In most regards, retail investors are at a big disadvantage to professional investors working at hedge funds. They typically aren't as well-trained; they likely don't have as much time to conduct research or nearly the same amount of resources at their disposal.
One major advantage, however, is that time is on their side. While hedge funds typically invest over a 12-to-18-month time horizon, retail investors can buy stocks they want to hold for five, 10, or even 20 years. This allows retail investors to buy stocks early and patiently wait for the catalysts to play out and for businesses to develop.
Here's one stock to buy that can 5x your money in 10 years.
Investors seeing the light in this AI company
When companies have serious ties to artificial intelligence (AI), their stocks are usually gobbled up before most retail investors take notice, resulting in stretched valuations that are often unappealing. But unlike most AI names, investors have had the chance all year to buy Nebius Group(NASDAQ: NBIS) at very attractive or at least reasonable valuations.
Image source: Getty Images.
While investors have started to catch on and the stock is now up 70% this year, Nebius, at a $11.4 billion market cap, still presents a compelling long-term opportunity. Nebius builds data centers specifically aimed at helping customers launch AI solutions. The company's data centers purchase graphics processing units (GPUs) from major chip players like Nvidia, and then allow companies to essentially rent their infrastructure to build and run AI languages and applications on.
For companies that would prefer to not have to set up their own AI infrastructure or need additional capacity, the arrangement is quite appealing. While this is Nebius' main business, the company also has some other smaller, developing businesses, like its generative AI development business, Toloka, and an autonomous driving technology business.
The stock traded extremely cheaply when it rejoined the Nasdaq toward the end of last year, because it hadn't traded on the Nasdaq for close to three years. Nebius used to be owned by Russian internet giant Yandex. When Russia invaded Ukraine, U.S. sanctions on Russia led to the delisting of many Russian stocks. Since that time, however, Nebius split off from Yandex in a $5.4 billion deal that would see the company move its headquarters to Amsterdam.
In December, Nebius announced that it had raised an oversubscribed private round of financing led by Nvidia and other major venture capital companies, which seemed to give the company more credibility and the market more confidence in the name. Nebius also has a partnership with Nvidia.
Growing fast
This month, Nebius unveiled a flurry of positive news events. The company raised $1 billion in additional capital through convertible notes to accelerate growth and recently announced expansion in the United Kingdom, as well as the general availability of Nvidia's next-generation Blackwell chips in Europe.
In the first quarter of the year, Nebius reported over $55 million of revenue, up 385% year over year, although the company's net loss grew 41% to close to $114 million. The company invested significantly in the quarter, and operating costs nearly doubled on a year-over-year basis, as capital expenditures (capex) and increased spending on data center hardware led to a more than fourfold increase in depreciation and amortization.
However, Nebius is growing fast and has expanded its data center network, adding four new locations in Europe, the U.S., and the Middle East over the last three quarters, not including its planned GPU cluster in the United Kingdom. Furthermore, management said they remain on track to exit the year with $750 million to $1 billion of annual run-rate revenue. Management also said they expect to become positive on an adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) basis in the second half of this year.
In the medium term, management projects to reach mid-single-digit billions of dollars in revenue, with adjusted EBIT margins in the 20%-30% range, assuming a four-year depreciation schedule.
Obviously, the company still needs to execute, and the AI trade and AI capex could see some ebbs and flows and may not work in a straight line. But overall, Nebius is growing fast and meaningfully growing revenue, and its use case is resonating strongly in one of the most promising sectors of the market.
Should you invest $1,000 in Nebius Group right now?
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Bram Berkowitz has positions in Nebius Group. The Motley Fool has positions in and recommends Nvidia. The Motley Fool recommends Nebius Group. The Motley Fool has a disclosure policy.
