Microsoft has ended an agreement to lease artificial intelligence infrastructure at Nscale Global Holdings Ltd.'s planned data center in Loughton, Essex, a cancellation that threatens the British neocloud startup's plans for a U.S. initial public offering. The Telegraph reported the termination this weekend. Nscale had already faced repeated construction delays at the site, and U.K. grid officials told the company they could not supply adequate power there until the 2030s, according to the report. Microsoft is Nscale's largest customer.
Nscale said its relationship with Microsoft remains strong and long-term and that the grid issue does not affect several other contracts it holds with the software giant. A company spokesperson said Nscale remains committed to both the Loughton project and the U.K., is exploring alternative power sources for the site, and is looking at other expansion locations in the U.K. The Loughton facility was announced in September 2025 alongside three other projects under a reported $24 billion contract with Microsoft. Those other sites, in Texas, Portugal and a second location in Norway, are all believed to still be on track.
For Loughton, Nscale had planned to install 23,040 Nvidia graphics processing units by the first quarter of 2027, providing an initial 50 megawatts of AI capacity, with room to expand to 90 megawatts. The project's future is now uncertain. The company is also dealing with construction problems at its other Norway facility, which has reportedly struggled with cooling system leaks, regulatory hurdles and a fire.
The Microsoft cancellation lands about a month after Nscale confidentially filed for an IPO with the U.S. Securities and Exchange Commission. The company has applied to list on the New York Stock Exchange under the ticker symbol NSCL and is reportedly seeking to raise $3 billion at a valuation of about $35 billion, above its private valuation of $15 billion. Microsoft and Anthropic PBC account for approximately 85% of Nscale's total contract value, according to its IPO filing, leaving the company with only two major customers.
Nscale is one of several neoclouds, specialized cloud infrastructure providers competing with hyperscalers such as Amazon Web Services, Microsoft Azure and Google Cloud. Others include CoreWeave Inc. in the U.S. and Nebius Group N.V. in Europe. Their expansion depends on securing billions of dollars to build data centers and buy equipment, leaving them exposed when delivery schedules slip or projects are canceled.
Signs of strain in AI infrastructure financing are mounting. CoreWeave's stock fell more than 25% last week on concerns about its financing needs, and the Financial Times reported growing investor nervousness over America's AI buildout. Australian firm Firmus Technologies Pty. Ltd. abandoned its own IPO plans after failing to attract sufficient demand, and Oracle Corp. has reportedly struggled to finance some data center projects, sending a force majeure notice last month to the developer of its planned New Mexico facility.
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