Nebius Stock Falls After Key Gartner Warning as Short Interest Nears 20%

Nebius Group (NASDAQ:NBIS) extended its steep sell-off as investors dumped neocloud stocks amid ongoing jitters in the artificial intelligence industry. The decline has also been fueled by growing short positions in the shares, a sign that some traders expect further losses in the near term. 

Nebius Group’s Short Interest is Rising as AI Jitters Continue

American investors are shorting Nebius and other neocloud companies. Its short interest is quickly rising and approaching the important milestone of 20%. This increase gained steam after Gartner (NASDAQ:IT) warned that these firms face substantial impairment at the end of 2030. Some popular analysts have also warned about the potential bursting of the AI bubble.

The bursting of the AI bubble or a significant decline in growth would negatively impact Nebius, a company that counts companies like Meta Platforms (NASDAQ:META) and Microsoft (NASDAQ:MSFT) as clients. 

Nebius is also facing other challenges, including the rising cost of doing business, with the prices of chips, memory, and servers continuing rising. At the same time, its depreciation costs are rising. Its last results showed that its depreciation rose by 245% in the second quarter to $259 million, a significant amount considering that its revenue was $582 million. 

Nebius is also facing financing challenges, with bond yields continuing to rise. The ten-year Treasury yield has jumped to 5.3%, its highest level in two decades. As a result, the company will need to pay a higher rate for future debt financing. CoreWeave (NASDAQ:CRWV) has seen its debt yields jump to 15%. 

As a result, the company may decide to use its equity to raise capital. It raised over $2 billion in equity financing in the second quarter and has over $2 billion left that it can raise. As a result, its outstanding shares have jumped to 238 million from 200 million last year.

Nebius Stock Technicals Suggest it Has More Downside

NBIS stock chart | Source: TradingVideo

The daily chart shows that NBIS stock has been in a strong sell-off this month. It has dropped below the important support level of $194, its lowest level on September 2nd. 

At the same time, it is nearing the 50% Fibonacci Retracement level. It has also moved below the 200-day Exponential Moving Average (EMA) and the Supertrend indicator.

These technicals suggest that the stock may continue falling, potentially to $146, its lowest level in August. A move below that level will point to more downside towards the 61.8% Fibonacci Retracement of $125.

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