Nebius Group NV - Shs Class-A-

Nebius Group is a specialized AI infrastructure company that provides a full-stack platform, including GPU-accelerated cloud computing, to help enterprises build, train, and deploy large-scale artificial intelligence models. The company has positioned itself as a leading next-generation cloud provider purpose-built for machine learning and high-performance computing workloads. We believe the company’s appeal is anchored by its vertically integrated approach, which combines proprietary data center design with in-house software to deliver superior performance and lower operating costs compared to traditional GPU cloud providers. Shares contributed positively to performance after the company reported better-than-expected revenues, driven by surging demand for AI computing power.

Nebius Group is a specialized AI infrastructure company that provides a full-stack platform, including GPU-accelerated cloud computing, to help enterprises build, train, and deploy large-scale artificial intelligence models. The company has positioned itself as a leading next-generation cloud provider purpose-built for machine learning and high-performance computing workloads. We believe the company’s appeal is anchored by its vertically integrated approach, which combines proprietary data center design with in-house software to deliver superior performance and lower operating costs compared to traditional GPU cloud providers. Shares contributed positively to performance after the company reported better-than-expected revenues, driven by surging demand for AI computing power.

Nebius is an AI-focused cloud infrastructure business that has secured multibillion-dollar deals with Microsoft and Meta, along with a $2 billion investment from Nvidia. The management has outlined a pathway to expand data center capacity to over 4GW by 2031, potentially generating over $50 billion in revenue at healthy margins. This growth is supported by Nebius's non-core holdings, valued conservatively at an additional $15 billion. Despite the caution regarding the AI ecosystem's economics, we maintain strong conviction in Nebius's potential.

Nebius, an AI focused cloud and infrastructure platform, benefited from explosive top line growth and large, long dated contracts with hyperscalers. The team continues to believe AI represents one of the most significant investment opportunities of the coming decade, with value creation increasingly expanding across a diverse group of beneficiaries.

Nebius Group is a specialized AI infrastructure company that provides a full-stack platform, including GPU-accelerated cloud computing, to help enterprises build, train, and deploy large-scale artificial intelligence models. The company has positioned itself as a leading next-generation cloud provider purpose-built for machine learning and high-performance computing workloads. We believe the company is anchored by its vertically integrated approach, which combines proprietary data center design with in-house software to deliver superior performance and lower operating costs compared to traditional GPU cloud providers. During the quarter, shares contributed positively to performance driven by several reinforcing catalysts, including a landmark multi-year infrastructure agreement with a major AI hyperscaler, significantly expanding its contracted backlog and validating its platform at scale.

We initiated a small investment in Nebius Group N.V., a builder of a new AI cloud business, popularly referred to as a 'neocloud.' Nebius is a Big Idea with a remarkable origin story – the company was born from Yandex, which founder Arkady Volozh built into a $30 billion business. Nebius boasts a world-class team of engineers and a vision to build a leading AI cloud business from first principles. We believe Nebius can capture more than a few percentage points of the large addressable market, targeting approximately 10%. At today's price, we are essentially buying a contracted bare metal business and a portfolio of valuable stakes at a fair price, and getting what could become a very big idea, as one of the world's next great AI cloud platforms.

Nebius moved sharply higher after announcing a multi-year AI infrastructure agreement with Microsoft with a contract value of $19+ billion that effectively exceeded Nebius’ pre-announcement market capitalization. The more important point isn’t the size of the headline win but the character of the revenue, which provides significant visibility into Nebius’ future earnings power. The structure of this tie-up is closer to an AI infrastructure off-take agreement than a typical cloud contract: long-dated, effectively take-or-pay, and financeable against Microsoft’s AAA credit profile. Even after the move in the share price in Q3, we believe NBIS still trades at an unsustainable discount to the earnings power implied by its contracted power pipeline and the quality of its counterparties.

Nebius has emerged as a significant player in the AI infrastructure power supply chain, particularly following its announced deal with Microsoft. This partnership positions Nebius favorably within the context of the ongoing AI capex cycle, which has seen a repricing of companies involved in high-performance computing and data centers. The recent performance of Nebius, alongside other companies in this sector, indicates strong market confidence and potential for growth as demand for reliable power access and data center capabilities continues to rise.

In Q2 2025, Heartwood rotated capital into Nebius (NBIS) at a cost basis of $31.35, with shares currently trading for $121.80. The resulting 288% gain has not only fully offset our entire DNUT loss, but has generated incremental outperformance for the fund. This trade now stands as Heartwood’s best ever. We believe Nebius is well-positioned to benefit from the ongoing AI-driven bull market, which remains in its long-term infancy, as it aligns with our focus on companies with strong long-run prospects.

The letter discusses Nebius in the context of Nvidia's investments and the broader AI infrastructure landscape. However, it does not provide a specific investment thesis or directional argument regarding Nebius itself.