Nebius Stock Soars on Microsoft Deal. Why CoreWeave, IREN Are Also Rising.

Data centers are becoming increasingly large to support artificial intelligence. (Courtesy Google)

Nebius stock was soaring on Tuesday after signing a big computing-infrastructure deal with Microsoft . It could be good news for rival CoreWeave and other peers.

Nebius shares were up 38% at $88.23 in early trading Tuesday after Microsoft agreed to pay the company $17.4 billion for artificial-intelligence infrastructure capacity over the next five years. Shares in peers CoreWeave, IREN and TeraWulf were also rising as shareholders bet on similar deals being struck in future.

Microsoft looks to be turning to Nebius due to constraints in its own cloud-computing business, as big technology companies struggle to acquire enough Nvidia chips to power AI services. Nebius said the computing power will come from its new 300-megawatt data center in Vineland, N.J., starting later this year.

Apart from providing additional capacity, advantages for Microsoft include avoiding recording more capital expenditure—a growing burden for large technology companies—and needing to use its own staff resources to build and manage more data centers. Microsoft may acquire additional services and capacity under the agreement, potentially increasing the value to $19.4 billion.

“We continue to believe that Nebius is well set up to bring on other high-profile customers including other hyperscalers or frontier AI labs, as the company continues to build out their data center capacity with upcoming greenfield opportunities,” wrote D.A. Davidson analyst Alexander Platt in a research note.

Platt has a Buy rating and $75 target price on Nebius stock.

Normally seeing your biggest customer sign a major deal with a rival operator isn’t good news, but shareholders of CoreWeave look to be concentrating on the prospect of future spending by Microsoft and other big tech companies.

CoreWeave shares were up 8% in morning trading. The stock has fallen by around 40% since its June peak when the AI cloud company became a darling of retail traders looking for the next hot name and it struck a deal to acquire its data-center infrastructure partner Core Scientific —an all-stock deal which has been put in jeopardy by its recent slump.

Nebius is growing from a much smaller base than CoreWeave. Nebius—which was spun out from the breakup of Russian tech company Yandex—reported quarterly revenue of $105.1 million in its most recent earnings. CoreWeave’s equivalent quarterly revenue came to $1.21 billion.

Other smaller competitors were also gaining. IREN stock was up 4.7%, adding to a surge last month after the company announced another round of Nvidia chip purchases and said it expected its annualized AI cloud revenue to grow tenfold by the end of the year. TeraWulf shares were up 3.3% and have more than doubled in the past three months, largely due to Google-parent Alphabet taking a stake in the company as part of an AI-hosting deal.

“Companies have their hands full with existing data center projects, so by leveraging management expertise at these neoclouds they can
satisfy demand more quickly,” wrote D.A. Davidson’s Platt. “They are also taking shrewd advantage of the frothy abundance of debt capital chasing AI deals at rates that likely do not reflect the level of risk.”

Write to Adam Clark at adam.clark@barrons.com