Nebius turns Nvidia's stake into $5.75bn of debt

When a company that posted a $21 million adjusted EBITDA loss a year ago can borrow $5.75 billion in a single convertible bond sale, the market is underwriting the conversion option rather than the coupon. Nebius Group closed that trade this week with two series of senior convertible notes—0.5 percent due 2030 and 4.5 percent due 2034—privately placed with qualified institutional buyers. The Nasdaq-listed European AI cloud said the net proceeds will fund data center construction, AI cloud development, expansion of its data center footprint, procurement of key components including GPUs, and general corporate purposes.

Initial purchasers exercised their options in full, adding $450 million to the 2030 notes and $300 million to the 2034s, with demand across both maturities. The coupons split four points apart: the 2030 notes carry 0.5 percent because the conversion option is doing the work, while the 2034 notes carry 4.5 percent because real duration risk finally arrives. Convertible debt is a warrant on execution, and the warrant is cheaper near at hand than far away.

Concurrent with pricing, Nebius entered into privately negotiated exchange agreements with a limited number of holders of its 2 percent notes due 2029 and 3 percent notes due 2031, swapping $400 million of each for approximately 15.8 million Class A ordinary shares—replacing old convertible paper with equity before the larger new layer lands. That exchange caps a month of rapid capital formation: Nebius secured $775 million in debt financing less than a month ago, and in March it launched a $4 billion convertible offering split into two series while Nvidia put $2 billion into the company. The sequence leaves a small, fast-growing AI cloud borrowing at a growth-stock coupon on the strength of the Nvidia association.

PWD has argued that the digital infrastructure capital stack rewards assets with a hyperscale anchor; everything else fights for capital. Nebius is the boundary case: it lacks hyperscale but carries a $2 billion Nvidia investment, a revenue curve up 454 percent, and now $5.75 billion of convertible debt. The short-dated coupon prices the near-term risk like infrastructure, and the long-dated coupon is the market reminding everyone that an AI cloud is still a growth equity at the back end.

None of this matters if the load cannot get connected; for noteholders, the bottleneck has shifted from land and chips to electrons. The note proceeds can order GPUs; they cannot order interconnection capacity. Nebius's stated use of proceeds includes expanding its data center footprint, which in practice means finding sites with power, not just roof space. The calendar for AI data centers is now set by utility queues and state power politics, rather than by funding.

Nebius's own numbers show why the capital matters and why the constraint matters: second-quarter revenue came in at $582.3 million, up 454 percent from the same quarter a year earlier, and adjusted EBITDA swung from a $21 million loss to a $236.2 million profit. That pace outruns internal cash generation, so external capital buys the GPU inventory and the land while the power queue decides whether that inventory produces revenue.

Nebius is not the only Nvidia-adjacent cloud company testing the capital markets. Earlier this month, Starcloud raised $250 million at terms tying a $2.3 billion valuation to Nvidia's not-yet-shipped Vera Rubin. The Nvidia affiliation enlarges the funding window without removing the execution risk. In Nebius's case, the window is open because the revenue curve is steep and the conversion story is credible—exactly when a company should issue five and a half billion dollars of convertible notes.

The exchange of old notes for shares is the quiet part of the deal: it shrinks the maturity wall before the new notes arrive, and it gives the holders who converted a position that moves with the equity rather than against it. Converting old debt into equity before a $5.75 billion new issue only makes sense if the equity is expected to be worth more, and the 0.5 percent coupon on the 2030 notes is the market agreeing.

The 2034 notes at 4.5 percent price in the possibility that the current GPU cycle may not pay the bills. The 2030 notes mature before the 2034 notes, and the four-point coupon spread is the market's answer to a question Nebius has not yet answered: what a neocloud's cash flows look like after that cycle. The $5.75 billion gets Nebius to the front of the GPU queue. The power queue is a different line, and no coupon jumps it.