Microsoft to Acquire AI Cloud Capabilities from Nebius for $194 Billion

Microsoft has entered into a multi-year agreement with Nebius Group NV to acquire AI cloud computing capabilities, with the deal potentially reaching up to 194 billion dollars. Nebius, a technology company spun off from the Russian internet giant Yandex, will provide Microsoft with dedicated capacity from its new data center in Vineland, New Jersey. The deployment will occur in multiple phases over the current and next year, with services expected to commence later this year. The agreement includes an initial payment of 174 billion dollars to Nebius, with an additional 20 billion dollars in services that Microsoft can purchase by 2031.

Nebius's investors include NVIDIA and Accel Partners. The company's core AI cloud business has been growing rapidly, with clients ranging from startups to large enterprises. The agreement with Microsoft is expected to significantly boost Nebius's AI cloud business by 2026, allowing the company to further expand its data center operations. Microsoft, on the other hand, is working to alleviate its long-term shortage of AI cloud computing capacity.

Nebius was founded in 1989 and was renamed from Yandex NV last year. The company has been expanding its presence in the United States, opening offices in San Francisco, Dallas, and New York. Nebius aims to support innovative AI companies in the region and is exploring additional financing options to achieve faster growth. The company plans to cover the capital expenditures related to this deal through the cash received from the agreement and debt secured by the contract. Nebius is evaluating multiple financing options to achieve growth rates far exceeding its original plans and will update the market on its financing strategy at the appropriate time.

Microsoft has been facing a persistent shortage of AI cloud computing capacity due to the increasing demand for AI services. The company has been investing heavily in new data centers and high-end servers to meet this demand. Despite these efforts, the supply of AI cloud computing resources continues to lag behind the demand. The company's Chief Financial Officer has indicated that Microsoft will continue to face capacity constraints until the end of the year.

Nebius's CEO highlighted the strategic importance of the agreement, stating that it not only provides substantial economic benefits but also accelerates the growth of the company's AI cloud business. The CEO also expressed optimism about future collaborations with other top AI labs and technology companies.