Nebius Group (NASDAQ: NBIS) is experiencing a significant decline in its stock price, driven by a combination of negative sentiment regarding the artificial intelligence sector and internal financial challenges. The company’s shares have extended a steep sell-off, with investors dumping neocloud stocks amid ongoing industry jitters.
The selling pressure has been exacerbated by a sharp increase in short interest, which is approaching the 20% threshold. This rise in short positions follows a warning from Gartner (NASDAQ: IT) regarding substantial impairment for these types of firms by the end of 2030. Additionally, some analysts have warned of a potential bubble burst in the AI sector, which could negatively impact Nebius.
Financially, the company is grappling with rising operational costs. Prices for chips, memory, and servers have increased, and depreciation costs have surged. In the second quarter, depreciation rose by 245% to $259 million, a figure that exceeded the company's revenue of $582 million for the same period.
Furthermore, Nebius is facing financing challenges due to rising bond yields. The ten-year Treasury yield has reached its highest level in two decades, forcing the company to pay higher rates for future debt. CoreWeave (NASDAQ: CRWV) has seen its debt yields jump to 15%, a trend that may influence Nebius’s capital strategy.
Despite raising over $2 billion in equity financing in the second quarter, the company has an outstanding share count that has jumped to 238 million from 200 million last year. Technical analysis of the stock suggests it has moved below key support levels, including the 200-day Exponential Moving Average and the Supertrend indicator, with the price dropping below $194. Analysts note that the stock may continue falling, potentially targeting the 61.8% Fibonacci Retracement level of $125.
