Quick overview

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Microsoft and Nebius Group NV, a technology company that emerged from Russian internet giant Yandex, have formed a multiyear deal valued at nearly $20 billion to acquire AI cloud computing power.

The agreement, which is expected to generate between $17 billion and $19 billion for Nebius by 2031, has investors that include Nvidia Corp. and Accel Partners, as reported in a document filed with the U.S. Securities and Exchange Commission.

Nebius’s stock surged by approximately 60% in late trading, while Microsoft’s stock remained relatively stable.  Nebius had more than doubled in value by the end of the year.

Microsoft has significantly increased its capital expenditures to unprecedented levels to meet the growing demand for AI services. Headquartered in Redmond, Washington, the company is concentrating on constructing new data centers and outfitting them with advanced servers and networking hardware.

MSFT closed slightly higher than the previous day’s closing price of $495.00. It peaked at $501.17 and settled at $498.2.

The stock has experienced volatility over the past month, reaching a peak of $531.00 on August 12, but has since declined to $498.16. Although it is currently below its 2025 peak of $555.45, Microsoft has shown strong growth over the year, rising from $430.30 in September 2024.

This situation suggests that the market views the deal as a strategic move rather than a transformative financial event for Microsoft. The Nebius agreement solidifies Microsoft’s position as a leader in AI and supports the expansion of Azure, especially with spending on AI infrastructure projected to reach $200 billion by 2028. Microsoft is considered a stable investment due to its diverse portfolio, which includes cloud services, software, and AI, as well as its strong cash flow.

The demand for cloud and AI services continues to exceed supply despite the rapid expansion. Microsoft CFO Amy Hood stated that the company anticipates remaining “capacity constrained” until the end of the year.

Nebius will provide Microsoft with dedicated capacity from a new data center located in Vineland, New Jersey.

Nebius also indicated that securing financing for this accelerated growth will be vital for the cloud provider. “Cash from the deal and debt secured against the contract will cover the capital expenses associated with this agreement,” stated Nebius, who is based in Amsterdam.