Nebius received a maximum AI computing power order from Microsoft worth $19.4 billion, rising over 60% in after-hours trading at one point

Microsoft Corporation reached a multi-year agreement with Nebius Group NV on Monday to obtain artificial intelligence cloud computing capabilities from the tech company, with a transaction amount of nearly $20 billion.

Nebius is a company spun off from the Russian internet giant Yandex. According to documents submitted by Nebius to the U.S. Securities and Exchange Commission (SEC), this deal will bring the company $17.4 billion, and Microsoft retains the option to purchase an additional $2 billion in services, valid until 2031, potentially bringing the total to $19.4 billion. Nebius's investors include NVIDIA and Accel Partners.

Under the agreement, Nebius will provide exclusive capacity for Microsoft from its new data center located in Vineland, New Jersey, which will be deployed in multiple phases this year and next, with services expected to start as early as later this year. Microsoft did not specify how it would use the resources from Nebius.

Analysts believe that this agreement represents a significant gain for Nebius, enabling it to expand its AI cloud business more aggressively by 2026. The company is leveraging the AI boom to continuously expand its data center operations. Meanwhile, Microsoft is working to alleviate its long-term shortage of AI cloud computing capacity.

After the announcement, Nebius's stock price surged over 60% in after-hours trading, later narrowing to around 43%, while Microsoft's stock price remained virtually unchanged. So far this year, as of Monday's close, Nebius's stock price has more than doubled, with the company's market value just exceeding $15 billion.

Nebius founder and CEO Arkady Volozh stated:

“Nebius's core AI cloud business is experiencing very strong momentum, with clients ranging from startups to large enterprises. We have previously indicated that, in addition to our core business, the company expects to sign multiple long-term cooperation agreements with top AI laboratories and large tech companies. Today, I am pleased to announce the first of such contracts, and I believe there will be more similar collaborations in the future. The economic benefits of this agreement are already substantial, and more importantly, it will help us accelerate the growth of our AI cloud business in 2026 and beyond.”

Microsoft’s Computing Power Continues to Be in Short Supply

Media reports indicate that in response to the growing demand for AI services, Microsoft has significantly increased capital expenditures in recent years, with its stock price reaching an all-time high. Microsoft is currently focused on building new data centers equipped with expensive servers and networking equipment.

Despite Microsoft's rapid expansion of infrastructure for cloud computing and AI services, demand continues to exceed supply. Microsoft CFO Amy Hood told investors in July that the company expects to "continue facing capacity constraints" before the end of this year Currently, Microsoft often struggles to meet the development demands of its own AI products while also needing to provide AI services under the "Azure" brand for customers. The company has signed an AI computing power contract with OpenAI, the developer of ChatGPT, and has entered into excess capacity cooperation agreements with companies like CoreWeave.

Nebius: Also Seeking Other Financing Methods for Faster Growth

Nebius was founded in 1989 and is headquartered in Amsterdam. Last year, it was renamed from Yandex NV to Nebius, after Russian investors acquired Yandex's Russian search engine and other assets.

The company announced last November that it had opened offices in San Francisco, Dallas, and New York to further expand into the U.S. market.

At that time, the company wrote in its blog:

"Expanding our presence in the U.S. allows us to be closer to our customers and also enables us to play a role in supporting the development of innovative AI companies in the U.S."

Nebius stated in its documents that this transaction will significantly drive the growth of its AI cloud business by 2026. However, to achieve faster growth, the company also needs to seek financing methods. Nebius pointed out that the capital expenditures related to this transaction will be covered by cash obtained through the agreement and debt secured by contracts.

Nebius stated,

"The company is evaluating multiple additional financing options to achieve a growth rate far exceeding the original plan and will update the market on its financing strategy at the appropriate time."