Nebius Deal With Microsoft: Lessons for IREN and CoreWeave
Why Megawatts Don't Tell the Full Story
Across the market, investors are busy counting megawatts, trying to draw straight-line comparisons between companies like Nebius ($NBIS) and IREN ($IREN). On raw energy capacity, it’s easy to see why. With 2.91 GW of total contracted power and 810 MW of operational capacity, IREN has built one of the largest and lowest-cost energy footprints in the industry. It's a staggering advantage on paper.
But focusing only on megawatts is an outdated metric that misses the real story.
The recent Microsoft-Nebius deal is a perfect case study in this new reality. What the deal proves is that scale alone is not enough. The real differentiator is the ability to deliver contracted, high-value services for hyperscalers. If a company can prove it can guarantee GPU output, maintain uptime, and structure contracts at a massive scale, then financing will follow. Capital is never the bottleneck once that level of trust is established.
The total contract value is an astonishing $17.4 billion through 2031, with the potential to grow to $19.4 billion if Microsoft decides to acquire additional capacity. To put that in perspective, this single agreement is larger than the market cap of many established companies.
It's a strategic partnership where the GPU services will be deployed in tranches throughout 2025 and 2026. Crucially, the contract also provides the financing itself. The cash flow generated from the agreement will be used to finance a significant portion of the capital expenditure.
This is a powerful signal to investors: the deal is not just a promise of future revenue, it's the engine that will fund the company’s expansion. The trust from a partner like Microsoft has unlocked Nebius's ability to grow without relying solely on traditional capital markets.
That doesn't make a company's bare-metal infrastructure obsolete. On the contrary, cheap power and GPU hosting will continue to thrive because not every enterprise can secure a hyperscaler-level partnership. But the roadmap for success has fundamentally shifted.
Nebius has proven that winning multi-billion-dollar contracts is possible, and now the question for peers like IREN is how to move further up the stack to provide higher-value services beyond just raw infrastructure.
The actions of other market players underscore this evolution. CoreWeave ($CRVW), another key Microsoft partner, is expanding aggressively by acquiring software companies. They just acquired OpenPipe Inc., a developer platform focused on reinforcement learning (RL) for AI agents.
This move pulls them further into the software layer, offering tools that make RL accessible for developers to train agents on their own workflows. This is a very different business model from IREN's, but it highlights how quickly the field is evolving beyond simple hardware hosting.
The Software Layer
While it's tempting to focus on a direct comparison of energy capacity, Nebius’s numbers tell a more strategic story. The company is targeting 220 MW of connected power by the end of 2025, with a long-term goal of reaching 1 GW of total capacity by the end of 2026.
These figures, while impressive, are not the final metric. Instead, they serve as a roadmap—a clear indication that Nebius’s scaling is not based on a "build it and they will come" model. These megawatts are being strategically deployed and financed as part of a phased approach to fulfill large, high-value contracts. They are a consequence of the business model, not the goal itself.
IREN, for example, has built one of the largest physical footprints in the industry, with 810 MW of operational capacity and a massive 2.91 GW of total contracted power. Its core business model is rooted in its low-cost physical infrastructure. The value proposition is a raw, bare-metal advantage.
Plug And Play
The deal with Microsoft tells us that hyperscalers, or simply well-capitalized companies, are looking for plug-and-play services. They want a complete, all-in-one solution, which is why Nebius, with its long-standing investments in software, proved to be an ideal partner.
This represents a transition for Nebius into a new level of competition and, potentially, a threat to CoreWeave, whose relationship with Bill Gates' company has, according to some reports, deteriorated. It's plausible that this is precisely why CoreWeave has begun investing in platforms like OpenPipe.
Nebius operates not just as a hardware provider but as a technology ecosystem. The company has direct ownership or significant stakes in a number of complementary businesses that address different layers of the AI development stack:
ClickHouse: Provides high-performance database management for data analytics, a foundational component for AI workloads.
Toloka: An AI data solutions business that offers tools for training, evaluation, and data labeling.
Tripleten: An online education platform that generates a pipeline of skilled tech talent.
Avride: An autonomous driving platform that provides a real-world use case for AI infrastructure.
Nebius will generate around $2.5 billion annually from its Microsoft deal alone—a sum that's more than double the scale of IREN's most ambitious AI projects. CoreWeave, even with heavy leverage, is already running at roughly $5 billion in annualized revenue, albeit with a far more aggressive risk profile.
The conclusion is straightforward: counting megawatts alone no longer tells the full story. The winners will be those who can transform their physical capacity into reliable, contracted revenue streams and, over time, build high-margin software and services on top of their hardware.
For IREN, with its immense energy footprint and strategic pivot, the opportunity remains enormous. But the benchmark for success just moved higher.
This publication is for educational and informational purposes only and does not constitute financial, investment, or trading advice. Readers are solely responsible for their own investment decisions. The author may hold positions in the securities mentioned.







Great case for Nebius!