Nebius Just Reminded Everybody Where the Money Is
The AI trade has been dead all summer. One earnings report changed that. What I do next is wait.
In April I bought SanDisk. My cost average ended up in the mid $700s. I sold my shares right around $1900.
What attracted me to the name was an incredible increase in earnings and sales. A fundamental change in the business, in the memory space, and the money just flowing into this company. That’s what gave me the conviction to make the trade and the conviction to sit with it.
I’m not an accountant. I don’t read income statements beyond what I need to know. All I need to know is, where’s the money? If you follow the money in anything in life, good things are going to happen.
Everyone who trades or invests is constantly looking for new information that may not be available to everyone else. They’re looking for a catalyst. Something that happens that drives the stock upward.
A lot of the time the catalyst is right under our nose. It’s the earnings and the sales.
Stocks follow earnings.
What happened Wednesday
I did my trading plan over the weekend. The names that were leading were software, cybersecurity, biotech. Some of the big caps were acting pretty well.
The AI trade has been completely dormant this summer. Those stocks have been dead in the water. Under massive consolidation, massive pressure. Despite where they are from a technical perspective, I keep them in my universe because of the strong fundamentals. So I’ve been watching them and tracking where they trade, and there has been nothing but downtrends across these names.
Then Nebius reported.
Nebius is a stock I’m familiar with. It was one of my big winners during the last cycle, so naturally I was interested in what they had to say. I wasn’t surprised at all. They absolutely crushed it.
Revenue of $582 million, growth of 454%
AI cloud revenue of $575 million
Four major contracts signed during Q2, each worth more than a billion dollars
More than $40 billion in customer commitments
The stock was up 20% early and did nothing but get stronger through the day. It closed up 34% at $259.20.
That’s mass accumulation. Accumulation is the fancy word for the big institutions buying, the funds and the big money, and it’s what moves a stock over weeks and months. This was new information hitting the market, and it’s something to pay attention to.
So what the hell is a neocloud?
I had no idea what a neocloud was until I did some research, even though I traded one of these names.
All I knew was that it was an “AWS for AI”. That isn’t far off from the truth.
You have your traditional hyperscalers. When you think about a Salesforce or a DocuSign, a lot of those platforms are built on AWS, which is an infrastructure for cloud applications.
A neocloud is newer infrastructure built around GPU intensive AI workloads. The AI systems we use day to day, and the AI systems used in enterprise, have an incredible consumption on compute. They need dedicated companies to provide the infrastructure for that.
Nebius, CoreWeave, IREN, Hut 8 and TeraWulf are the names in that space. They’re also the top five holdings of NCLD, the ETF that tracks the neoclouds.
Why does anybody care? Because this isn’t one company making money. This is multiple companies in the same space with ridiculous growth, absolutely dominating in the marketplace right now.
That’s why we have to pay attention and look for the clues of when these stocks are under accumulation.
Which brings me to the charts.
Nebius (NBIS)
Nebius had an incredible run from April 7 all the way through June 22, where it eventually topped at $299.86. Since then it’s been in a continuous downtrend through most of July.
In late July it stopped the downtrend and started to trade sideways, but in a very choppy manner. Very volatile. A range from 230 down as low as 145 at the 200-day moving average.
Before earnings it closed around 12% below its 50-day. That’s well below where we would typically look at stocks. It powered right through that level after this latest report and went straight up in the air.
Would I buy here? No.
There’s a possibility it works from here. I think there’s a better possibility of finding a setup in the coming week or so, or in the coming weeks. However long it takes.
It needs some sideways action. When you get a reprice like Nebius had, there needs to be agreement in the market, and that typically comes in the form of a consolidation and a digestion of the gains. The more this stock can stay sideways and not give up the immense gains from the earnings report, the better chance it has of a sustained move upward.
So we’re patient. The power Nebius showed is a signal to have this on your radar. From here we need a tradable setup.
CoreWeave (CRWV)
CoreWeave had a similar look. A huge gap today, up 20%, after a very long consolidation. You can argue the downtrend for CoreWeave started around May 7, earlier than Nebius.
Even before then, CoreWeave has been lagging. It hasn’t had the performance. You can tell just by the numbers that Nebius is the leader. Nebius has a cleaner return on equity, and cleaner EPS growth YoY.
