The co-founder of Russian tech group Yandex is launching an artificial intelligence venture in Europe mostly staffed with the company’s former employees after its parent this week concluded a deal to exit the country.
Arkady Volozh, one of only two prominent Russian businessmen to condemn Moscow’s invasion of Ukraine, will head up Nebius Group, an AI infrastructure company and formerly Yandex’s Nasdaq-listed, Netherlands-based parent company.
The move marks Volozh’s efforts to salvage some of Yandex’s former international operations after Russia’s war in Ukraine roiled the company and prompted thousands of its staff to flee the country.
“It was obvious that not only [can we not] build anything out of Russian technology, but also the Russian technology business itself will continue by itself,” Volozh said in an interview with the Financial Times. “When it all happened, half of Yandex’s top management and 10 per cent of the developers found themselves outside Russia.”
He added: “We saw a new opportunity . . . Finally we are free to do something new.”
Volozh is leading 1,300 employees, mostly ex-Yandex staff, to build Nebius, whose core business is developing a cloud computing platform specifically designed to support the training and running of large-scale AI models by start-ups.
Nebius is already working with Europe’s best-known AI start-ups in France and Germany, according to Volozh, with 500 of its engineers focused on developing its specialised cloud infrastructure.
“We have engineers who have built big tech infrastructure [at Yandex] . . . we know how to do it very efficiently,” he said. “We know how to interconnect into supercomputers . . . and we know how to build really big clusters.”
The $5.4bn sale of Yandex’s core Russian assets, the largest western corporate departure from the country during the conflict, came after a protracted two-year negotiation that required President Vladimir Putin’s personal approval over an asset the Kremlin considers strategically important.
The company hammered out the deal with the help of Alexei Kudrin, a former finance minister with long-standing ties to Putin, whom it enlisted to negotiate with Sergei Kirienko, the Kremlin’s domestic policy chief.
The war in Ukraine dashed Volozh’s ambitions to make Yandex, which had a market capitalisation of $30bn at its peak, a global internet giant, prompted key technology partners to distance themselves from the company, and led Nasdaq to suspend trading in its shares.
Yandex’s core Russian business, which accounted for 95 per cent of the group’s revenue, assets and employees, is now owned by a consortium including members of the company’s management and several Kremlin-approved investors.
The EU imposed sanctions on Volozh in 2022 over what it described as Yandex’s complicity in the war.
Volozh resigned as chief executive, transferred the voting rights from his controlling stake to the board, and released a statement a year later saying the invasion “is barbaric, and I am categorically against it”.
He has reassumed control of voting rights in Nebius following the split with Yandex.
The EU agreed this year not to renew sanctions against Volozh, making him the first person to be removed from its list after speaking out against the war.
“I’m still in the same place . . . I was there from the beginning,” Volozh said when asked about his anti-war statement.
“A lot of people have changed their lives. And they just didn’t want to stay, for a reason,” he said. “It’s not because they were running from the army . . . they left because they didn’t want this to be done in their name. They didn’t want to stay with that.”
Volozh, who moved to Israel in 2014 and is an Israeli citizen, hopes the venture will allow Nebius to harness the former Yandex employees’ engineering talent without facing the severe restrictions on any Russian company seeking to do business in the west.
“We have zero connection, which means zero,” he said. “There is no byte or bit going between us and our previous company. It’s a new company, new infrastructure, new corporate entity.”
The Nasdaq-listed company has built up clusters of tens of thousands of Nvidia chips in its existing data centre in Finland, which it plans to triple in size, in an effort to take on big cloud providers including Microsoft, Amazon and Google in the area of AI applications.
Nebius is touting a “strong long-term relationship” with leading AI chipmaker Nvidia to help it procure powerful new processors even amid soaring demand. Its data centre is home to a supercomputer it says is the most powerful in Europe.
“It’s in [Nvidia’s] interest to diversify their client base; they’re interested in growing guys like us,” Volozh said. “We’ve had a working relationship with them for years. They know and trust us.”
Nebius has commissioned an audit from a Big Four auditor to certify it no longer has any ties to Russia, he added.
“You own basically the same stock, but it’s a different company [that has] completely pivoted. We cannot offer you exposure to the Russian IT ecosystem any more, but probably we can provide you with something much more interesting,” he said.
“We used to be big tech, it meant you have . . . a very big ecosystem around you, lots of users generating lots of data. This is a different world,” Volozh said. “Then we appeared outside with nothing, like any other start-up . . . this was a new, refreshing feeling.”
Nebius has retained three other internationally focused businesses from Yandex in the split, focusing on data annotation and generation, education and self-driving cars, as well as the data centre in Finland and some intellectual property licences.
Developers were forced to reinvent large aspects of the projects on the fly, Volozh said, rushing to keep up with rapid AI-driven technological change while simultaneously grappling with the split from Yandex.
“It was a perfect storm,” Volozh said. “They were moving people outside Russia and trying to rebuild the business and, in parallel, the business model has changed.”
The rebranded Nebius holds $2.5bn in cash following the sale of Yandex’s Russian business and has no debt, allowing the company to invest some of it in expanding the business and return “a substantial proportion” to shareholders.
Nebius will continue to report to the US Securities and Exchange Commission, plans to launch a new board and hopes it can resume trading on the Nasdaq “in due course”, with a view to attracting more funding.
“We have an opportunity to build something bigger than there was,” Volozh said. “The scale of what we are building assumes there will be multibillion-dollar investments in the future through debt, through equity. What we have now . . . gives us a scale which I think doesn’t exist in Europe, outside of the big tech sector.”
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