Nscale's IPO to Test Investor Appetite for Concentrated AI Bets

The company has accumulated more than $103 billion worth of contracts since it was spun out of Australian cryptocurrency mining company Arkon Energy two years ago, according to its IPO filing. About 85% of that total comes from two agreements: a deal to supply Microsoft with $43.8 billion worth of compute through 2033, and a $44.6 billion supply agreement with Anthropic.

Anthropic’s agreement is conditional on Nscale obtaining financing, and the AI lab can walk away from or cancel the deal if Nscale fails to meet milestones that the filing describes as “stringent,” TechCrunch AI reported. The filing makes clear that Nscale’s revenue is tied primarily to two customers.

That concentration reflects broader links across the AI industry. A paper by credit hedge fund Sona Asset Management, featured in the Financial Times, found that many AI infrastructure providers depend on a limited number of customers. Nscale competitor CoreWeave generates 67% of its revenue from Microsoft, while data center builder Applied Digital derives 67% of its revenue from Oracle and 30% from CoreWeave, according to the paper. Sona noted that such interconnectedness is not necessarily bad, but it warned that a single setback or strategic shift by a major player could easily affect the entire industry.

Nscale expects to be valued at $35 billion in the listing, the Financial Times reported, and is seeking to raise $3 billion in the offering, according to Bloomberg. The company reported revenue of $140.6 million for the six months ended June 30, up from $10.4 million a year earlier. Its net loss widened to $1.02 billion from $369 million in the same period.

Earlier this month, Nvidia, a major Nscale investor, agreed to provide the company with $1 billion in convertible debt as part of a larger $3.1 billion financing deal. Nscale was valued at $14.6 billion when it raised a $2 billion Series C led by Aker ASA and 8090 Industries. Its competitors include CoreWeave, Nebius, Lambda and Crusoe. Crusoe said last week that it raised $3.9 billion at a $30.9 billion valuation.

Nscale operates data centers in Norway, Portugal, Texas and West Virginia. Its board includes former Meta executives Sheryl Sandberg and Nick Clegg, as well as former OpenAI executive Fidji Simo.

Editor's Summary

Nscale’s planned NYSE listing will test whether public investors accept an AI infrastructure company whose revenue is concentrated in two customers, Microsoft and Anthropic. The company has signed more than $103 billion in contracts but reported a widening net loss and faces financing conditions on part of its Anthropic agreement. Its IPO comes as AI infrastructure providers increasingly rely on a small number of large customers.