Nebius and history
Nebius is a technology company that provides the high-performance computers needed to create and train artificial intelligence (AI) models. Specifically, the company provides graphics processing units (GPUs), i.e., the processors that help AI models work through huge volumes of data at speed.
The company is comparatively young. It was spun off from Russian internet giant Yandex in 2023. Nebius is now headquartered in Amsterdam and is self-standing with international investors such as Nvidia and Accel on its list. In the company’s comparatively short existence, Nebius has already become a major player in the rapidly growing AI infrastructure market.
The big microsoft deal
On Monday, Nebius announced a whopping deal: a multi-year contract worth up to $19.4 billion with Microsoft. The agreement runs through 2031, with Nebius providing cloud computer capacity to Microsoft’s artificial intelligence workloads.
The core of the agreement is worth $17.4 billion, but the valuation could be up to $19.4 billion if Microsoft takes the option to purchase more capacity. The partnership is designed to give Microsoft the computing muscle it needs in order to be able to keep extending the limits in the race to build next-generation AI systems, including large language models like those that power ChatGPT.
To Nebius, the deal is not just about money. It is also a stamp of approval on one of the world’s largest technology firms. To be able to call Microsoft a long-term partner boosts its credibility and assures years of revenue.
Investor excitement and market reaction
The news sent Nebius’s stock through the roof. Shares rose 60% in Monday’s after-hours trading and continued to climb Tuesday, finishing up nearly 51%. The turnaround reflects the extent to which investors are excited about the prospects of Nebius now that it has forged an agreement of this size.
The impact also spilled over into the market. Shares of rival AI infrastructure company CoreWeave rose 8%, as investors hoped that demand for AI compute capacity would only keep growing across the sector.
Why the deal matters
The Nebius-Microsoft deal is a definite signal that AI infrastructure demand is not in any way decreasing. Indeed, it is a suggestion that the market is just getting started.
To train and run advanced AI models, enormous quantities of processing power are required. At the heart of it all are GPUs, and with Nebius sending them to Microsoft, it is helping bring online the building blocks of AI capabilities that will revolutionize industries from healthcare through finance to entertainment.
This comes as recent warnings from some analysts said the AI sector was in a bubble. Sam Altman, CEO of OpenAI, and others have sounded alarms regarding wildly high valuations of AI firms. Nevertheless, this deal indicates that top companies like Microsoft are not about to stop shelling out big money for the infrastructure required to support AI.
Broader AI market trends
Nebius’s success is representative of wider trends in the AI economy. Nvidia, the AI chip market leader, just reported record profits, and estimated sales will keep growing more than 50% this quarter. Nvidia CFO Colette Kress envisioned that between $3 trillion to $4 trillion will be spent on AI infrastructure by the end of the next decade.
Meanwhile, private AI startups are also drawing eye-boggling valuations. OpenAI is said to be worth $500 billion, and Anthropic recently raised capital at a $183 billion valuation. These numbers reflect both the fervor and the risk in the industry.
Looking ahead
Nebius has been at the center of one of the biggest technology revolutions of our time. By signing its nearly $20 billion deal with Microsoft, the company has positioned itself as ready to handle the high-stakes world of AI infrastructure.
While there are doubts if the market for AI is overhyped, deals like this one suggest that demand for computing power will continue to grow in the years to come. To Nebius’ shareholders and Nebius itself, it could mean more opportunities—and more reasons for Wall Street to be cheerful.
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