Prediction: By 2031, this Artificial Intelligence (AI) stock could become a widely recognized name in households

In recent years, tech giants such as Nvidia, Amazon, Alphabet, Microsoft, and Meta Platforms have been at the forefront of discussions around artificial intelligence (AI). As the focus has expanded from hardware to include data center operations and software innovations, companies like Broadcom, Taiwan Semiconductor Manufacturing, and Palantir Technologies have also garnered significant attention.

It's well recognized that most AI investments are still centered around a select group of large technology firms. However, seasoned investors realize that the best opportunities often extend beyond these major players.

This leads to an important question: Are you familiar with Nebius Group ( NBIS 49.67%)? If not, you're certainly not the only one.

This expansive data center operator has largely stayed out of the limelight, but its strategic role in the AI space could soon propel it to greater prominence and make it a recognized name across the industry.

Nebius charted a distinct path into AI

Unlike many competitors that made a splash as flashy start-ups or established tech behemoths, Nebius has a different origin story. Its beginnings are linked to Yandex, a major Russian internet corporation.

When the Russia-Ukraine conflict intensified, Yandex began shedding its non-core divisions. As a result, Nebius was spun off and went public on the Nasdaq in October of last year.

Not long after, Nebius secured additional funding, attracting a high-profile backer: Nvidia. The leading AI chip provider not only invested in Nebius but also formed a strategic partnership, granting Nebius a level of credibility few peers enjoy.

At its essence, Nebius operates as a neocloud company—developing AI infrastructure by building data centers and offering access to Nvidia’s in-demand GPUs to clients through cloud services. This approach allows Nebius to grow in parallel with Nvidia and benefit as advanced chips like Blackwell and Rubin come to market.

Nebius’s reach goes beyond GPUs

Though infrastructure remains at the core of its operations, Nebius also manages several subsidiaries and holds notable strategic investments.

Toloka specializes in data annotation, which is crucial for building datasets used in AI training. The company’s portfolio also includes Avride, which focuses on autonomous driving and robotics, and a software platform called TripleTen that trains developers in various AI fields.

Additionally, Nebius owns a stake in ClickHouse, an open-source platform for database management and analytics.

This blend of businesses exposes Nebius to a wide array of emerging markets that could be worth trillions as AI applications become more sophisticated and widespread.

Should you consider buying Nebius shares now?

By December 2024, Nebius’s primary infrastructure business had reached an annualized revenue run rate of $90 million. Fast forward two quarters to June 30, and that figure had soared to $430 million in annual recurring revenue (ARR). Adding to this momentum, management recently increased full-year revenue projections to between $900 million and $1.1 billion, up from the previous estimate of $750 million to $1 billion.

But everything changed for Nebius on September 8, when it was announced that the company had secured a major contract with Microsoft. According to regulatory disclosures, Nebius will supply Microsoft with exclusive GPU infrastructure capacity at its New Jersey data center. The deal is valued at $17.4 billion and extends through 2031.

Before signing the agreement with Microsoft, Nebius had a market cap of $15.4 billion, translating to a forward price-to-sales ratio of roughly 14 at the higher end of its ARR guidance. For comparison, that's about half the valuation ratio that CoreWeave reached at its height following its highly anticipated IPO earlier this year.

CRWV PS Ratio data by YCharts

This reveals a couple of key points. Nebius’s valuation has, in part, been driven by the overall enthusiasm for AI, which has introduced some over-optimism. Yet, the company’s shares have avoided the dramatic declines that have affected more volatile competitors like CoreWeave—a factor that could work to Nebius’s advantage as it seeks to gain visibility in a rapidly evolving, crowded market.

Looking to the future, Nebius seems well-placed to capitalize on long-term trends driving demand for AI infrastructure. The new agreement with Microsoft underscores the continued aggressive investment by cloud giants, and Nebius is positioning itself as a direct beneficiary of this spending.

In my opinion, as Nebius strengthens its partnership with Microsoft, its stock could see substantial growth over the coming decade. For these reasons, I view it as an attractive option for long-term investors.