Microsoft reportedly decided not to exercise an option to more than double its agreement to rent computing power from AI cloud provider Nscale at its Texas data center.
The Financial Times first reported the news on Thursday, citing three people familiar with the matter. The outlet said losing the potential deal meant Nscale, where former Meta executive Sheryl Sandberg and former UK deputy prime minister Sir Nick Clegg sit as board members, could miss out on tens of billions of dollars in potential revenue unless it finds new customers for the capacity.
It marks a setback for the Nvidia-backed UK company, led by former Australian cryptocurrency miner Josh Payne, which is targeting a public listing later this year at a valuation of around $35 billion. The company filed for its initial public offering on Sept. 18 and was last privately valued at $15 billion.
Nscale said in its IPO filing that between September 2025 and April 2026 it signed agreements with Microsoft worth up to around $43.8 billion through December 2033, excluding optional extensions.
Microsoft previously withdrew from Nscale's UK data center project
It's not the first time Microsoft has pulled out of a deal with Nscale either. Last month, the tech giant reportedly backed out of a deal to anchor Nscale's first UK data center. Microsoft had agreed to rent 23,000 Nvidia AI chips at the site in Essex. The project had planned to come online next year but has faced repeated delays amid grid connectivity issues. Nscale has also run into delays at its flagship data center in Norway, reportedly leading to heavy penalties.
Microsoft's decision not to expand the Texas contract was made ahead of Nscale's IPO filing, Reuters reported, citing a person familiar with the matter, who added that Nscale's existing contract with Microsoft was not affected.
The decision also had no impact on Nscale's total disclosed contract value of about $103 billion, the person said, with the firm already in discussions with other customers for its Texas data center capacity.
The Latent reached out to Microsoft and Nscale for comment.