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NBIS vs. MSFT: Which AI Infrastructure Stock Has More Upside?
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Key Takeaways
Nebius is expanding GPU capacity fast, lifting contracted power targets to 2.5 gigawatts by 2026.
NBIS won hyperscale deals with Meta and Microsoft, but rising costs and heavy capital spending hurt profits.
Microsoft is embedding AI across Azure and Copilot, boosting scale with massive global data center.
Artificial intelligence (AI) spending continues to accelerate, and investors are increasingly focused on the infrastructure powering this boom. From data centers and GPUs to cloud platforms optimized for AI workloads, the race to supply compute capacity is well underway. In this context, Nebius Group N.V. (NBIS - Free Report) and Microsoft Corporation (MSFT - Free Report) represent two very different ways to invest in AI infrastructure: one as a fast-growing pure play, the other as a dominant technology giant.
According to an IDC report, spending on AI infrastructure is expected to top $758 billion by 2029. This surge in AI-related spending supports both Microsoft and Nebius, but the impact is far from the same. The two companies operate on vastly different scales and follow different growth paths. So, for investors looking to make a smart move in the AI infrastructure space, which stock truly stands out?
Let’s analyze their fundamentals, growth opportunities, market challenges and valuation to assess which one presents a stronger investment opportunity.
The Case for NBIS
Nebius operates in a supply-constrained AI infrastructure market, with demand for GPU capacity far exceeding available power and data-center readiness. To take advantage of this imbalance, the company is accelerating the buildout of its platform. It has raised its contracted power target to 2.5 gigawatts by 2026 from its earlier 1-gigawatt goal. By the end of next year, Nebius expects between 800 megawatts and 1 gigawatt of fully connected capacity to be live.
On the last earnings call, management underscored the strength of demand visibility by highlighting two landmark hyperscale agreements: a five-year, $3 billion contract with Meta and a $17.4–$19.4 billion deal with Microsoft. Also, the company is enhancing its product portfolio through the launch of the Aether 3.0 cloud platform and Nebius Token Factory, an inference solution designed to efficiently run open-source AI models at scale.
For 2026, Nebius plans to expand existing data-center footprints in the U.K., Israel and New Jersey, while commissioning new facilities across the United States and Europe in the first half of the year. The company is also in the process of securing multiple large-scale sites, each capable of supporting several hundred megawatts of power, with a number of these locations expected to become operational before the end of 2026. Nebius is targeting $7–$9 billion in annual recurring revenue by 2026 and remains on track to exit 2025 with $900 million to $1.1 billion in ARR.
However, the company is facing challenges such as macroeconomic uncertainty, rising operating costs and substantial capital outlays. Third-quarter 2025, sales, general and administrative expenses surged 87% year over year, reflecting the cost burden of rapid expansion. For 2025, Nebius has increased its capital expenditure guidance sharply from $2 billion-$5 billion. Higher capital expenditure levels pose a risk if revenue growth fails to keep pace with the company’s capital intensity, particularly in an environment where AI demand may fluctuate amid competitive pricing pressures and evolving regulatory frameworks.
Nebius has tightened full-year revenue guidance to $500–$550 million, expecting results to land near the midpoint due to timing delays in bringing capacity online. While adjusted EBITDA is expected to turn slightly positive at the group level by year-end 2025, it will remain negative for the full year. Moreover, scaling aggressively (multiple data centers in various regions) involves execution risk.
The Case for MSFT
Microsoft has strategically embedded AI capabilities throughout its entire product ecosystem, from Azure AI services to Copilot features in Office 365 and Dynamics applications. The company's substantial investment in OpenAI provides exclusive access to leading-edge language models, creating a significant competitive moat in enterprise AI adoption. Microsoft monetizes AI through existing customer relationships, reducing customer acquisition costs while expanding revenue per user. The company's vast computing infrastructure and data resources create sustainable advantages in training and deploying AI models at scale, positioning Microsoft to capture substantial value as businesses increasingly prioritize AI implementation.
