Key Points
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Nvidia announced a strategic partnership and $2 billion investment in neocloud operator Nebius Group.
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The pair will partner to deploy 5 gigawatts of data center capacity by 2030.
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Nebius is a high-risk, high-reward opportunity, and its valuation is pricey.
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In recent years, Nvidia (NASDAQ: NVDA) has become synonymous with artificial intelligence (AI). The company’s graphics processing units (GPUs) provide the computational horsepower that underpins AI and have become the gold standard for these applications. Nvidia has also been a prolific investor in the AI space, owning stakes in a wide variety of chipmakers, software developers, and infrastructure providers.
The company turned heads this week with the latest in a growing list of investments and strategic partnerships.
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In a press release that dropped on Wednesday, Nvidia announced a strategic partnership with neocloud provider Nebius Group (NASDAQ: NBIS) to “develop and deploy the next generation of hyperscale cloud for the AI market.” As part of the deal, Nvidia plans to invest $2 billion in Nebius, which the company says reflects Nvidia’s confidence in Nebius’s business and unique depth of engineering expertise across the full AI technology stack.”
The pair will collaborate to develop and build data centers to support Nebius’s cloud growth, with plans to create “multiple gigawatt-scale AI factories in the U.S.” The investment by Nvidia will help Nebius deploy more than 5 gigawatts of capacity by the end of 2030.
“Nebius is building an AI cloud designed for the agentic era, fully integrated from silicon to software and powered by Nvidia’s next-generation accelerated compute,” said Nvidia CEO Jensen Huang. “Together, we are scaling the cloud to meet the surging global demand for intelligence.”
Nebius is one of the emerging group of neocloud operators who stockpile cutting-edge chips and provide AI-centric cloud services, commonly called GPU-as-a-Service (GPUaaS). The company was worth just over $24 billion when the market closed yesterday, but news of its partnership with Nvidia has driven its shares up by 16% (as of this writing), pushing its market cap to $28 billion.
Earlier this month, Nebius received approval to break ground on the company’s largest AI factory to date, which will soon begin construction in Independence, Missouri.
Nebius and its larger rival, CoreWeave, have experienced explosive revenue growth, fueled by strong demand for AI. In late January, Nvidia struck a similar deal with CoreWeave, investing $2 billion to help the company build out 5 gigawatts of AI capacity by 2030. Sound familiar?
Nvidia has been investing heavily in a number of companies that buy its AI chips, prompting talk of circular deals fueling an AI bubble. This latest deal won’t do anything to silence the critics.
Nebius has been growing like wildfire, thanks to soaring demand for its AI-centric neocloud services. Its 2025 revenue of $530 million soared 479% year over year, while its operating loss of $596 million worsened by 49%.
Neocloud operators have sprung up to fill the gap between demand for AI services and the shortage of data centers needed to provide them. The largest cloud operators — including Amazon Web Services, Alphabet‘s Google Cloud, and Microsoft Azure — have all admitted to being capacity-constrained, with more demand for AI and cloud services than their existing data centers can provide.
As the major cloud operators struggle to meet the soaring demand for AI, the opportunity is ripe for neocloud operators to fill the void. That said, Nebius stock is currently trading for 43 times sales, a lofty valuation for a company with no profits. As such, Nebius is a high-risk, high-reward opportunity that should only be owned as a small part of a balanced portfolio.
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Danny Vena, CPA has positions in Alphabet, Amazon, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
