Nebius Stock and IREN Jump. AI Neoclouds Are Flexing Their Pricing Power.

Nebius stock has more than doubled in the past 12 months. (Courtesy Nebius)

Key Points

• Nebius Group shares rose on Thursday, leading other neocloud companies higher.
• Nebius informed customers it will raise on-demand rental prices for a range of AI chips, including a 20% hike for certain Nvidia GPUs.
• The price hikes suggest strong demand for computing power and that AI chips are holding their value despite depreciation concerns.

Nebius Group was leading its fellow so-called neoclouds higher early Thursday. There’s more evidence that computing power is in enormous demand and artificial-intelligence chips are holding their value.

Nebius recently informed customers that it will raise its on-demand rental prices for a range of AI chips, with the price for renting a number of Nvidia graphics-processing units increasing by about 20%, according to Shay Boloor, chief market strategist at Futurum Equities.

Nebius didn’t immediately respond to a request for comment from Barron’s early Thursday.

Nebius shares were up 9% in premarket trading. The stock is up more than 150% this year so far coming into Thursday’s session, although it has slumped 27% in the past three months.

Its neocloud peer—companies which provide additional cloud-computing capacity— IREN was up 5%. CoreWeave, another peer, was initially higher but turned lower the company announced plans to raise $3 billion from a convertible bond offering.

One obvious conclusion is that there is huge demand for spare AI capacity— CoreWeave hiked its prices by around 25% in July. But investors shouldn’t assume the price rise will be fully reflected in the companies’ future reports, as much of their revenue is tied to large multiyear contracts with separate pricing terms.

However, one of the other striking things about the price increases is that Nebius is increasing the cost of renting Nvidia H100 chips, a processor that was first released in 2022.

A major argument made by AI skeptics—including Big Short investor Michael Burry—was that cloud-computing companies are overstating the long-term value of chips bought from Nvidia by using a six-year depreciation schedule. That’s the time frame used to spread the cost of an asset over its estimated useful life and would mean chip buyers were systematically underestimating their annual expenses.

Nebius feeling confident enough to raise prices on four year-old chips suggests that the skepticism was misplaced, at least for now.

Write to Adam Clark at adam.clark@barrons.com

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