On October 21, a new stock was opened to Nasdaq traders called NBIS, short for Nebius, a new player in the field of AI cloud infrastructure.
With little in the way of the usual fanfare surrounding the IPO journey of most startups, casual observers could be forgiven for wondering where this company came from. There was no roadshow. The horn does not sound. No event is filled with confetti. Nothing, not even a peep. That’s because Nebius is an unusual beast. Although it is a publicly traded company, it is a startup in almost every sense of the word.
Nebius has actually been public for 13 years, listing under Yandex NV in May 2011. Yandex NV is the Dutch holding company of Russian internet giant Yandex (often called “Russia’s Google”). At the end of 2021, Yandex NV hit a peak valuation of $31 billion, but everything changed with the Russian invasion of Ukraine in early 2022. Nasdaq suspended trading in Yandex NV stock in February of that year due to sanctions imposed on Russian-affiliated companies, and a year later Nasdaq said it would delist Yandex entirely. However, Yandex successfully appealed on restructuring grounds. This process will take an additional 16 months to be fully completed.
This included offloading all Russian assets, most of which had real business value. What remained under Yandex NV’s ownership was a random assortment of infrastructure and business units that happened to be located outside Russia. The sale was finalized in July when Yandex NV renamed itself Nebius AI, an AI cloud platform with its own Finnish data centre.
The new venture was to be led by Russia’s Yandex co-founder and former CEO Arkady Volozh (pictured above). He was removed from European sanctions lists in March after publicly condemning Russian attacks on Ukraine.
The core Nebius business sells “graphics processing units (GPUs) as a service” to companies with “computing” needs. That is, processing power and resources to perform computing tasks such as executing algorithms and running machine learning models. Last month, the company unveiled a holistic cloud computing platform designed for the “full machine learning lifecycle,” encompassing data processing, training, fine-tuning, and inference.
With the restructuring complete and Volozh free to run the show from the company’s new headquarters in the Netherlands, Nasdaq gave Nebius the green light last month to resume trading. But the situation was almost unprecedented. A listed company ceases trading and then resumes almost three years later with a new name and a completely different business proposition?
In many ways, it would have made sense to delist and grow through private capital the old-fashioned startup way. But as Volozh explained to TechCrunch earlier this year, building infrastructure is capital intensive, and in what is currently one of the hottest sectors in technology, the easiest and cheapest way to access capital is through public markets. But it was not at all clear how the public markets would react to this strange new entity. No one really knew what to expect.
After a month, Nebius enjoyed a somewhat lukewarm re-entry into public life. It’s down significantly from its expected market capitalization of $18 billion before trading halted in February 2022, and has fluctuated between $3.5 billion and $4.75 billion since then, with some signs it is starting to stabilize.
“We couldn’t predict what was going to happen. It could be $5 a share, it could be $50 a share. This has never happened before and we don’t know what to do with it,” Volozh told TechCrunch in an interview in London this month. “No one knows what will happen,” he said. . “There is still volatility, but it is stabilizing, and the good thing is that it is stabilizing above the cost of assets. This means the market believes we can build a business here. “We’ll see how big of a business it is,” he said.
Nebius competes with all the usual hyperscaler cloud giants, but its more direct competitors are other alternative cloud startups like CoreWeave, which raised a ton of cash this year. As CoreWeave expands from the US to Europe, Nebius is moving in a different direction and this week announced plans to expand its presence into the US with a new GPU cluster in Kansas City (on the Missouri side). The company has also opened “customer hubs” in San Francisco and Dallas, and plans to build a third in New York by the end of the year.
But while its cloud infrastructure business is its bread and butter (accounting for two-thirds of revenue according to its first earnings report last month), there are three additional businesses under the Nebius Group umbrella. This includes a Texas-based self-driving car company called Avride. Toloka, a Swiss-based generative AI and LLM company; and TripleTen, an educational technology platform located in Wyoming.
driving time
Avride is the descendant of the international arm of Yandex’s self-driving unit, which was spun off from a joint venture with Uber in 2020. Alphabet’s Waymo is currently a leader in the fast-growing robotaxi space, having recently secured a $45 billion valuation, while Yandex was an early entrant. Volozh noted that as a pioneer in Russia, the company was on the verge of beating Waymo and launching the first fully self-driving car on public roads. The war put the kibosh on plans.
