Nebius, which rents out AI infrastructure, has announced a landmark $17.4 billion agreement with Microsoft over five years, potentially ramping to $19.4 billion. Under the deal, Nebius will deliver dedicated capacity to Microsoft from its new New Jersey data center.
This represents a transformational win for Nebius, a significant position in both our AI and Big Data portfolios, which surged more than 40% on the news. The Microsoft contract is set to more than double Nebius’ revenue in the coming years and provides crucial validation for a company that emerged from the remnants of a Russian Internet company (Yandex) and, until recently, had limited US data center assets. Importantly, the deal could open the door to additional hyperscaler partnerships while also lowering Nebius’ cost of capital—upcoming debt issuance for capex can now be secured against this long-term contract.
More broadly, this transaction underscores the robust momentum in data centers following concerns earlier this year. Hyperscalers continue to aggressively expand capacity, while also leaning on independent providers to optimize their capex.
Worth noting, these independent data centers have been attracting attention recently: Google’s 8% stake in TeraWulf, a crypto miner pivoting to high-performance computing, and CoreWeave’s $9B takeover of Core Scientific. We expect M&A to intensify as buying can prove faster and more efficient than building in the data center space.
