Investors thinking capital spending to build artificial intelligence (AI) infrastructure will continue to soar were thrown a curveball earlier this year. China’s privately held DeepSeek announced its new R1 large language model (LLM) cost only $6 million to build, and big AI tech stocks plunged.
But it’s unclear exactly what went into building DeepSeek’s model, and large U.S.-based tech companies reiterated plans to continue to spend billions to grow data center and AI compute power in 2025. With those capital expenditure plans still on track, investors should look for the following two growing tech stocks to benefit.
Amsterdam-based Nebius Group (NASDAQ: NBIS) grew out of the restructuring of Russian search engine giant Yandex. The Nasdaq stock exchange halted trading in Yandex after Russia invaded Ukraine. After a Russian consortium purchased its Russian assets, the restructured company resumed trading on the exchange last October as Nebius Group.
The company is now made up of its core AI infrastructure business as well as three additional businesses. Those businesses include AI development data partner Toloka, educational technology business TripleTen, and autonomous driving and delivery robot maker Avride.
Nebius’ first full year trading on the Nasdaq exchange is off to a great start with a 67% gain year to date.
That’s because its business is growing quickly. Quarterly revenue has jumped from just $11.4 million in the first quarter to about $38 million in the just-reported fourth quarter. Full-year 2024 revenue reached $117.5 million, and management sees that continuing to accelerate. CEO Arkady Volozh called plans to achieve as much as a $1 billion annual revenue run rate by the end of 2025 “well within reach.”
Also, the restructuring left its balance sheet in pristine shape. The company ended the fourth quarter with $2.45 billion in cash and negligible debt. That’s more than a quarter of the company’s total $9.3 billion market cap.
Investors aren’t the only ones noticing. Leading AI chip and software company Nvidia (NASDAQ: NVDA) participated in a $700 million private funding round in December. Nvidia also owns more than 1 million shares of Nebius stock worth about $33 million. That investment was made in the fourth quarter, according to Nvidia’s recently released Form 13F filing.
Speaking of Nvidia, as large as it has become, the company still has great growth potential. Fears that capital spending on AI infrastructure would stall were premature. Several large growth tech companies have recently announced spending plans for 2025. Microsoft, Meta Platforms, Amazon, and Alphabet have confirmed plans to spend at least $300 billion combined in ongoing AI capital expenditures through this year.