NBIS vs. GOOGL: Which AI Infrastructure Stock is the Smarter Buy?

Yahoo

6 days ago

Nebius Group N.V. NBIS is an upcoming player in the AI-infrastructure market, while Alphabet GOOGL is an established tech behemoth.
The AI boom is fueling an unprecedented surge in demand for high-performance cloud and data-center infrastructure. Per an IDC report, spending on AI infrastructure is expected to top $200 billion by 2028. While both are positioned to benefit from the same megatrend, one is a high-risk disruptor, the other a cash-rich incumbent.
Now the question remains: Which stock has more upside potential? Let's break down their fundamentals, growth prospects, market challenges and valuation to determine which offers a more compelling investment case.
Nebius: A Fast-Growing Pure-Play AI Infra Provider
Based in Amsterdam, Nebius is a neo cloud company. NBIS builds full-stack infrastructure for AI, like large-scale GPU clusters, cloud platforms, and tools and services for developers. Collaboration with Saturn Cloud and deeper NVIDIA (NVDA) integration bodes well. It recently announced the general availability of NVIDIA GB200 Grace Blackwell Superchip capacity for its customers in Europe.
NBIS' ambitious 2025 targets have captured investors' attention following a remarkable 385% year-over-year revenue increase in the first quarter of 2025 and a 700% surge in annualized run-rate revenue (ARR). It expects $750 million to $1 billion in ARR and $500-$700 million in total revenues. The company appears well-positioned to pursue its goals. ARR reached $310 million in April, indicating strong momentum for the second quarter.
NBIS is doubling down on AI infrastructure with an ambitious $2 billion capital expenditure plan for 2025, up from its earlier guidance of $1.5 billion. Backed by a $700 million funding round involving high-profile investors like NVIDIA and Accel in December 2024, Nebius is expanding aggressively in North America and Europe. In June 2025, NBIS announced private placement of $1 billion in convertible notes to capitalize on the AI-infrastructure boom and drive-up revenue opportunities in 2026.
However, higher capex can be a concern if revenues do not keep up the required pace to sustain such high capital intensity, especially in a macro environment where AI demand cycles could fluctuate due to competitive pricing and regulatory changes.
Nebius faces tremendous competition in the AI cloud infrastructure space, which boasts behemoths like Amazon, Microsoft and Alphabet, as well as small players like CoreWeave. Despite its exceptional top-line growth, NBIS remains unprofitable, with management reaffirming that adjusted EBITDA will be negative for the full year 2025. Though it added that adjusted EBITDA will turn positive at 'some point in the second half of 2025.'
Alphabet: Structurally Dominant Force
Alphabet is one of the dominant names in the AI cloud infrastructure space with its Google Cloud. It leads the cloud computing space, along with Microsoft and Amazon Web Services. In first-quarter 2025, Google Cloud revenues increased 28% year over year to $12.3 billion (13.6% of total first quarter of 2025 revenues), with operating income coming in at $2.2 billion. Google Cloud revenue growth benefited from strong GCP growth and a solid demand for AI infrastructure and generative AI solutions.
Google's focus on TPUs and GPUs bodes well. Its seventh-generation TPU is designed specifically for inference at scale. Alphabet is benefiting from its partnership with NVIDIA. Google Cloud was the first cloud provider to offer NVIDIA's B200 and GB200 Blackwell GPUs and will be offering its next-generation Vera Rubin GPUs. The introduction of 2.5 flash, Imagen 3 and Veo 2 augurs well. GOOGL launched Gemma 3, a collection of lightweight, state-of-the-art open models that can run on a single GPU or TPU.
Google's network is supported by over 2 million miles of fiber and 33 subsea cables. Apart from expanding AI infrastructure and cloud footprint, its dominant position in the search domain is a key catalyst. In first-quarter 2025, GOOGL witnessed a double-digit revenue growth in Search. Driven by strength in YouTube and Google One, Alphabet surpassed 270 million paid subscriptions.
Apart from business diversification, Alphabet's has stupendous financial resources. Alphabet generated $36.15 billion of cash from operations in the first quarter of 2025 and had cash. Cash equivalents and marketable securities were $95.328 billion at the quarter-end.
However, the intense competition from Azure and AWS is concerning. Heavy capex spend could strain margins if AI returns do not materialize. The company expects to invest roughly $75 billion in capital expenditures in 2025, targeted at building up technical infrastructure, mainly for servers, followed by data centers and networking.
NBIS Shares vs. GOOGL
NBIS shares have gained 11.2%, while the GOOGL stock has appreciated 12% over the past month.
Image Source: Zacks Investment Research
Valuation for GOOGL & NBIS
Valuation-wise, both Alphabet and Nebius are overvalued, as suggested by the Value Score of C and the Value Score of F, respectively.
Image Source: Zacks Investment Research
In terms of Price/Book, NBIS shares are trading at 3.94X, lower than GOOGL's 6.50X.
How Do Zacks Estimates Compare for NBIS & GOOGL?
Analysts have significantly revised their earnings estimates downward for NBIS' bottom line for the current year.
Image Source: Zacks Investment Research
For GOOGL, there is a marginal upward revision.
Image Source: Zacks Investment Research
NBIS or GOOGL: Which is a Better Pick?
GOOGL currently carries a Zacks Rank #3 (Hold) while Nebius has a Zacks Rank #4 (Sell).
You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
As per the Zacks Rank, GOOGL emerges as a better pick for investors seeking an AI infrastructure stock with long-term growth potential.
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This article originally published on Zacks Investment Research (zacks.com).
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