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Microsoft deals fresh blow to Nscale’s $35bn IPO ambitions
Microsoft has declined an option to rent substantially more computing capacity at Nscale’s Texas data centre, leaving the British AI company seeking other customers for the space. The decision follows Microsoft’s withdrawal from a planned UK project and adds pressure on Nscale to show it can deliver the infrastructure behind its proposed $35bn New York listing.
Nscale’s existing Texas agreement for about 240 megawatts remains in place; the rejected option covered roughly 500 megawatts and could have brought tens of billions of dollars in future revenue. The move does not change its reported $103bn contracted backlog. Nscale is targeting more than twice the $14.6bn valuation it raised at earlier this year, despite reporting a $1bn net loss on $141m revenue in the first half of 2026; its other large projects have also faced delays.
In short
- Microsoft passed on extra Texas data centre capacity.
- Nscale’s current 240-megawatt agreement remains intact.
- The decision adds scrutiny ahead of a proposed $35bn IPO.
Steelman: both sides, in good faith
The strongest fair case each way — we don't pick a winner.
The case for
Microsoft’s decision may reflect prudent commercial discipline: committing to a further 500 megawatts would be a major long-term obligation, and a customer should expand only when its needs and the project’s readiness justify it. Nscale retains its existing Texas agreement and reported backlog, while finding other customers could diversify its business and demonstrate demand beyond one technology company.
The case against
Losing a potential anchor customer for such a large expansion raises legitimate questions about demand, execution and the assumptions behind Nscale’s proposed valuation. With major projects delayed and substantial losses reported, investors may reasonably doubt whether its contracted commitments will translate into delivered capacity and revenue, even though the existing Microsoft agreement and reported backlog remain unchanged.
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