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Microsoft has reportedly pulled out of a planned data center deal with the British AI cloud company Nscale, and the Nscale Microsoft deal matters because Nscale is trying to go public. The Daily Telegraph reported on October 18 that Microsoft ended its agreement to anchor a site in Loughton, Essex. Microsoft hadn’t commented when Reuters asked. Nscale says its relationship with Microsoft “remains strong and long-term.” The company filed last month for a New York Stock Exchange listing at a valuation of up to $35 billion.
This article explains what was reported, how big the Nscale Microsoft deal was, why customer concentration is the real issue behind the IPO, and what to watch next.
What was reported about the Nscale Microsoft deal
According to Reuters’ summary of the Telegraph story, Microsoft is one of Nscale’s two largest customers and recently terminated its agreement for the Loughton site. AI Weekly’s write-up adds that Microsoft was to rent 23,000 Nvidia AI chips there, and that the cancellation leaves the facility without its only announced customer. The Telegraph did not report a reason from Microsoft. Another summary says the likely cause is power, because grid operators reportedly told Nscale the site may not get a connection until the 2030s.
Nscale’s response was a defense. A spokesperson blamed what it called “this unfortunate London-wide grid issue,” said the problem has no effect on its other contracts, and said it remains committed to Loughton and the UK. It is exploring other power sources for the site. The deal’s dollar value hasn’t been disclosed. Startup Fortune says Loughton was central to Microsoft’s £22 billion UK AI investment pledge, announced during a state visit in 2025.
One caution. Microsoft has not confirmed the report, and the details come from a newspaper account relayed by others. Two things remain unclear: the final status of the Loughton contract, and whether Microsoft’s wider relationship with Nscale is untouched.
For readers new to the company, Nscale is an Nvidia-backed firm that sells computing power, data center space and software for training and running AI models. Reuters lists CoreWeave, Nebius, Crusoe and Lambda as rivals, and says Nscale’s total contracted value grew from $100 million to more than $103 billion in about two and a half years. That is a very fast climb, which is exactly why investors are asking how much of it is firm.
Why the Nscale Microsoft deal matters for the IPO
Nscale’s own filing makes the stakes clear. Computing reports that in the first half of 2026 Nscale had revenue of $140.6 million and a net loss of $1.02 billion. Only about 7 megawatts of capacity were running in its own data centers at the end of August, plus 48 in rented space. Its contracted backlog is $103 billion, but only $2.6 billion of it covers facilities already running. The remaining $101 billion depends on capacity that hasn’t been built yet.
One unnamed customer accounted for 52 percent of first-half 2026 revenue. That’s why customer concentration matters. Startup Fortune says Microsoft accounted for about 73 percent of Nscale’s 2025 revenue, and that Microsoft and Anthropic together make up roughly 85 percent of the backlog. When one buyer is that large, losing even one site can change how investors see the whole book.
There are signs investors were already cautious. Bloomberg reported on October 18, as summarized by AI Weekly, that investors want Nscale to price its IPO at $16 billion to $19 billion, against the $30 billion to $35 billion it is seeking. By our arithmetic, that range is only about 10 to 30 percent above the $14.6 billion valuation of its March funding round. The same summary says Nscale’s flagship Norwegian site runs at 6.4 megawatts against a 30-megawatt target.
Power is the bottleneck
The Nscale Microsoft deal is a reminder that AI buildouts depend on electricity as much as chips. Nvidia is also deeply tied in: Computing says it has invested more than $2 billion in Nscale, including $1 billion in convertible notes this month, and guarantees $860 million of lease obligations for a Texas site. A data center can be designed and financed quickly, but a grid connection can take far longer. Nscale says it is looking at alternative power, and its largest project, the Anthropic campus in West Virginia, includes a 2-gigawatt gas plant in the plan, according to Computing.
That West Virginia deal is large too. Anthropic agreed in August to a lease worth about $45 billion, per Computing, but the IPO coverage says it hasn’t yet secured formal financing commitments. For more on the financing side of the AI boom, see our piece on how CoreWeave’s debt insurance hit a record. Our report on Anthropic’s profit claim and its IPO paperwork covers the customer side.
What to watch next
Five things are worth tracking. First, whether Microsoft comments, and whether it keeps its other Nscale contracts, including sites in Texas and Portugal. Second, whether Nscale prices its IPO, which was reportedly aimed at raising up to $3 billion as early as this month, and at what valuation. Third, whether the Anthropic financing firms up. Fourth, whether other AI data center projects run into the same grid delays, or whether the Nscale Microsoft deal turns out to be a one-off.
Fifth, what Nscale says about alternative power for Loughton. A credible on-site or off-grid plan could bring the project back, while silence would suggest it is stalled for years. The company says it is exploring options, but it has not named any. This is general information, not investment advice.
Editor’s take
The Nscale Microsoft deal is a small cancellation attached to a large question. The question isn’t whether AI demand exists. It’s whether a company with a $1 billion half-year loss, two customers and a lot of unbuilt capacity deserves a $30 billion price tag. Investors have already hinted at their answer. If Microsoft keeps its other contracts and Nscale finds power, the Loughton episode will look like a hiccup. If more sites stall, it will look like the first crack.
