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October 02, 2025
Nbis Stock: Microsoft has signed an agreement with Nebius Group NV, a neocloud provider. The deal will give its teams the computing power they need to build large language models and a new consumer AI assistant, according to people familiar with the matter.
The agreement is valued at up to $19.4 billion. Nebius shares jumped after the news broke on September 8, though few details were made public.
Under the deal, Microsoft will also gain access to more than 100,000 of Nvidia’s latest GB300 chips. Sources asked not to be named since the discussions are private.
The strategy is meant to ease the shortage of AI data center capacity. It also gives Microsoft room to use its own servers for high-value AI services offered to customers.
This is one of several partnerships Microsoft has struck with emerging “neocloud” companies. These smaller providers specialize in leasing out AI-focused computing power.
Microsoft has already committed more than $33 billion to such firms. Among them are Nebius, CoreWeave, Nscale, and Lambda.
The deals show Microsoft’s growing openness to relying on newer players for essential infrastructure.
Nebius and the other neocloud companies declined to comment.
Most cloud companies build and run their own data centers. Microsoft, however, is struggling to bring enough capacity online.
Leasing servers from neocloud providers offers a quicker solution. These firms have already tackled the toughest challenges, like securing power and obtaining chips.
“We’re in full land-grab mode when it comes to AI,” said Scott Guthrie, who heads Microsoft’s cloud division. “We’ve chosen not to let capacity hold us back.”
Generative AI demands massive amounts of computing power, putting pressure on data centers. To manage this, Microsoft is moving some internal and OpenAI workloads to neocloud facilities.
This helps free up capacity in its own data centers for cloud customers, Guthrie said.
As an example, early foundation AI models led by consumer AI chief Mustafa Suleyman were trained at a CoreWeave data center near Portland, Oregon, according to sources familiar with the project.
In essence, the approach lets Microsoft use its own servers to expand AI services while computing capacity remains limited. Investors are watching closely for signs that the company’s major AI investments are paying off.
Renting access to data centers also gives Microsoft more financial flexibility. Some expenses can be counted as operational costs instead of capital expenditures.
This can benefit cash flow, taxes, and how profits are reported to Wall Street, said Bernstein analyst Mark Moerdler.
Working with neocloud providers also allows Microsoft to scale and adapt faster than relying solely on its own data centers, he added.
Microsoft is not just using neocloud servers for AI model training. Deals with Nscale in the UK and Norway will also support the company’s AI services in those regions, Guthrie said.
Earlier, Microsoft announced it would lease capacity from Oracle to power an AI-enhanced Bing search engine.
Rival cloud providers, like Amazon, have not partnered with neoclouds as extensively. Google is renting some capacity from CoreWeave for its work with OpenAI, Reuters reported.
Bernstein analyst Mark Moerdler said this likely reflects Microsoft’s greater AI-related demand compared with competitors.
Guthrie noted that AI demand is surging from Microsoft products like GitHub Copilot and from OpenAI, which has hundreds of millions of ChatGPT users.
“Amazon doesn’t come close to that scale,” he said. “Google doesn’t either, especially when considering heavy usage during business hours.”
Microsoft is still investing heavily in its own data centers, even as it outsources some AI computing to neocloud providers.
On Tuesday, the company announced a second phase of development at its Racine, Wisconsin facility.
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The expansion will boost the site’s utility power capacity to at least 900 megawatts, according to sources familiar with the plans—almost the output of a typical nuclear reactor.
Earlier this year, Microsoft paused or stepped back from several projects to review its computing needs. Guthrie said the company will keep fine-tuning its infrastructure plans.
Some projects may be accelerated, others slowed, and focus may shift across regions as demand and regulations evolve.
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