The AI boom rests on cheap capital. Nebius Group (NASDAQ:NBIS | NBIS Price Prediction) CEO Arkady Volozh just spelled out how a few hundred basis points of borrowing cost could undermine the economics of the buildout.
In a recent interview with venture capital firm Accel, Volozh walked through his company’s financing stack:
“For a startup like us with all of our public NASDAQ status and size, we’re still a young startup for the banks working in a very risky new part of the economy. If you want to get your financing for, I don’t know, 10, 12%, you can get it. It depends on the size, but it kills all of the economy. People maybe don’t understand the difference between 6% annual interest and 9% annual interest, 10% annual interest. They see it as a 4%, but on a 5-year contract, it’s like 20% of extra margins. It’s a huge difference. So we’re looking for affordable financing in pretty big volumes, tens of billions, probably hundreds of billions of dollars.”
That sentence captures why Nebius’s Q1 results and the broader AI capex cycle are so sensitive to the Federal Reserve.
A growth story built on borrowed money
Nebius reported Q1 FY2026 revenue of $399.00 million, up 279.6% YoY, but missing the consensus $593.19 million estimate by 32.74%. The core Nebius AI Cloud segment grew 841% YoY to $389.70 million, with adjusted EBITDA margin nearly doubling QoQ to 45%.
Headline EPS of $2.11 versus -$0.79 consensus was inflated by a $780.60 million non-cash gain from revaluing the company’s ClickHouse stake. Excluding that, the adjusted net loss widened to $100.30 million.
Capital intensity is where Volozh’s quote lands. In Q1, capex ran $2.47 billion against $2.26 billion of operating cash flow, itself driven by $3.198 billion of customer prepayments. Cash from financing reached $6.30 billion. In March, Nebius priced $4.3375 billion in convertible notes (1.250% due 2031 and 2.625% due 2033).
Volozh plans to fund contracted power exceeding 4 GW by year-end 2026, plus 1.2 GW AI factories in Pennsylvania and Missouri, a 310 MW Finland site, and NVIDIA Vera Rubin NVL72 deployments from H2 2026. On the call, he framed the strategy bluntly: “We are not simply responding to where the industry stands today; we have the knowledge and experience to build the infrastructure, tools, and capabilities for where it will be tomorrow.”
Why the Fed matters more than the market thinks
The Federal Funds target rate upper bound sits at 3.75%, down 0.75 points from a year ago and unchanged since December 11, 2025. Markets priced in more cuts. Sticky inflation and AI-driven electricity costs could force a further pause or even interest rate hikes.
That scenario stress-tests Volozh’s math. A jump from sub-6% to 10% financing would erase roughly 20% of margin over a five-year contract. Applied to Nebius’s 2026 ARR target of $7B to $9B and ~40% adjusted EBITDA margin goal, the picture deteriorates quickly.
NVIDIA (NASDAQ:NVDA), which took a $2 billion equity stake in Nebius, posted Q4 FY2026 data center revenue of $62.31 billion (up 75%). Palantir (NASDAQ:PLTR) reported Q4 2025 revenue of $1.41 billion, up 70%, with a Rule of 40 score of 127%. NBIS shares are up 138.77% year-to-date. Every name in this trade is rate-sensitive. Volozh just said the quiet part out loud.
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