Microsoft has lost both its power supply and its anchor tenant as the tech giant exits Nscale’s first UK data center in Loughton, England. The withdrawal deals a major blow to Europe’s most promising AI infrastructure startup just as it prepares for a New York IPO.
Nscale had secured Microsoft as its only announced customer at the Essex facility, where the software company planned to rent 23,000 Nvidia AI chips. That commitment formed part of billions Microsoft pledged to invest across Britain following President Trump’s state visit last year.
However, grid operators recently informed Nscale that electricity would not reach the site until the 2030s, pushing the original next-year launch timeline far beyond viability. Microsoft declined to comment on the decision.
Nscale insists it remains dedicated to the UK project and continues exploring alternative power solutions. The company characterizes its Microsoft relationship as strong and long-term while noting the London-area grid constraint does not impact other contracts.
That relationship carries enormous weight. Microsoft reportedly represents over 40 percent of Nscale’s total order backlog, with Anthropic serving as its other major customer. The Loughton setback marks Nscale’s second British disappointment this year, after OpenAI scrapped a planned Stargate facility in northeast England this spring over high electricity costs.
The timing compounds the problem. Nscale filed its IPO prospectus with the SEC in September and intends to list on the New York Stock Exchange under ticker NSCL. Initial targets pointed toward a $30 billion valuation, but investor pushback now suggests $16 billion to $19 billion appears more realistic, according to Bloomberg.
The company’s own financials explain the skepticism. First-half revenue reached $140.6 million against a net loss near $1 billion. While the order backlog totals $103 billion, only $2.6 billion comes from operational contracts. The rest represents capacity yet to be constructed. Loughton demonstrates precisely that risk: signed agreements mean little without available power.
Nscale’s struggles reflect broader sector turbulence. Australian operator Firmus recently canceled its IPO, and industry executives predict only seven to ten of hundreds of AI-focused neoclouds will survive. Nvidia, which backs many through credit arrangements, also holds an investment in Nscale.
Despite the setbacks, Nscale retains influential supporters. Jensen Huang effusively praised the company at a London event, while board members include former Meta executives Sheryl Sandberg and Nick Clegg. Whether that backing proves sufficient remains uncertain as SEC review continues and marketing efforts have yet to formally begin.
