Neocloud operator Nscale’s IPO plans could be in jeopardy after Microsoft canceled the UK data center project

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

According to a report in The Telegraph, Microsoft has today terminated an agreement to lease artificial intelligence infrastructure at the company’s planned facility in Loughton, Essex. The project, which had already suffered repeated construction delays, was effectively doomed to failure after British network operator Nscale announced that it would only be able to supply the site with sufficient electricity in the 2030s.

The termination of the contract comes at a time when Nscale is also facing construction problems at another site in Norway. This site reportedly struggled with cooling system leaks, regulatory hurdles and a fire.

An Nscale spokesperson told The Telegraph that the company’s relationship with Microsoft remains “strong and long-term” and stressed that the network issue does not impact several other contracts the company has signed with the Windows software giant. “We remain committed to both the Loughton project and the UK and are exploring alternative energy sources for the site alongside other expansion sites in the UK,” the spokesperson said.

Nscale announced the facility in September 2025 along with three other projects as part of a $24 billion deal signed with Microsoft. Other projects included locations in Texas, Portugal and a second facility in Norway, located near an existing data center the company already operates. It is assumed that these projects are all still on track.

However, the future of the Loughton facility is now uncertain. Nscale originally announced plans to install 23,040 Nvidia GPUs at the site by the first quarter of 2027, which would have initially provided 50 megawatts of AI capacity. There were also plans to expand this to 90 megawatts if necessary.

$MSFT Microsoft has terminated an AI data center contract with Nvidia-backed company Nscale in the UK 🤖❌

The facility was expected to house around 23,000 Nvidia GPUs, but power 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 initial public offering with the U.S. Securities and Exchange Commission. The company has filed 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 above its private valuation of $15 billion. But with the loss of the Loughton facility, investors will be much more skeptical about betting on Nscale.

One reason investors are nervous is that Microsoft is one of only two large customers that Nscale currently has. According to the IPO filing, Microsoft and Anthropic PBC account for about 85% of Nscale’s total contract value.

Nscale is one of a number of so-called neoclouds, which are specialized cloud infrastructure providers that compete with hyperscalers such as Amazon Web Services Inc., Microsoft Azure and Google Cloud. Other well-known Neoclouds include CoreWeave Inc. in the USA and Nebius Group NV, which has a very strong presence in Europe.

They have become a popular bet among investors looking to capitalize on the AI ​​boom, but their expansion plans rely heavily on their ability to secure billions of dollars in funding to build the data centers and procure the equipment they house. This makes them extremely vulnerable if delivery schedules are postponed or projects are canceled.

Despite Nvidia Corp.’s best efforts to give Wall Street new ways to fund AI infrastructure construction, there are signs that securing funding has become more difficult. CoreWeave shares fell more than 25% last week on concerns about its financing needs. Over the weekend, a Financial Times report warned of investors’ growing nervousness over the huge buildout of AI infrastructure in the US, which many believe will underpin the broader US economy.

The US’s debt-laden $10 trillion AI infrastructure boom is showing cracks as project delays, public backlash and weak investor confidence make a reckoning with data center expansion the bedrock of the US economy pic.twitter.com/b8kRAMKvXL

— Financial Times (@FT) October 18, 2026

Last week, Australian company Firmus Technologies Pty. Ltd. canceled its own IPO plans after failing to attract enough demand from potential investors. In recent weeks there have been reports that even Oracle Corp. had difficulty financing some of its data center projects. The database giant sent a “force majeure” notice to the developer of its planned New Mexico facility last month after reports that it was also having difficulty securing a power source.

Against this backdrop, Nscale’s planned IPO is sure to be a real test of investors’ appetite for even riskier bets, whose growth depends on an infrastructure that is still being built.

Image: Nscale