Nebius' 454% growth leads AI cloud picks

The AI build-out has made cloud computing infrastructure a rentable commodity: most AI developers lack in-house compute and must rent from providers with excess capacity. Amazon Web Services and Google Cloud are two of the three largest cloud providers, and their growth rates have accelerated to 37% and 82% respectively. Their backlogs—$514 billion for Google Cloud and $496 billion for Amazon as of the end of the second quarter—suggest years of contracted revenue ahead, especially relative to AWS' trailing 12-month revenue of just shy of $150 billion.

Nebius, a neocloud focused on AI-first infrastructure, is much smaller and can pursue contracts too small for the giants, which may explain its exceptional growth. But its unprofitability means the key question is whether management can reach profitability before the current demand wave subsides. If it can match the profitability of Alphabet and Amazon's cloud units, it could prove a fantastic investment; if not, it could be a dud.