The report adds to pressure on AI infrastructure stocks already under strain, with CoreWeave’s sharp weekly fall showing investors are quicker to punish debt-funded buildouts. Nscale may face pressure to price its IPO more conservatively or delay it, and peers seeking capital could find the window narrower. For the energy complex, the story reinforces the view that grid capacity, not chips, is becoming the binding constraint on data centre growth. That supports utilities, independent power producers and gas-fired generation tied to data centre demand. For Microsoft itself, the move reads as capital discipline rather than a retreat from AI spending.
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Earlier:
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Nscale has lost its anchor tenant in Essex not for lack of AI demand but for lack of electricity, a costly lesson to learn days before asking investors for $3 billion.
Summary:
- Microsoft has pulled out of a deal to anchor Nscale’s first British data centre, in Loughton, Essex, the Telegraph reported
- No reason was given, but the site faces power connection delays reportedly stretching into the 2030s
- Nscale says its relationship with Microsoft remains strong and is exploring other power sources and UK sites
- Microsoft and Anthropic account for about 85% of Nscale’s contracts, according to its IPO filing
- Nscale is seeking to raise up to $3 billion in an IPO, possibly as soon as October
- Neocloud sentiment has soured, with CoreWeave down 25% last week and Australia’s Firmus scrapping its IPO
Microsoft has pulled out of a deal to anchor Nscale’s first British data centre, according to a report in the Telegraph, dealing a blow to the AI infrastructure company as it prepares a listing that could raise up to $3 billion as soon as this month.
Microsoft had been expected to be the main customer at the planned site in Loughton, Essex. No reason for the withdrawal has been disclosed, and Microsoft did not comment on the report, which was picked up by Bloomberg on Sunday. The project has, however, been dogged by repeated delays, and local authorities have reportedly warned Nscale that it may not secure a grid power connection until the 2030s.
Nscale said its relationship with Microsoft remained strong and long term, and that the power constraints in Essex would not affect its other contracts. The company said it is exploring alternative power sources and additional UK locations.
The timing is awkward. Nscale’s IPO filing shows Microsoft and Anthropic together account for about 85% of its contracts, leaving the company heavily exposed to two customers. Anthropic agreed in August to spend $45 billion on Nscale computing capacity over six years, and Microsoft has signed a letter of intent for a campus in West Virginia, so the Essex exit does not end the relationship. But it removes an anchor tenant from a flagship project just as investors scrutinise the company’s growth story.
Execution elsewhere has also lagged. Nscale’s flagship site in Norway is reportedly running about six months behind schedule, with just over 6 MW of a planned 30 MW in operation.
The setback lands as sentiment toward so-called neoclouds, specialist providers that lease AI computing capacity and often borrow heavily to fund construction, turns more cautious. CoreWeave shares fell 25% last week, their steepest weekly drop since November, while Australian developer Firmus abandoned its planned listing after failing to draw enough investor demand at its target valuation.
The episode also highlights a growing constraint on the AI buildout: access to electricity. Demand for data centre capacity remains intense, but projects that cannot secure timely grid connections risk losing customers regardless of how much hyperscalers plan to spend.
Nscale’s IPO pricing will now be a test of whether investors view the Essex setback as an isolated power problem or as a warning about execution risk across the sector.
This article was written by Eamonn Sheridan at investinglive.com.
