Rumble Inc. (NASDAQ: RUM) opened over 10% up this morning following news that it is considering buying Northern Data (ETR: NB2), an artificial intelligence (AI) and high-performance computing solutions provider.
The expected $1.17 billion agreement with the Frankfurt-headquartered firm will likely involve an exchange of newly issued RUM shares for NB2 shares.
Rumble’s stock price increased following the announcement, reflecting investor enthusiasm about the strategic pivot toward AI infrastructure and data privacy.
Despite today’s surge, however, RUM shares are trading more than 20% below their recent high.
Why is Northern Data’s prospect a positive for Rumble stock?
Investors are responding positively to the potential Northern Data transaction due to the potential synergy between the two companies and what it could broadly mean for Rumble’s future in the AI cloud space.
NB2 brings with it a robust portfolio of Nvidia GPUs and multiple high-capacity data centres – assets that are increasingly critical in the race to scale AI workloads.
RUM’s emphasis on data privacy and independence aligns well with Northern Data’s infrastructure, potentially attracting enterprise clients wary of centralised cloud providers.
Moreover, the deal structure – an all-stock transaction – preserves Rumble’s cash reserves while expanding its technological footprint.
With Tether (Northern Data’s majority shareholder) backing the transaction and committing to GPU purchases, RUM gains not only strategic assets but also a long-term customer.
All in all, Rumble shares are ripping higher at the time of writing because the NB2 deal could mark a transformative moment, positioning them as a serious contender in the global AI cloud services market.
Is it too to buy RUM shares following today’s surge?
Note that the exchange of RUM shares with NB2 shares would mean significant dilution for those invested in the video-sharing and cloud services platform.
And while the AI pivot means meaningful expansion of capabilities that may justify a premium valuation, it’s worth mentioning that Rumble stock is already going for a price-to-sales (P/S) ratio of more than 36.
That suggests gross overvaluation given it’s an unprofitable tech name for now.
Plus, Rumble reported its financial results for the second quarter this morning, which came in notably below Street estimates.
The Nasdaq-listed firm generated $25.08 million in revenue and lost 12 cents a share, handily below $26.78 million and 7 cents a share that analysts had called for.
So, the company’s financials don’t warrant an investment in Rumble stock at current levels either.
How Wall Street recommends playing Rumble shares
Finally, investors are recommended to tread with caution on RUM stock also because it receives coverage from just three Wall Street analysts at the time of writing.
That may be a red flag because it signals limited institutional interest and scrutiny. Fewer analysts mean less transparency, reduced market oversight, and fewer professional forecasts to guide investors.
It can also suggest that major investment banks don’t view Rumble stock as a priority, possibly due to its niche positioning, volatile fundamentals, or uncertain growth trajectory.
In short, with minimal coverage, price movements may be more speculative and less anchored to fundamentals, increasing risk for retail investors.
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