Microsoft inks AI infra deal with Yandex cofounder's biz for nearly $20B

Netherlands based Nebius Group to deliver capacity from facility in New Jersey

As the AI frenzy shows no signs of letting up, Microsoft has signed an agreement that could be worth up to $19.4 billion with Netherlands-based Nebius Group – formerly known as Yandex N.V. – in exchange for access to its GPU infrastructure over five years.

The Amsterdam-based GPU costermonger is owned by Dutch parent company the Nebius Group, the outfit formerly known as Yandex N.V. Back in 2024, the Dutch group split off entirely from its Russia ops, keeping its AI-focused businesses in cloud, data, self-driving cars and education tech.

Yandex's cofounder and former chief Arkady Volozh is Nebius's chief exec. In August of 2023, about a year after stepping down as Yandex's CEO, Volozh publicly denounced Russia's invasion of Ukraine. The company no longer has ties to Russia.

Nebius says it will deliver dedicated capacity to Microsoft from its new datacenter sited in Vineland, New Jersey. These GPU services will be deployed in several tranches during 2025 and 2026, with the total contract value expected to be about $17.4 billion through 2031.

However, the Windows-maker has the option to acquire additional services or capacity under the agreement, which would bring the total contract value to about $19.4 billion, Nebius states in its Form 6-K regarding the deal, filed with the US Securities and Exchange Commission.

The GPU biz expects to finance the capital expenditure associated with the contract – i.e. the purchase of any further kit it will need to deliver the services - through a combination of cash flow coming from the deal and the issuance of debt secured against the contract.

Nebius is also evaluating a number of additional financing options to enable significantly faster growth than originally planned, and will update investors in due course.

Founder and chief exec Volozh said the economics of this agreement are attractive in their own right, and it will help the company in growing its AI cloud business in future, with more deals like this to come.

"Nebius's core AI cloud business, serving customers from AI startups to enterprises, is performing exceptionally well. We have also said that, in addition to our core business, we expect to secure significant long-term committed contracts with leading AI labs and big tech companies," he stated.

Microsoft refused to comment.

Microsoft has officially joined the World Nuclear Association, an international body that promotes nuclear power, as its newest member.

The organization hailed the move as a "game-changing moment" for the industry, saying that the world would take notice.

"When one of the world's most innovative technology companies recognizes nuclear energy as essential to their carbon-negative future, it sends a powerful signal to markets, policymakers, and industry leaders worldwide," said Director General Dr Sama Bilbao y León.

She claimed the partnership will accelerate nuclear deployment at the scale needed to meet both climate goals and the growth in energy demand from datacenters, a factor that has seen several hyperscalers, including Microsoft, investing in nuclear sites and technologies.

The contract with Nebius shows that Microsoft is still plowing money into more infrastructure for AI services, despite the fact that the technology has few discernible business benefits as yet.

A UK government department recently reported that its three-month trial of Microsoft's M365 Copilot found no real gain in productivity, for example, while The Reg reported last year that Microsoft was imploring third party suppliers to sell its licenses for AI-enabled tools to customers who are still to be convinced of their value.

Earlier this year, the company's president and vice chair Brad Smith declared that Microsoft would invest $80 billion in 2025 on infrastructure to train and deploy AI models.

There then followed a period of confusion where it was reported that the megacorp was cancelling leases on some datacenter capacity, sparking concerns that it had overestimated demand for AI services and the compute infrastructure it needs to drive them.

Microsoft tried to quash this talk on its earnings call in May, where CEO Satya Nadella said his company was merely adjusting its portfolio of leases "to be positioned for the workload growth of the future."

Nebius isn't the only rent-a-GPU biz that Microsoft has signed deals with. Earlier this year, CoreWeave revealed in SEC filings that 77 percent of its revenues came from just two customers during 2024, with Microsoft accounting for 62 percent.

Being heavily reliant on the whims of one large customer is a risky game that Nebius will no doubt be mindful of. ®