Microsoft Cancels U.K. Data Center Deal, Clouding Nscale’s IPO Plans

The Loughton project had already been hit by repeated construction delays, and it was effectively derailed after U.K. grid officials told Nscale they would not be able to provide adequate power to the site until the 2030s, The Telegraph reported. Nscale had originally planned to install 23,040 Nvidia graphics processing units at the facility by the first quarter of 2027, providing an initial 50 megawatts of AI capacity. The company had also planned to expand the site to 90 megawatts if needed.

A spokesperson for Nscale told The Telegraph that the company’s relationship with Microsoft remains “strong and long-term” and said the grid issue has no impact on several other contracts it has signed with the software giant. “We remain committed to both the Loughton project and the U.K., and we are exploring alternative power sources for the site, in addition to other expansion sites in the U.K.,” the spokesperson said.

Nscale first announced the Loughton facility in September 2025 alongside three other projects as part of the reported $24 billion Microsoft contract. The other projects included sites in Texas and Portugal and a second facility in Norway, located close to an existing data center the company already operates. Those projects are all still believed to be on track, according to the report.

The cancellation also comes as Nscale faces construction problems at its other Norway facility. That site has reportedly struggled with cooling system leaks, regulatory hurdles and a fire.

The setback arrives just after Nscale confidentially filed for an IPO with the SEC. It has applied to list on the New York Stock Exchange under the ticker symbol NSCL and is reportedly hoping to raise $3 billion at a valuation of around $35 billion, well above its private valuation of $15 billion. The loss of the Loughton facility is likely to make investors more skeptical about the offering.

Microsoft is one of only two major customers Nscale currently has. Microsoft and Anthropic PBC account for approximately 85% of Nscale’s entire contract value, according to its IPO filing.

Nscale is one of a group of so-called neoclouds, specialized cloud infrastructure providers that compete with hyperscalers such as Amazon Web Services, Microsoft Azure and Google Cloud. Other well-known neoclouds include CoreWeave Inc. in the U.S. and Nebius Group N.V. in Europe. Their expansion plans depend heavily on securing billions of dollars in funding to build data centers and procure equipment, leaving them vulnerable when delivery schedules slip or projects are canceled.

Despite efforts by Nvidia Corp. to create new avenues for Wall Street to finance AI infrastructure, there have been signs that securing financing has become more difficult. CoreWeave’s stock fell more than 25% last week on concerns over its financing needs. The Financial Times reported at the weekend that investors were growing nervous about America’s immense AI infrastructure buildout, which many believe is propping up the broader U.S. economy. Last week, Australian firm Firmus Technologies Pty. Ltd. abandoned its own IPO plans after failing to attract sufficient demand from prospective investors, and there have been recent reports that even Oracle Corp. has struggled to finance some of its data center projects.