GW based on all their numbers is close to 30B with 29B+ from GPUs alone. Which is double your high end.

@jonathan1

Because GPU depreciation is an accounting cost and not real cash going out the door, Nebius can turn free-cash-flow positive once the cash it generates each year is higher than what it needs to spend to maintain the business.

I agree that depreciation is just an accounting cost and not real cash going out the door but Capex is not an accounting cost and is real cash going out the door. When Capex falls below depreciation for a heavy asset company, it signals that the company doesn’t have much growth. You either get growth (bad cash flow) or good cash flow (stagnation/decline). I don’t think you can get growth and good cash flow.

Nebius could potentially turn the corner in the future with higher cash flow and reduced spend with growth but that’s a story and not supported by their current financials. Here is a good quote from Saul on story stocks like Nebius.

@SaulR80683

Companies with very high PE ratios (like 100 or more, because people have very high expectations for them) often don’t turn out well as investments, although the company itself may do well. That’s because it takes a long while for the company to grow into its stock price. These are often called “story stocks” because they have a great exciting story, which makes investors bid up the price of their shares.

Overall, I find this company very interesting, just the financials of this company are what’s holding me back. I would recommend caution or smaller position sizes because the company is priced for its success already and success would not move the needle that much.

Drew