Nebius Shares Surge Nearly 50% Following Microsoft AI Partnership

Shares of Nebius Group, an artificial intelligence (AI) infrastructure firm, surged nearly 50% on Tuesday following the announcement of a multi-billion-dollar deal with Microsoft. The announcement came a day after the Amsterdam-based company disclosed that it had signed a multi-year agreement with Microsoft, valued at up to $19.4 billion. Under this deal, Nebius will provide cloud computing power for AI workloads. The company, which was spun out from the Russian internet giant Yandex in 2023, specializes in providing graphics processing units (GPUs) necessary for training advanced AI models.

The agreement with Microsoft will generate $17.4 billion in revenue for Nebius through 2031. Microsoft also has the option to acquire additional computing capacity under the contract, which could raise the overall deal value to $19.4 billion. This partnership highlights the strong demand for high-performance computing infrastructure to train and run sophisticated AI systems. Nebius counts prominent investors, including Nvidia and Accel, among its backers, reinforcing confidence in its technology and market position.

Investor enthusiasm over the Microsoft-Nebius deal drove Nebius shares to climb 60% in extended trading on Monday, with continued momentum on Tuesday. The announcement also positively impacted rival AI infrastructure firm CoreWeave, whose shares rose by 8% in response to the news. This surge indicates growing investor optimism in AI infrastructure and the critical role of cloud computing and GPU technology in supporting AI development.

The demand for AI infrastructure remains strong across the industry. Last month, Nvidia, a dominant player in the AI infrastructure sector, reported earnings and revenue that exceeded expectations for the quarter ending in June. The company also projected that sales growth for the current quarter would remain above 50%, reflecting sustained global demand for AI chips and related technologies. Nvidia’s Chief Financial Officer, Colette Kress, stated during the company’s earnings call that the AI infrastructure market is expected to see between $3 trillion and $4 trillion in spending by the end of the decade, highlighting the enormous growth potential of the sector.

Despite this optimism, market participants have expressed some caution regarding potential overvaluation in the AI sector. Concerns about a possible AI bubble were raised last month by OpenAI CEO Sam Altman, along with analysts and industry experts. Private AI companies have seen their valuations soar over the last three years, driven by high investor interest and rapid technology adoption. For instance, OpenAI is reportedly valued at approximately $500 billion, while Anthropic recently secured $13 billion in a funding round, giving it a valuation of $183 billion.

The Microsoft-Nebius deal reflects both the scale of investment being funneled into AI infrastructure and the critical role of specialized hardware, such as GPUs, in enabling AI model training and deployment. It also underscores a broader trend in which technology giants and investors are heavily backing AI development, ensuring that companies providing cloud computing resources and specialized AI infrastructure continue to thrive. As AI adoption accelerates across industries, the demand for high-capacity computing, energy-efficient GPUs, and cloud infrastructure is expected to remain strong, creating lucrative opportunities for firms like Nebius and its competitors.

Overall, the Nebius-Microsoft agreement, combined with ongoing investment and valuation trends in the AI sector, signals a period of substantial growth, innovation, and market activity in AI infrastructure, even as investors remain mindful of potential market volatility and overvaluation risks.