Neocloud operator Nscale’s IPO plans could be at risk after Microsoft cancels U.K. data center project

Neocloud operator Nscale’s IPO plans could be at risk after Microsoft cancels U.K. data center project

British neocloud startup Nscale Global Holdings Ltd.’s plans to launch an initial public offering in the U.S. have suffered a massive setback after its biggest customer Microsoft Corp. pulled out of a critical data center deal this weekend.

A report in The Telegraph on Sunday said Microsoft has terminated an agreement to rent artificial intelligence infrastructure at the company’s planned facility in Loughton, Essex. The project, which had already been beset by repeated construction delays, has effectively been derailed after U.K. grid officials told Nscale they would not be able to provide adequate power to the site until the 2030s.

The cancellation of the deal comes at a time when Nscale is also experiencing construction problems at another facility in Norway. That site has reportedly struggled with cooling system leaks, regulatory hurdles and a fire. A spokesperson for Nscale told The Telegraph that the company’s relationship with Microsoft remains “strong and long-term,” and insisted that the grid issue has no impact on several other contracts it has signed with the Windows software giant. “We remain committed to both the Loughton project and the U.K., and we are exploring alternative power sources for the site, in addition to other expansion sites in the U.K.,” the spokesperson said.

Nscale first announced the facility in September 2025 alongside three other projects as part of a reported $24 billion contract it had signed with Microsoft. The other projects included sites in Texas, Portugal and a second facility in Norway, located close to an existing data center the company already operates. Those projects are all still believed to be on track.

However, the future of the Loughton facility is now up in the air. Nscale originally announced plans to install 23,040 Nvidia graphics processing units at the site by the first quarter of 2027, which would have provided an initial 50 megawatts of AI capacity. It also had plans to expand that to 90 megawatts if needed.

$MSFT Microsoft has canceled an AI data center deal with Nvidia-backed Nscale in the UK 🤖❌

The facility was expected to house around 23,000 Nvidia GPUs, but electricity may not be available until the 2030s.

Other deals between Microsoft and Nscale are not affected. pic.twitter.com/Fmeo7z04Ay

— The Future Investors (@ftr_investors) October 18, 2026

The setback comes at a difficult time for Nscale, just a month after the company confidentially filed for an IPO with the U.S. Securities and Exchange Commission. It has applied to list on the New York Stock Exchange under the ticker symbol NSCL, and is reportedly hoping to raise $3 billion at a valuation of around $35 billion, well in excess of its private valuation of $15 billion. But with the loss of the Loughton facility, many investors are going to be much more skeptical about betting on Nscale.

One reason for investors to be nervous is that Microsoft is one of only two major customers Nscale currently has. Microsoft and Anthropic PBC account for approximately 85% of Nscale’s entire contract value, according to its IPO filing.

Nscale is one of a number of so-called neoclouds, which are specialized cloud infrastructure providers that rival hyperscalers such as Amazon Web Services Inc., Microsoft Azure and Google Cloud. Other well known neoclouds include CoreWeave Inc. in the U.S. and Nebius Group N.V., which has a very strong presence in Europe. They have become popular bets with investors looking to capitalize on the AI boom, but their expansion plans are heavily dependent on being able to secure billions of dollars in funding to construct the data centers and procure the equipment that goes inside them. That leaves them extremely vulnerable should delivery schedules slip or projects end up being canceled.

Despite the best efforts of Nvidia Corp., which has tried to create new avenues for Wall Street to fund the AI infrastructure buildout, there have been signs that securing financing has become more difficult. CoreWeave’s stock fell more than 25% last week due to concerns over its financing needs. At the weekend, a Financial Times report warned of the growing nervousness investors have over America’s immense AI infrastructure build out, which many believe is propping up the broader U.S. economy.

Cracks are appearing in America’s debt-laden $10tn AI infrastructure boom as project delays, public backlash and shaky investor confidence bring a reckoning for the data centre build-out underpinning the US economy https://t.co/UkrO7uUUuO pic.twitter.com/b8kRAMKvXL

— Financial Times (@FT) October 18, 2026

Last week, the Australian firm Firmus Technologies Pty. Ltd. abandoned its own IPO plans after failing to attract sufficient demand from prospective investors. In recent weeks, there have been reports that even Oracle Corp. has struggled to finance some of its data center projects. The database giant last month sent a notice of “force majeure” to the developer of its planned facility in New Mexico, following reports that it was also struggling to secure a power source.

Against this backdrop, Nscale’s planned IPO is sure to become a real test of investor’s appetite for yet more risky bets whose growth depends on infrastructure that’s still under construction.

Image: Nscale