1 of Jensen Huang's Favorite Artificial Intelligence (AI) Stocks Just Signed a Blockbuster Deal, and Investors Can't Get Enough of It

AI infrastructure firm Nebius Group (NASDAQ: NBIS), a company in which Nvidia (NASDAQ: NVDA) holds a stake, secured a multiyear agreement with Microsoft valued at $17.4 billion to $19.4 billion through 2031 for data center capacity. This landmark deal, which sent Nebius shares soaring nearly 50%, is projected to significantly boost its annual revenue run rate, potentially reaching $4 billion by late 2026, and has prompted analysts to raise price targets, anticipating further hyperscaler engagements and accelerating the company's market penetration in AI infrastructure.

Analysis

Nebius Group (NBIS) has secured a transformative multiyear agreement with Microsoft, valued at $17.4 billion to $19.4 billion through 2031, for AI-focused data center capacity. This single contract is poised to dramatically alter the company's financial trajectory, potentially adding approximately $2.9 billion in annual revenue and driving its total run rate toward $4 billion by 2026, a significant leap from the current guidance of up to $1.1 billion. The market's reaction, a nearly 50% surge in NBIS shares, reflects the deal's magnitude, which effectively validates Nebius's business model and renders previous financial estimates obsolete, as highlighted by a BWS Financial analyst who raised the price target to $130. The company's strategic position is strengthened by its relationship with Nvidia, which is both a key supplier of essential GPUs and an investor holding approximately 1.2 million shares. Despite a reported net loss of $175 million in the first half of 2025, Nebius maintains a strong balance sheet with $1.68 billion in cash and a low debt-to-equity ratio of 26%, providing flexibility to accelerate infrastructure expansion to meet contract demands. Pro-forma valuation, at an estimated 5.75 times projected 2026 revenue, appears reasonable within the high-growth AI sector, especially given CEO commentary suggesting a pipeline for similar hyperscaler deals.

Key Decisions for Investors

• The Microsoft contract significantly de-risks Nebius's growth profile and provides strong revenue visibility, suggesting that investors should evaluate the company as a key, emerging player in the AI infrastructure space, even after its recent stock appreciation.
• Monitor execution risk closely, particularly the timeline for bringing the New Jersey data center online, as this is critical to realizing revenue from the Microsoft deal and will be a key indicator of management's ability to scale operations.
• Given that CEO Arkady Volozh hinted at more large-scale agreements, any new hyperscaler partnerships should be considered a primary catalyst for further re-rating of the stock.
• While the long-term growth narrative is compelling, investors must weigh this against the company's current unprofitability and the inherent volatility of an early-stage stock in a rapidly evolving sector.