Nscale IPO plans may change: faces setback as major client Microsoft (MSFT.US) withdraws from UK data center agreement

According to Jinse Finance APP, it has been reported that Microsoft (MSFT.US) has withdrawn from a previously planned data center deal in the UK with artificial intelligence infrastructure provider Nscale, which could complicate the British company's initial public offering (IPO) plans. The agreement involved Nscale’s proposed data center in Loughton, Essex, where Microsoft was originally expected to serve as the anchor tenant.

The specific reason for Microsoft's withdrawal remains unclear, although the project had already faced delays and encountered difficulties in securing a power supply. It has been reported that Nscale has been informed the facility may not gain access to the electricity grid until the 2030s, casting doubt on its development timeline.

Nscale’s flagship data center in Norway is also about six months behind schedule, with only 6.4 megawatts of its planned 30-megawatt capacity currently operational.

These developments come as Nscale is preparing for an IPO that could take place as early as October, aiming to raise up to $3 billion. According to its IPO filing, Microsoft and Anthropic together account for roughly 85% of Nscale’s contracts, highlighting its heavy reliance on major tech clients. The loss of Microsoft as an anchor tenant could complicate Nscale's expansion plans and subject the company to greater investor scrutiny ahead of its listing.

Nscale stated that it remains committed to developing the Loughton project and is exploring alternative power sources and further opportunities to expand in the UK. The company maintains that its relationship with Microsoft remains strong and that the power supply issues will not affect other contracts.

This development comes at a time when investors’ concerns are rising over the financing needs and execution risks of artificial intelligence infrastructure projects. Shares of competing AI infrastructure provider CoreWeave (CRWV.US) fell approximately 25% last week due to concerns about its borrowing plans and data center financing.

Additionally, it is reported that Australian data center developer Firmus recently abandoned its planned IPO after failing to attract sufficient investor demand at the proposed valuation. These setbacks underscore the increasing pressure on AI infrastructure companies to prove the financial sustainability of their ambitious expansion plans.