“They (Yandex) were going to launch the first taxi on public roads with no one in the driver’s seat in a real city (Moscow) a few months before Waymo launched in San Francisco,” Volozh said. “Journalists were invited to a big event in March 2022, but that never happened. “People had to pack up everything and leave within a few weeks.”
The team working on Yandex’s self-driving car project switched to Avride, a new brand launched last year, and eventually moved to Tel Aviv and then Austin.
“These are the same 250 people,” Volozh added.
Last month, Avride announced a significant multi-year partnership with Uber. This partnership saw Avride’s street food delivery robot launch in Austin and land on Uber Eats. However, this partnership could eventually bring Avride’s self-driving cars to Uber’s platform (Uber has signed other similar deals). , including Google’s sibling company Waymo).
Yandex has enough money to finance its self-driving car project, but Nebius does not. It has billions of dollars in the bank from the Russian sale and is focused on building out its cloud infrastructure business. That’s why Volozh says Avride should look for additional partners in the long term.
“They have enough budget for this year and next year,” Volozh said. “We are funding them, but building a fleet is capital intensive, so they should use this time to find new partners. “Substantial investment is needed,” he said.
Obvious partners could include automakers, but could also be any company prepared to invest billions of dollars, Volozh said, adding that he would be willing to give up control of Avride if necessary.
Meanwhile, Toloka is a platform specializing in data labeling and quality control for large language models (LLMs) and related AI systems. This is very similar to Scale AI, which was most recently valued at over $13 billion. Although Toloka has clear synergies with Nebius’ core infrastructure business, their customers are not the same. Nebius works primarily with generative AI startups pursuing computational pursuits, while Toloka works with large companies like Amazon and Hugging Face looking to improve LLM.
Toloka and Avride could eventually follow a similar path to ClickHouse, the creator of the eponymous open-source database management system that was spun off from Yandex in 2021. The commercial ClickHouse entities Index Ventures, Benchmark Capital, Coatue and Nebius retained minority stakes.
“ClickHouse became so popular that we were offered investment funds to start a business around open source projects. Now they are profitable and growing,” Volozh said.
TripleTen, on the other hand, is unusual in the Nebius business group in that it is a direct-to-consumer offering that offers online coding bootcamps for those looking to transition into the tech sector. One idea Nebius is trying is to position itself as a “full-stack services” provider to AI companies, from data centers and GPU infrastructure to education. This highlights the situation Nebius finds himself in. Nebius tries to draw lines between the various entities left behind and make it all make sense.
TripleTen has now reached breakeven and Volozh acknowledges that although it is not as big a revenue generator as its infrastructure business, it has the potential to deliver meaningful returns and will remain part of the Nebius Group.
“Nebius is a multibillion-dollar business,” Volozh said. “TripleTen — it’s a good model, but maybe it’s a tens or hundreds of millions of dollars business. “It’s not a billion-dollar business.”
parallel computing
For its core Nebius AI cloud business, the company already has a wholly-owned data center facility in Finland and plans to triple its capacity to 75 MW. Alongside this, the company is building additional sites in co-location facilities, a move designed to not only increase capacity but also reduce wait times by bringing processing closer to customers. In addition to the Kansas location announced this week, Nebius has already revealed a new GPU cluster in Paris, coming online this month.
Furthermore, Nebius plans to build more of its own data centers in both Europe and the US, but given the time it takes, it is faster to fill the gap with colocation facilities, so Nebius is taking a hybrid approach.
“It would be more efficient to build it ourselves, but it would take a year and a half or two years to build it. It’s a long process and we can’t wait,” Volozh said. “This is why we have joint locations in Paris and Kansas City.”
