From the ashes of Russia comes something interesting
- Nebius may not seem very exciting on the surface, but outside of AI infrastructure, the company also has some of the non-Russian Yandex assets which could be more interesting when the current craze around generative AI calms down.
- Yandex was viewed as the Russian Google and while it operated mostly in Russia, it has always had significant assets outside of Russia.
- The holding company for all of the assets is based in The Netherlands but with the permission of the Russian government, the assets will now be split into two.
- The Russian assets were sold for $5bn to a consortium of Russian investors which leaves the Yandex holding company with just the international assets which now become Nebius.
- What is left are 1,300 employees (mostly ex-Yandex), a data centre in Finland with 10s of thousands of Nvidia GPUs, a data annotation and generation business, an education business and autonomous driving.
- The company is already going to great lengths to reassure the market that there are no longer any connections with Russia.
- Arkady Volozh, the founder of Yandex and now CEO of Nebius was removed from the EU sanctions list earlier this year which I think is a pretty good sign of the veracity of the company’s claims.
- Furthermore, the company has also commissioned one of the big four auditors to certify that there are no links to Russia.
- Once this is done, then the intention is to recommence trading of the suspended shares on Nasdaq although this might take some time as new audited accounts will need to be prepared.
- In the meantime, Nebius is well capitalised as it has $2.5bn in cash from the sale of the Russian assets and no debt meaning it can invest for growth and have some runway before it has to raise again.
- The current plan is to triple the size of the Finnish data centre and become one of the very few European providers of AI infrastructure and in this regard, I think it is pushing against an open door.
- This is because there is currently insatiable demand for AI infrastructure and it is North American companies that are taking almost all of the business meaning that a European company will have some attraction for European companies on the merit of geography alone.
- However, one risk to this strategy is the EU which looks like it will issue draconian AI regulations just the very prospect of which has caused Apple and Meta Platforms not to launch their latest innovations in Europe.
- Hence, Europe risks becoming a place where there is little AI innovation which in turn could hurt the prospects of Nebius as a European AI infrastructure provider.
- However, AI infrastructure is not all there is and the autonomous driving business in particular could be very interesting.
- This is because I have long viewed it as a leading contender (even though it would never produce any performance data) and this IP will now be part of Nebius.
- Hence, Nebius could become one of the leading European providers of autonomous driving which may endear it to the large European OEMs.
- I suspect that it will take some time to shake the stigma of its Russian heritage and so when the shares start trading again, they may do so at a discount making this an interesting proposition to consider for investing in AI at a reasonable price.
