Microsoft Leases Billions in Nvidia GPUs to Sustain Azure AI Growth Amid Supply Constraints

Microsoft is making strategic sacrifices to maintain its dominance in the AI cloud race. The tech giant has signed a $17.4 billion deal with Nebius to secure critical GPU capacity from Nvidia, causing NBIS stock to surge 40% in Tuesday's trading session. This MOVE comes as Microsoft's in-house silicon production lags behind explosive demand for Azure AI services.

Cloud revenue tells the story: Microsoft's intelligent cloud segment grew 27% YoY to $46.7 billion last quarter. The constraint isn't customer demand—it's GPU supply. By front-loading capacity through third-party deals, Microsoft is prioritizing long-term market position over short-term margins.

The Nebius agreement serves as a stopgap while Microsoft develops its Maia and Cobalt processors. Investors appear to recognize the strategic calculus, with MSFT shares holding steady at $500 despite the margin pressure. In the AI infrastructure arms race, capacity now may justify the cost later.