Microsoft plans to increase total AI capacity by more than 80% this year and nearly double its overall data center footprint over the next two years. The company recently unveiled the Fairwater facility in Wisconsin, which will scale to 2 gigawatts of power on its own, underscoring the sheer magnitude of its infrastructure ambitions. Microsoft has also deployed the world’s first large-scale cluster of NVIDIA GB300 GPUs, positioning Azure at the cutting edge of next-generation AI compute.
In December 2025, Microsoft unveiled $23 billion in new AI investments, highlighted by a $17.5 billion commitment in India, its largest investment ever in Asia and an additional $5.4 billion earmarked for Canada over the coming years. These large-scale regional investments underscore Microsoft’s strategic focus on expanding sovereign cloud infrastructure and scaling AI capacity to meet rapidly growing global demand.
For the second quarter of fiscal 2026, Microsoft expects total company revenues between $79.5 billion and $80.6 billion, representing growth of 14% to 16%. However, Microsoft is grappling with intense competition from AWS and Google Cloud, escalating regulatory scrutiny and mounting capital expenditure requirements for AI infrastructure. Long-term debt raises concerns amid rising interest rates, straining financial flexibility. Microsoft expects the fiscal 2026 capital expenditure growth rate to be higher than in fiscal 2025, driven by accelerating demand and a growing RPO balance.
NBIS & MSFT’s Price Performance
NBIS’ shares have plunged 15%, while MSFT stock has inched up 0.1% over the past month.
Image Source: Zacks Investment Research
Valuation for MSFT & NBIS
Valuation-wise, Microsoft seems undervalued while Nebius seems overvalued, as suggested by the VGM Score of B and the Value Score of F, respectively.
Image Source: Zacks Investment Research
In terms of Price/Book, NBIS shares are trading at 4.46X, lower than MSFT’s 9.98X.
How Do Zacks Estimates Compare for NBIS & MSFT?
Analysts have significantly revised their earnings estimates downward for NBIS’ bottom line for the current year.
Image Source: Zacks Investment Research
For MSFT, there is a marginal upward revision.
Image Source: Zacks Investment Research
NBIS or MSFT: Which is a Better Pick?
NBIS carries a Zacks Rank #4 (Sell) at present, while MSFT has a Zacks Rank #3 (Hold). Consequently, in terms of Zacks Rank, MSFT seems to be a better pick at the moment.
Image: Bigstock
NBIS vs. MSFT: Which AI Infrastructure Stock Has More Upside?
Key Takeaways
Artificial intelligence (AI) spending continues to accelerate, and investors are increasingly focused on the infrastructure powering this boom. From data centers and GPUs to cloud platforms optimized for AI workloads, the race to supply compute capacity is well underway. In this context, Nebius Group N.V. (NBIS - Free Report) and Microsoft Corporation (MSFT - Free Report) represent two very different ways to invest in AI infrastructure: one as a fast-growing pure play, the other as a dominant technology giant.
According to an IDC report, spending on AI infrastructure is expected to top $758 billion by 2029. This surge in AI-related spending supports both Microsoft and Nebius, but the impact is far from the same. The two companies operate on vastly different scales and follow different growth paths. So, for investors looking to make a smart move in the AI infrastructure space, which stock truly stands out?
Let’s analyze their fundamentals, growth opportunities, market challenges and valuation to assess which one presents a stronger investment opportunity.
The Case for NBIS
Nebius operates in a supply-constrained AI infrastructure market, with demand for GPU capacity far exceeding available power and data-center readiness. To take advantage of this imbalance, the company is accelerating the buildout of its platform. It has raised its contracted power target to 2.5 gigawatts by 2026 from its earlier 1-gigawatt goal. By the end of next year, Nebius expects between 800 megawatts and 1 gigawatt of fully connected capacity to be live.
On the last earnings call, management underscored the strength of demand visibility by highlighting two landmark hyperscale agreements: a five-year, $3 billion contract with Meta and a $17.4–$19.4 billion deal with Microsoft. Also, the company is enhancing its product portfolio through the launch of the Aether 3.0 cloud platform and Nebius Token Factory, an inference solution designed to efficiently run open-source AI models at scale.
