Microsoft Scraps UK Data Center Deal With Nscale, Telegraph Says

(Bloomberg) -- Microsoft Corp. has pulled out of a UK data center deal with British neocloud Nscale at a critical time for the startup's initial public offering hopes, the Telegraph reported.

The newspaper did not provide a specific reason for why the US tech giant had pulled the plug on the deal in Loughton, Essex, though it said the site has been contending with a series of delays. Authorities have told Nscale they don't expect a power supply to the facility until the 2030s, it added.

Nscale's flagship site in Norway is also six months behind schedule, with only 6.4 megawatts of the intended 30-megawatt data center up and running.

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.

Microsoft's withdrawal would mark a setback for the company that's seeking to raise as much as $3 billion in an IPO as soon as this month, and which was already contending with investor jitters over the risks of the wider artificial intelligence buildout.

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.

An Nscale spokesman told the Telegraph: "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.

"Our relationship with Microsoft remains strong and long-term, and this unfortunate London-wide grid issue has no impact on our other contracts."

Microsoft did not comment to the Telegraph and did not immediately respond to a request for comment from Bloomberg outside usual business hours.

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.