- Microsoft canceled a UK data center deal with Nscale, affecting the startup's IPO plans
- Nscale's Loughton project faces delays due to power constraints and grid issues in London
- Nscale is exploring alternative power sources and other UK expansion sites despite setback
Microsoft Corp. has pulled out of a UK data center deal with Nscale, the British neocloud firm said, marking a setback for the startup's initial public offering hopes.
Nscale didn't provide a specific reason for why the US tech giant had pulled the plug on the deal in Loughton, Essex, which has been contending with delays due to power constraints. Nscale's flagship site in Norway is also six months behind schedule, Bloomberg has reported, with only 6.4 megawatts of the intended 30-megawatt data center up and running.
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Microsoft's withdrawal comes as Nscale is seeking to raise as much as $3 billion in an IPO as soon as this month, which was already contending with investor jitters over the risks of the wider artificial intelligence buildout.
“We remain committed to both the Loughton project and the UK and we are exploring alternative power sources for the site, in addition to other expansion sites in the UK,” an Nscale spokesperson said in an emailed statement. “Our relationship with Microsoft remains strong and long-term, and this unfortunate London-wide grid issue has no impact on our other contracts.”
A spokesperson for Microsoft declined to comment.
Nscale relies on Microsoft and Anthropic for around 85% of its contracts, according to an IPO filing, and the former had been set to become the anchor tenant at Nscale's first British data center in Essex.
Nscale is one of the most prominent neoclouds, a new group of companies seeking to build huge computer complexes for AI. They want to cash in on the hundreds of billions of dollars big tech companies have pledged to spend on the technology and are a key part of the AI boom's supply chain.
The backdrop to Nscale's IPO ambitions has turned gloomier in recent days, with fellow neocloud CoreWeave Inc. in the spotlight last week after the co-founder said the company was exploring ways to borrow in investment-grade debt markets, where there are vast pools of money from insurers to tap.
Investors had already grown cautious of AI computing suppliers due to the tens of billions of dollars they and their customers are borrowing to finance the massive buildout of data center capacity.
CoreWeave shares plunged in the first three sessions of the week, then bounced back somewhat, before concern returned on Friday, leading to the the stock's worst week since November with a 25% drop.
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That also came in the wake of Australian data center company Firmus scrapping its plans for an IPO after the deal failed to garner enough support for the marketed share price.
Microsoft's withdrawal was first reported by the Telegraph newspaper.
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