On October 21, a new ticker opened for Nasdaq traders: NBIS, short for Nebius, a young player in AI cloud infrastructure.
Casual observers could be forgiven for wondering where this company came from, as there was little of the usual fuss surrounding most startups’ journey to IPO – no roadshows; no horn toot’; no confetti-laden ceremonies; nothing, not a beep. That’s because Nebius is an unusual beast: a publicly traded company, but a startup in almost every sense of the word.
Nebius has been listed on the stock exchange for 13 years and started in May 2011 under the name Yandex NV – the Dutch holding company of the Russian internet giant Yandex (often called the ‘Google of Russia’). At the end of 2021, Yandex NV reached a peak valuation of $31 billion, but in the wake of Russia’s invasion of Ukraine in early 2022, everything changed. Nasdaq halted trading in shares of Yandex NV in February due to sanctions against Russia-linked companies, and a year later Nasdaq said it would delist Yandex altogether. But Yandex successfully appealed on the grounds that it was a restructuring – a process that would take another sixteen months to fully complete.
Part of this included transferring all of its Russian assets, where most of the real company value lay. What remained under the ownership of Yandex NV was a random collection of infrastructure and business units that happened to be located outside of Russia. This divestment was completed in July, with Yandex NV changing its name to Nebius AI, an AI cloud platform packed with its own Finnish data center.
Nebius’ core business is selling GPUs (graphics processing units) ‘as-a-service’ to companies that need ‘compute’ – that is, processing power and resources to perform computational tasks such as running algorithms and performing machine learning – models. Last month, the company debuted a holistic cloud computing platform designed for the “full machine learning lifecycle,” which includes data processing, training, refinement and inference.
With the restructuring complete and Volozh taking the reins from the company’s new headquarters in the Netherlands, Nasdaq gave Nebius the green light to resume trading last month. However, the situation was virtually unprecedented: a listed company whose trading was suspended, only to resume almost three years later under a new name and an entirely different business proposition?
In many ways, it would have made sense to delist and grow with private capital, the old-fashioned startup way. But as Volozh explained to TechCrunch earlier this year, building infrastructure is capital intensive, and the easiest and cheapest way to access capital in what is currently one of the hottest sectors in tech is through the public markets. But there was never any certainty about how the public markets would react to this strange new entity. No one really knew what to expect.
A month later, Nebius has enjoyed a somewhat lukewarm return to public life; it is significantly lower than its market cap of $18 billion before trading was halted in February 2022, which was expected, and since then it has yo-yoed between $3.5 billion and $4.75 billion, with some signs that it is starting to settle to stabilize.
“We couldn’t predict what would happen, it could be $5 a share, or it could be $50 a share – this has never happened before, no one really knows how to treat it,” Volozh told TechCrunch this month in an interview in London. . “It’s still volatile, but it’s stabilizing, and the good thing is that it has stabilized above the cost of the assets, which means the market believes we can build a business here. We’ll see how big a company it will be.”
Nebius competes with all the usual hyperscaler cloud giants, although its more direct rivals are other alternative cloud startups like CoreWeave, which raised a ton of money this year. With CoreWeave in the midst of expanding from the US to Europe, Nebius is moving in the opposite direction, announcing plans this week to expand its presence to the US with a new GPU cluster in Kansas City (on the Missouri side ) which is scheduled to go live in early 2025. The company has also opened “customer hubs” in San Francisco and Dallas, with plans for a third in New York by the end of the year.
But while the cloud infrastructure business is its bread and butter (accounting for two-thirds of revenue, according to last month’s first earnings report), there is a triumvirate of additional companies under the Nebius Group umbrella. This includes an autonomous vehicle company called Avride, based in Texas; a Swiss-based generative AI and LLM company called Toloka; and edtech platform TripleTen, based in Wyoming.
