Nebius Secures Landmark AI Infrastructure Agreement with Microsoft

Nebius Group N.V. (NASDAQ: NBIS) announced a multi-billion dollar agreement to provide AI infrastructure to Microsoft (NASDAQ: MSFT), leading to a significant rally in Nebius shares and highlighting the intensifying demand for specialized AI computing capacity.

Technology Sector Gains Following Major AI Infrastructure Agreement

U.S. equities saw a notable uplift in the technology sector on September 9th, driven by a significant announcement in the artificial intelligence (AI) infrastructure space. Nebius Group N.V. (NASDAQ: NBIS), a provider of AI infrastructure, revealed a multi-billion dollar agreement to supply dedicated AI computing capacity to Microsoft (NASDAQ: MSFT). The news propelled Nebius shares to a substantial advance, signaling strong investor confidence in the rapidly expanding AI sector.

The Agreement in Detail

Under the terms of the multi-year agreement, Nebius will deliver dedicated GPU cloud infrastructure capacity to Microsoft from its new data center located in Vineland, New Jersey, with initial deployments anticipated to commence later this year. The base value of this transformative deal is $17.4 billion over a five-year period. The agreement also includes an option for Microsoft to purchase additional services or capacity, which could increase the total value of the contract to $19.4 billion. This partnership is structured to extend through 2031, providing Nebius with a robust and stable revenue stream for nearly a decade.

To facilitate the necessary expansion and meet its commitments under the contract, Nebius has outlined a financing strategy. The company intends to leverage cash flows generated directly from the agreement and secure debt against the contract, thereby capitalizing on Microsoft's credit quality. Furthermore, Nebius announced plans to raise additional capital through a dual offering, including a $1 billion public sale of its Class A shares and $2 billion in private placement of convertible senior notes. An updated financing plan indicates Nebius is seeking $2.75 billion in convertible notes across two series: $1.375 billion of 1% convertible notes due in 2030 and $1.375 billion of 2.75% convertible notes due in 2032. These funds are earmarked for acquiring essential hardware, expanding data center footprints, and for general corporate purposes.

Market Reaction and Analysis

The market responded with considerable enthusiasm to the announcement. Nebius Group shares advanced 49.42% to close at $95.72 on September 9th. This significant single-day movement was accompanied by extraordinary trading volume, with over 88 million shares changing hands, a figure nearly nine times its daily average. This surge further augmented Nebius's impressive year-to-date performance, which has seen the stock increase by 245%.

For Microsoft, this strategic partnership addresses a critical need for expanding AI cloud capacity without directly incurring substantial capital expenditures on its balance sheet. By utilizing off-balance-sheet arrangements with specialized providers like Nebius, Microsoft can secure essential GPU infrastructure, crucial for supporting its extensive AI initiatives and maintaining a competitive edge in the rapidly evolving AI landscape. The deal underscores the intense and growing demand for high-performance computing resources within the AI industry, benefiting not only Nebius but also potentially other specialized infrastructure providers.

Broader Context and Implications

The scale of this agreement is transformative for Nebius. To put the financial impact into perspective, the base value of the $17.4 billion contract significantly surpasses Nebius's entire market capitalization of approximately $15.1 billion recorded the day prior to the announcement. The deal also dwarfs the company's own ambitious full-year 2025 annualized run-rate (ARR) guidance of $900 million to $1.1 billion. This single contract provides a substantial backlog of revenue that fundamentally reorders Nebius's financial trajectory, translating to over $3.5 billion annually over the five-year period.

This agreement further highlights a broader market trend: hyperscale cloud providers facing AI capacity constraints are increasingly turning to specialized AI infrastructure providers. The model of securing dedicated capacity through long-term contracts with external providers offers a flexible and capital-efficient approach to meet the soaring demand for AI compute.

Expert Commentary

Market analysts have largely reacted positively to the news. Firms such as BWS Financial have raised their price target on NBIS to $130, while Goldman Sachs and D.A. Davidson have reiterated their "Buy" ratings on the stock. Commenting on the financial implications of such arrangements, Gil Luria, an analyst at D.A. Davidson, stated:

"We believe the trend is clear — capex is out and off-balance-sheet arrangements with external debt are the way forward."

This perspective underscores the strategic advantages for both the infrastructure provider and the hyperscale client in such partnerships.

Looking Ahead

The successful execution of this landmark agreement will be a key focus for investors. The timely buildout of the New Jersey data center and the effective deployment of dedicated GPU capacity for Microsoft will be critical metrics to monitor in the coming quarters. Nebius has indicated its intention to pursue additional contracts with other technology companies and AI laboratories, suggesting further expansion opportunities within the burgeoning AI infrastructure market. The company's long-term goal of securing over 1 GW of power by the end of 2026 further illustrates its ambitious growth trajectory in this high-demand sector.

source:

[1] Nebius announces multi-billion dollar agreement with Microsoft for AI infrastructure[2] Nebius Joins the AI Elite After a $17.4 Billion Microsoft Pact - MarketBeat[3] Nebius Group launches offerings to fund AI cloud business growth - Investing.com

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The Event in Detail The market's momentum is largely concentrated in chipmakers and companies providing AI infrastructure. Nvidia Corp. (NVDA) has seen its stock climb over 13% this year, pushing its market capitalization close to $4 trillion, surpassing the gross domestic product of some nations. Other significant advancers include Palantir Technologies Inc. (PLTR), up over 83%, alongside strong performances from Broadcom Inc. (AVGO), Super Micro Computer Inc. (SMCI), and Arm Holdings Plc (ARM). Nvidia's first-quarter earnings report highlighted a 73% year-over-year increase in data center revenue, underscoring the robust demand driving this sector. Oracle Corp. (ORCL) shares experienced notable volatility, slipping 6.2% after a prior 36% surge. This initial surge, which marked Oracle's best trading day since 1992, followed a "blowout earnings report" propelled by multibillion-dollar orders for its cloud services. 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