Meta strikes $27B AI infrastructure deal amid computing race
What's the story
Meta has signed a major long-term agreement worth up to $27 billion with Dutch cloud provider Nebius. The deal is set to span five years and will significantly expand Nebius's role in the fast-growing AI cloud computing market. Following the announcement, shares of Nebius surged 14% in early trading.
Capacity details
Nebius to provide Meta with dedicated computing capacity
As part of the agreement, Nebius will provide $12 billion worth of dedicated computing capacity to Meta over the next five years. The infrastructure will be spread across multiple locations and include what the company says will be one of the first large-scale deployments of NVIDIA's new AI-specialist Vera Rubin chips. In addition, Meta has also committed to buying extra available compute capacity from Nebius worth up to $15 billion during this period.
Market growth
Nebius's rapid rise in the AI cloud computing space
Founded in 2022, Nebius has quickly become a major European player in the rapidly growing AI cloud computing space. The company has seen its share price increase by over 400% since listing in New York in 2024. "We are pleased to expand our significant partnership with Meta as part of securing more large, long-term capacity contracts to accelerate the build-out and growth of our core AI cloud business," said Arkady Volozh, founder and CEO of Nebius.
Analyst outlook
Citigroup initiates coverage of Nebius with buy/high risk rating
Citigroup has initiated coverage of Nebius with a buy/high risk rating. The bank's outlook is based on a "differentiated view on AI datacenter [total addressable market] growth, margin improvement and NBIS's capital-efficient scaling." This comes as part of a broader trend among major tech companies racing to expand infrastructure for the AI boom.
Tech investments
Meta and hyperscalers' skyrocketing AI-related capital expenditure
Meta expects its AI-related capital expenditure to hit between $115 billion and $135 billion this year. This is part of a combined $700 billion in spending by hyperscalers such as Amazon, Alphabet, and Microsoft. The move comes as investors continue to flock to the AI cloud computing sector.