Microsoft and Nebius Forge $174 Billion AI Infrastructure Powerhouse Deal

In a strategic move underscoring the growing demand for high-performance AI computing power, Microsoft has entered into a substantial agreement with AI infrastructure firm Nebius, valued at up to $174 billion over five years. This landmark deal positions Nebius to provide significant computational resources specifically for Microsoft's expansive AI ventures.

Following the announcement made post-market on Monday, Nebius' stock experienced a meteoric rise, surging over 60% before settling at a 44% increase by the session’s end. Meanwhile, Microsoft's shares edged up by a modest 0.21%, reflecting the market's cautious optimism in response to this significant partnership.

Under the terms of the contract, Microsoft may also receive additional services from Nebius, potentially increasing the total contract value to approximately $194 billion. This agreement highlights the ever-intensifying competition within the tech industry for cutting-edge AI infrastructure and resources.

Established after the divestiture of overseas operations by Yandex, Nebius is valued around $150 billion and specializes in the provision of NVIDIA GPU chips and AI cloud services. In the upcoming period, Nebius is expected to offer dedicated GPU infrastructure from its new data center located in Vineland, New Jersey, focusing on enhancing Microsoft's AI capabilities.

Commenting on the agreement, Nebius CEO Arkady Volozh emphasized its lucrative economic benefits and its potential to significantly accelerate the company's AI cloud business growth post-2026, further establishing Nebius as a formidable player in the AI infrastructure landscape.

The ripple effects of the deal were felt across the industry, with CoreWeave, another competitor in the AI infrastructure space and Microsoft's existing client, witnessing a 5% uptick in its stock price. This movement signals a robust acknowledgment of the sustained demand for AI infrastructure.

For Microsoft, this partnership is part of a larger strategic push, as reflected in its July announcement that it plans to elevate its annual AI capital expenditure to $120 billion, up from $88 billion last year, marking a substantial increase from $32 billion in 2023. This reinforces Microsoft's keen focus on securing vital computational capacity in its quest to stay at the forefront of AI development and deployment.