CoreWeave does have a strong fundamental story. That story is wrapped into sales growth and acceleration, which I love. I always think sales is the key to any company succeeding.
I might be a little biased there as a former enterprise sales rep.
With a stock like this I’m waiting for sideways action again.
I’ve been studying gap ups for a while and I like to buy them when there has been a lot of sideways action first. This has been more of a gap up coming out of a downtrend.
So we wait on this one too. Very similar situation to Nebius. We’ll see if it gives us an entry.
IREN
IREN is a little different. It’s a bit of a laggard in terms of earnings and sales growth, and from a stability perspective.
What I don’t like about IREN is the deceleration in sales growth. I like to see that in reverse.
This one definitely needs more time. It’s below its 200-day. It’s below its 50-day. It isn’t looking as good as the other two on the list.
One to watch nonetheless, because it does seem to be rounding out the bottom of a base. If it can follow through with some strength, that’s a positive signal.
Hut 8 (HUT)
Hut 8 is a stock I’ve tried multiple times. I couldn’t make money on it. I never got it at the right time. It popped onto my screen and captured my attention at the end of the AI run.
It’s off its highs, but the decline and the consolidation aren’t as ugly as the others.
Right now it’s finding a lot of resistance at declining moving averages, which isn’t a good signal.
I drew a downward trend line I want to see Hut break before it gets serious and I start looking at setups.
I don’t know what it is about Hut. I love their earnings numbers. They just have good solid sales growth.
TeraWulf (WULF)
TeraWulf is a disaster. It’s gone straight down since June 22. It had a great run in April through June, and now it doesn’t look good.
This one is four for four below every key moving average. It’s under a tremendous amount of pressure, finding resistance at every single moving average, all of them declining on it. It’s an ugly, ugly chart.
They reported earnings on the fifth and there wasn’t much of a reaction. It was kind of a dud.
This one has to put in a lot of work to even be included in a watch list. I would spend my time on the top two.
How I rank them
Nebius. CoreWeave. Hut 8. IREN. TeraWulf.
You have a clear leader in the top two. I would also keep my eye on Hut.
One of the key reasons I sort them that way is relative strength. Relative strength is a rating that tracks how a stock has performed against every other stock in the market, around 6,000 names, not just the S&P 500. It’s one thing you always have to look at.
Why not just buy it
The reason you don’t pile into a stock, the way we trade, is that you want continued signals of accumulation.
A big part of accumulation is trading within a range. You’re looking for a sustained uptrend, so you want to buy out of a pattern that’s indicative of long term accumulation.
When funds and big institutions buy stocks, they can’t achieve their whole position in one day. Even though it felt like that with Nebius on Wednesday, it takes weeks and months for these institutions to build their positions.
So we look for the signals. I call them the elephant footprints. That was a huge footprint on Wednesday.
Now we want to see where the support levels are. If it drifts, if it has a consolidation and there’s an agreement between the buyers and sellers on a range of what the stock is worth, and it trades in that range for a few weeks or longer and then breaks again, we know we’re in a continuous cycle of accumulation.
Those are the entry points. Those are the low risk entry points.
Did it change how I see the market
It did.
You want to start to see leaders. Leadership in stocks is a funny thing, because just like in anything, the followers will follow the strongest individuals. There’s no difference with stocks.
You want to see signals that these companies are still present in the AI space, and Nebius made it very clear.
A 34% move isn’t retail investors on Robinhood moving that stock. That’s some big boys accumulating a massive amount of stock.
Nebius is a great business. A great business doesn’t always mean a great stock.
Nebius is essentially a resurrection, and it’s a really good sign for the AI trade for Nebius to be strong. So we want to watch that. It has absolutely earned our respect and it deserves our attention.
Tying it back to what we do, nothing is a better vote for a stock going up than that business making a ton of money.
We’ll continue to watch these names.
Happy trading. We’ll talk to you all soon.
I like the patience behind this approach. A big jump can be tempting, but waiting to see what the stock does next makes a lot of sense.
Thanks for sharing, nice write-up! I am with you on this one: Nebius is probably the strongest neocloud stock right now and its earnings are a positive signal (demand is real and they can sell all their capacity). But I am less concerned about price but more about the economic moat and how Nebius can defend itself when datacenter competition rises (from Big tech). Would be curious to hear your thoughts.