Nscale Loses Microsoft Before Its I.P.O., and Its Valuation Wobbles
Trending Topics Jakob Steinschaden
Microsoft has walked away from Nscale’s first UK data center. That leaves its IPO pitch shakier just as investors argue over the price.
Based on reporting by Trending Topics, Jakob Steinschaden — read the original for the full story.
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Microsoft has pulled out as the anchor tenant for Nscale’s first British data center in Loughton, England. The site in Essex was supposed to host 23,000 Nvidia A.I. chips for Microsoft, and it was the only customer Nscale had announced there. The project now looks far less solid than it did when the deal was tied to billions Microsoft pledged to invest in Britain last year.
The timing is brutal. Grid operators have told Nscale they do not expect to provide power until the 2030s, The Telegraph reported, even though the data center was originally meant to go live next year. Microsoft declined to comment. Nscale says it remains committed to Britain, is looking at alternative power sources, and still sees its relationship with Microsoft as strong and long-term. It also says the London-wide grid problem does not affect its other contracts.
That matters because Microsoft accounts for more than 40 percent of Nscale’s total order backlog, according to The Telegraph. Its other major customer is Anthropic. And this is already the company’s second British setback this year: in the spring, OpenAI dropped a planned “Stargate” data center in northeast England, blaming high electricity prices.
All of this hangs over Nscale’s planned New York listing. The company filed its I.P.O. prospectus with the S.E.C. in September and wants to trade on the New York Stock Exchange under NSCL. It had been targeting a valuation of about $30 billion, but Bloomberg reported that some investors think $16 billion to $19 billion is more realistic. In its last private round, Nscale was valued at $14.6 billion. The numbers in the prospectus do not help: first-half revenue was $140.6 million, net loss about $1 billion, and while the backlog is $103 billion, only $2.6 billion of that is already running.
Nscale is not the only neocloud getting a reality check. Firmus, the Australian data center operator, recently scrapped its I.P.O., and The Information says industry executives expect only seven to 10 of the hundreds of these A.I. infrastructure outfits to survive. Nvidia is backing many of them, including Nscale, but backing is not the same as electricity.
My take — AI-written commentary, not fact-checked reporting
This is the classic A.I. infrastructure trap: a giant backlog on paper, a bottleneck in the real world. Neoclouds are turning into the telecom stocks of this cycle, except with more power bills and fewer excuses. A signed contract is nice; a signed contract with no grid connection is just stationery.
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