Avride is descended from the international division of Yandex’s self-driving unit, which emerged from a joint venture with Uber in 2020. While Alphabet’s Waymo is now at the forefront of the fast-growing robotaxi world and recently secured a $45 billion valuation, Yandex was an early pioneer in Russia, with Volozh noting that before the war the company was close to beating Waymo by becoming the first Launching fully autonomous cars on public roads puts the kibosh on plans.
“She [Yandex] would launch the first taxis on public roads without anyone behind the wheel, in a real city (Moscow), a few months before Waymo launched in San Francisco,” Volozh said. ‘Journalists were invited to a major event in March ’22. , but that launch never took place. People had to pack up all their things and leave within a few weeks.”
The team that had been working on Yandex’s autonomous vehicle project switched to Avride, a new brand it launched last year, and eventually moved to Austin via Tel Aviv.
“These are the same 250 people,” Volozh added.
Last month, Avride announced a major multi-year partnership with Uber, bringing Avride’s food delivery robots to Uber Eats, starting in Austin, though the partnership will later also bring Avride’s self-driving cars to the Uber platform (Uber has signed other similar deals , also with Google’s sister company Waymo).
Image credits:Avride
While Yandex had deep enough pockets to fund autonomous vehicle projects, Nebius does not: It has a few billion dollars in the bank from its Russian divestment, and it is very focused on building its cloud infrastructure business. And this is why Volozh says Avride will have to find additional partners in the longer term.
“They have enough budget for this year and next year,” Volozh said. “We finance them, but they need to use this time to find new partners because it is very capital intensive to build fleets. Real investments are needed.”
Obvious partners could be carmakers, but it could be any entity willing to invest billions, with Volozh adding that it would be willing to give up control of Avride if necessary.
Toloka, meanwhile, is a platform that specializes in data labeling and quality control for large language models (LLMs) and related AI systems – it’s a lot like Scale AI, which was recently valued at more than $13 billion. Toloka has clear synergies with Nebius’ core infrastructure business, but the customers are not the same. Nebius works largely with generative AI startups looking to gain computing power, while Toloka works with larger companies like Amazon and Hugging Face looking to improve their LLMs.
Both Toloka and Avride could ultimately follow a similar path to that of ClickHouse, makers of the eponymous open source database management system that spun out of Yandex in 2021. While the commercial ClickHouse entity secured major backers such as Index Ventures and Benchmark Capital. and Coatue, Nebius has retained a minority stake.
“ClickHouse became very popular and we were approached by investment funds to build a company around the open source project. Now they have revenue and they are growing,” Volozh said.
TripleTen, on the other hand, is a bit of an outlier in the Nebius group of companies, in that it is virtually a direct-to-consumer product that offers online coding bootcamps for those looking to transition into the tech sector. One idea Nebius is working on is to position itself as a provider of a “full suite of services” to AI companies, from data centers and GPU infrastructure to education. And this highlights the situation Nebius finds itself in: it’s drawing lines between the various entities it’s left with, trying to make it all make sense.
For now, TripleTen is breaking even, and Volozh acknowledges it won’t be the big revenue generator that its infrastructure business is – but it has the potential to generate meaningful revenue and will remain part of the Nebius Group.
“Nebius is a multi-billion dollar company,” Volozh said. “TripleTen – it’s a nice model, but it may be a tens or hundreds of millions of dollars business. It’s not a billion dollar business.”
In terms of its core Nebius AI cloud business, the company already has its own fully-owned data center in Finland, with plans to triple its capacity to 75 megawatts. At the same time, the company is building out additional locations at colocation facilities, a move intended not only to increase capacity but also to reduce latency by bringing processing closer to customers. In addition to the Kansas location announced this week, Nebius in Paris had already unveiled a new GPU cluster that will come online this month.
Further down the line, Nebius plans to build more of its own data centers, both in Europe and the US, but given the time this takes, the gap could be closed more quickly with co-location facilities. That is why the company is continuing with a hybrid approach.
“It will be more efficient if we build it ourselves, but construction means one and a half or two years – it is a long process and we cannot wait,” Volozh said. “That’s why we have these co-locations in Paris and Kansas City.”
