Global Impact of AI Neoclouds
Francis Sideco
In a move that could have major implications in the AI datacenter and services market, Nebius and Microsoft have just agreed to a huge deal valued between $17.4 billion and $19.4 billion. The deal has Nebius providing Microsoft access to dedicated GPU infrastructure capacity at its new data center in Vineland, New Jersey, over the span of five years. Currently, the total contract value is $17.4 billion through 2031, with Microsoft being able to acquire additional services and/or capacity, which would increase the total contract value to around $19.4 billion.
What is Nebius?
Nebius is a neocloud, which is a company that builds and operates data centers using large amounts of high-performance GPUs and then rents out those data centers to companies. Unlike other neoclouds that emerged from cryptocurrency miners, Nebius’ roots come from the Russian tech company, Yandex, and was formed after the company sold off its Russian assets in 2024 following Russia’s invasion of Ukraine in 2022. Since the sale, it has mainly focused on the global AI market. Nebius is backed by AI powerhouse Nvidia, which provides the company with priority access to its newest, high-performance GPUs. After the change in focus, Nebius thrived with an annualized run-rate revenue (ARR) that has just reached approximately $1 billion. Nebius differs from major cloud hyperscalers in that it focuses only on AI and machine learning workloads, consequently allowing its datacenter design to be more optimized as opposed to other hyperscalers who have to address more general-purpose applications. Also, it separates itself from other AI infrastructure specialists such as CoreWeave by providing developer tools and services that can refine AI models, run inference tasks, and develop custom solutions rather than just focusing on raw computing power. Nebius is also unique in that it proactively added capacity before it had demand for the resources.
A Smart Move by Microsoft
Financially, this is a great decision by Microsoft. Instead of spending large amounts of resources to build its own data centers, Microsoft turns to a proven AI infrastructure provider in Nebius. By doing so, it can improve its AI infrastructure faster with lower upfront costs. This deal also removes a lot of the financial risk that companies would typically have to face if it built its own data centers. Not only does Microsoft get the GPU capacity needed for its AI services immediately instead of the years it would take to build the data center in-house, but Nebius will also be the one handling the building, financing, and managing of the data centers.
Nvidia Continues to Win
Microsoft and Nebius are not the only two companies that came out of this deal positively. The deal is also a huge win for Nvidia, as the company is the one backing Nebius. Nvidia has a partnership with Nebius and significant investments in the company itself. The deal between Nebius and Microsoft promises huge financial gains for Nvidia through increased demand for its GPUs, as well as the shares it has in Nebius as its stock rises in value. In Nvidia’s eyes, this deal has nothing but positives for the company.
Future of Neoclouds Looks Bright
The deal between Nebius and Microsoft, while one of the biggest, is one of many recent agreements between neocloud providers and major companies. Industry competitor CoreWeave just recently extended an $11.9 billion contract with OpenAI by another $4 billion in May 2025. Microsoft also signed a deal with Nscale to rent $6.2 billion worth of computing power in Norway. It will be no surprise to see many major companies following the same route and signing large, long-term deals with these neocloud providers, with these companies becoming the new industry standard for large-scale AI infrastructure.
Tirias Research tracks and consults for companies throughout the electronics ecosystem from semiconductors to systems and sensors to the cloud. Members of the Tirias Research team have consulted for IBM, Nvidia, AMD and other companies throughout the data center, AI and Quantum ecosystems.