Nscale raises $3.36B in convertible notes ahead of planned IPO

The money will arrive in two tranches. Nscale expects to receive $2.26 billion in the near future from a consortium that includes Third Point, Apollo, Citadel and more than a dozen other institutional investors. Nvidia Corp. will provide the remaining $1 billion in mid-November.

"This marks a milestone for Nscale as we continue scaling our full-stack AI infrastructure to meet unprecedented global demand," founder and Chief Executive Officer Josh Payne said. "With the backing of these world-class investors, we are strongly positioned to accelerate our data center buildouts globally."

Nscale reportedly hopes to raise $3 billion in the listing at a $35 billion valuation, according to SiliconANGLE. Convertible notes are short-term debt instruments that investors can exchange for stock.

The company's pitch to Wall Street rests on more than $103 billion in total contracted value, or TCV, a metric that forecasts future revenue from data centers. Nscale expects most of that revenue to come from contracts with Microsoft Corp. and Anthropic PBC.

Nscale builds AI data centers with what it describes as a vertically integrated approach, designing and constructing not only the facilities themselves but also the supporting power infrastructure. In West Virginia, the company is building an AI campus with an on-site microgrid that will be capable of generating 2 gigawatts of power when it comes online in early 2028. The facility will also be equipped with energy storage infrastructure to offset potential fluctuations in the microgrid's generation capacity. According to Nscale, the West Virginia campus will not draw any electricity from the public grid.

The company's data center network includes 16 other sites. Nscale owns five of the campuses while the rest are operated by partners. Its IPO prospectus states that the construction strategy prioritizes locations where electricity prices are often approximately 70% lower than major U.S. power markets.

Custom software development is another focus of Nscale's technical roadmap. The company said last month that it has built an AI tool to automatically troubleshoot issues in its graphics card clusters. When recovering a server requires physical repairs, the software identifies which specific part needs to be fixed and how. In June, Nscale acquired Anyscale Inc. for $1.65 billion to enhance its software capabilities, buying a platform designed to improve the efficiency and reliability of AI clusters. Some of the proceeds from the new financing could be used for additional acquisitions.