Microsoft has cancelled a deal to lease computing capacity at Nscale's Essex data centre, citing power supply delays beyond 2030. The setback hits Nscale, which is targeting a New York IPO at a $35bn valuation and counts former Meta executives Sir Nick Clegg and Sheryl Sandberg as directors. The cancellation exposes broader vulnerabilities in the AI-focused neocloud sector, where long-term contracts depend on power, chips, infrastructure and upfront financing.
Nscale's contracted revenue exceeds $100bn, roughly 40 times its current active business, but relies on deploying 461,000 GPUs—20 times its current holdings. Contracts include termination rights tied to delivery milestones, with clients like Anthropic and Microsoft holding significant backlog influence. Despite risks being flagged in pre-IPO filings, Nscale's first-half 2026 revenue was $141mn, implying a full-year run-rate of $420mn.
Valuation comparisons to peers Nebius and Core Weave suggest a fair value of just over $6bn, far below the $35bn IPO target. Microsoft's retreat may shift demand to established data centre operators with existing capacity, benefiting hyperscalers like Space X.
Source: Financial Times Companies · Summarized by HeadlinesBriefing