Microsoft strikes $17.4B GPU deal with Nebius

Microsoft inks $17.4B cloud deal with Nebius for long-term access to high-speed GPUs. The contract provides Microsoft with a guaranteed pipeline of computing power during sky-high demand for AI hardware.

The contract includes a potential expansion that could raise its total value to $19.4 billion if Microsoft scales up and increases capacity. This flexibility allows the company to respond to rising AI demand quickly. The agreement represents a major long-term partnership between the two firms spanning five years. Analysts note that it stands among the largest deals ever secured by an AI start-up and ranks as one of the most significant in the history of the AI industry.

For Microsoft, the deal highlights its resolve to stay at the forefront of the race to develop and apply artificial intelligence. For Nebius, it is a watershed victory demonstrating its ascent as an international supplier at the forefront of AI infrastructure.

This development comes as Microsoft beat Wall Street expectations, posting quarterly earnings of $3.65 per share and revenue of $76.44 billion, above the projected $73.89 billion. Its Intelligent Cloud unit brought in $29.88 billion, also surpassing forecasts. Because Microsoft’s fiscal year ends in June, this quarter closed out its FY2025 rather than the calendar year’s second quarter.

Nebius powers Microsoft’s AI growth

Nebius will also grant Microsoft access to dedicated GPU clusters via a future data center it is building in Vineland, New Jersey. The timing of the deal is key. As companies race to develop and deploy generative AI, the demand for computing power has soared. Microsoft’s investment in OpenAI requires huge infrastructure for training ever-bigger models and delivering AI services to its customers over Azure.

GPU global supply chains are still in short supply. Nvidia, the leading maker of chips used in AI, can’t make things fast enough. This shortfall has led big technology companies to seek alternative solutions for guaranteed capacity.

This deal also ensures Microsoft gets a secure source of GPUs that don’t have to come through traditional channels. It also means hardware bottlenecks won’t set back its AI research teams and enterprise customers.

To some extent, the agreement is also about strategic diversification, the experts said. Microsoft is mitigating the risks by not putting all of its trust in just Nvidia and a handful of hardware manufacturing partners. This reduces risk and increases resilience in its infrastructure planning.

Analysts said the move would provide a big lift to Microsoft in its battle with others in the race for so-called artificial intelligence supremacy. Amazon Web Services and Google Cloud also pour billions into AI data centers and custom chips. Now that they have added this GPU capacity, they can continue to differentiate themselves in the race to provide reliable and scalable AI services on the industry’s best infrastructure.

Finally, the collaboration sets Microsoft up to grow its Azure global AI footprint, while offering Nebius an opportunity to demonstrate its infrastructure at scale.

Deal fuels Nebius’s future

Nebius, on the other hand, sees the deal as transformative. The Amsterdam company, spun out of the Russian tech company Yandex in 2024, is rapidly emerging as a player in the world of global AI infrastructure.

Nebius CEO Arkady Volozh said the agreement demonstrated the company’s ability to compete with established giants. It was the first of several long-term deals planned with leading technology firms.

Nebius intends to fund the new infrastructure underneath the deal through a combination of cash flow from the Microsoft deal and debt backed by the contract. The firm is also considering other sources of funding to fuel growth.

Nebius stock soared more than 60% in early trading on the news. Investors greeted the deal as indicating strong interest in Nebius’s AI cloud services.

The contract also ensures Nebius of a steady revenue stream for years. That stability will let it grow its global footprint, invest in more data centers, and strengthen its cloud play for AI.

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