For 2026, Nebius plans to expand existing data-center footprints in the U.K., Israel and New Jersey, while commissioning new facilities across the United States and Europe in the first half of the year. The company is also in the process of securing multiple large-scale sites, each capable of supporting several hundred megawatts of power, with a number of these locations expected to become operational before the end of 2026. Nebius is targeting $7–$9 billion in annual recurring revenue by 2026 and remains on track to exit 2025 with $900 million to $1.1 billion in ARR.
However, the company is facing challenges such as macroeconomic uncertainty, rising operating costs and substantial capital outlays. Third-quarter 2025, sales, general and administrative expenses surged 87% year over year, reflecting the cost burden of rapid expansion. For 2025, Nebius has increased its capital expenditure guidance sharply from $2 billion-$5 billion. Higher capital expenditure levels pose a risk if revenue growth fails to keep pace with the company’s capital intensity, particularly in an environment where AI demand may fluctuate amid competitive pricing pressures and evolving regulatory frameworks.
Nebius has tightened full-year revenue guidance to $500–$550 million, expecting results to land near the midpoint due to timing delays in bringing capacity online. While adjusted EBITDA is expected to turn slightly positive at the group level by year-end 2025, it will remain negative for the full year. Moreover, scaling aggressively (multiple data centers in various regions) involves execution risk.
The Case for MSFT
Microsoft has strategically embedded AI capabilities throughout its entire product ecosystem, from Azure AI services to Copilot features in Office 365 and Dynamics applications. The company's substantial investment in OpenAI provides exclusive access to leading-edge language models, creating a significant competitive moat in enterprise AI adoption. Microsoft monetizes AI through existing customer relationships, reducing customer acquisition costs while expanding revenue per user. The company's vast computing infrastructure and data resources create sustainable advantages in training and deploying AI models at scale, positioning Microsoft to capture substantial value as businesses increasingly prioritize AI implementation.
Microsoft plans to increase total AI capacity by more than 80% this year and nearly double its overall data center footprint over the next two years. The company recently unveiled the Fairwater facility in Wisconsin, which will scale to 2 gigawatts of power on its own, underscoring the sheer magnitude of its infrastructure ambitions. Microsoft has also deployed the world’s first large-scale cluster of NVIDIA GB300 GPUs, positioning Azure at the cutting edge of next-generation AI compute.
In December 2025, Microsoft unveiled $23 billion in new AI investments, highlighted by a $17.5 billion commitment in India, its largest investment ever in Asia and an additional $5.4 billion earmarked for Canada over the coming years. These large-scale regional investments underscore Microsoft’s strategic focus on expanding sovereign cloud infrastructure and scaling AI capacity to meet rapidly growing global demand.
For the second quarter of fiscal 2026, Microsoft expects total company revenues between $79.5 billion and $80.6 billion, representing growth of 14% to 16%.
However, Microsoft is grappling with intense competition from AWS and Google Cloud, escalating regulatory scrutiny and mounting capital expenditure requirements for AI infrastructure. Long-term debt raises concerns amid rising interest rates, straining financial flexibility. Microsoft expects the fiscal 2026 capital expenditure growth rate to be higher than in fiscal 2025, driven by accelerating demand and a growing RPO balance.
NBIS & MSFT’s Price Performance
NBIS’ shares have plunged 15%, while MSFT stock has inched up 0.1% over the past month.
Image Source: Zacks Investment Research
Valuation for MSFT & NBIS
Valuation-wise, Microsoft seems undervalued while Nebius seems overvalued, as suggested by the VGM Score of B and the Value Score of F, respectively.
Image Source: Zacks Investment Research
In terms of Price/Book, NBIS shares are trading at 4.46X, lower than MSFT’s 9.98X.
How Do Zacks Estimates Compare for NBIS & MSFT?
Analysts have significantly revised their earnings estimates downward for NBIS’ bottom line for the current year.
Image Source: Zacks Investment Research
For MSFT, there is a marginal upward revision.
Image Source: Zacks Investment Research
NBIS or MSFT: Which is a Better Pick?
NBIS carries a Zacks Rank #4 (Sell) at present, while MSFT has a Zacks Rank #3 (Hold). Consequently, in terms of Zacks Rank, MSFT seems to be a better pick at the moment.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.