NBIS vs. MSFT: Which AI Infrastructure Stock is the Better Buy?

Core Insights - Nebius Group N.V. (NBIS) is emerging in the AI infrastructure market, while Microsoft Corporation (MSFT) is a well-established leader with its Azure cloud platform, the second-largest globally after AWS [1][2] Company Overview - Nebius is based in Amsterdam and focuses on AI infrastructure, offering an AI-powered cloud platform for intensive AI and ML workloads, leveraging NVIDIA's Reference Architecture [3] - Microsoft, with its Azure platform, has a global data center presence and is investing in custom AI chips, enhancing its competitive position in the cloud market [8][9] Market Trends - The AI infrastructure market is rapidly growing, with spending expected to exceed $200 billion by 2028, benefiting both Microsoft and Nebius, albeit unequally [2] - Microsoft has a significant advantage due to its exclusive partnership with OpenAI, hosting all workloads on Azure and integrating AI models into its services [10][11] Financial Performance - Nebius targets a revenue run rate of $750 million to $1 billion for 2025 and raised $700 million in a private placement, ending Q4 2024 with $2.4 billion in cash [6] - Microsoft reported cloud revenues of $40.9 billion, growing 21%, with Azure services growing 31%, including a 157% increase in AI services [12] Growth Strategies - Nebius is expanding its data center footprint in the U.S. and Europe, with new facilities in Kansas City and New Jersey, aiming to meet rising demand for AI infrastructure [4][5] - Microsoft continues to enhance Azure's capabilities and customer base, with over 60,000 Azure AI customers [11] Stock Performance - Both companies have faced stock declines due to tech sell-offs, with MSFT down 3.1% and NBIS down 17.9% [13] - Valuation metrics indicate that both companies are overvalued, with NBIS trading at 1.52X Price/Book compared to MSFT's 9.13X [14] Analyst Estimates - Analysts have revised earnings estimates downward for NBIS, while MSFT has seen only marginal downward revisions [17][19] - Currently, Microsoft holds a Zacks Rank 3 (Hold), while Nebius has a Zacks Rank 4 (Sell), indicating a stronger investment case for Microsoft [20]