Microsoft Declines Option to More Than Double Nscale's Texas Compute Deal, FT Says

The decision is a blow to the British AI infrastructure company as it prepares for a US initial public offering. Nscale, which is backed by Nvidia, filed for the listing in September, and Microsoft and Anthropic were expected to be among its biggest customers, Reuters reported. Neocloud operators like Nscale borrow heavily to build capacity for a small number of large tenants, so whether a hyperscaler takes up extra capacity bears directly on what investors will pay for the business.

Reuters said it could not immediately verify the FT's report. Microsoft and Nscale did not immediately respond to requests for comment.

It is the second time in a few weeks that Microsoft has stepped back from Nscale. Before the Texas decision, Microsoft withdrew from a deal to anchor Nscale's flagship data centre project in Loughton, Essex, after delays in connecting the site to the grid pushed expected supply into the 2030s.

Microsoft keeps the capacity it has already contracted in Texas. According to the FT, what it declined was the option to expand that commitment. Microsoft has not said why. The decision comes days after Microsoft linked lower-than-expected quarterly capital spending partly to delays in data centre capacity from third-party providers.

Nscale is looking for other large buyers. Reuters reported last month that the company was in talks to sell AI computing power to Anthropic in a deal that could be worth about $45 billion. Neither company has confirmed an agreement.

The timing matters for the listing. Investors in AI cloud providers tend to judge them by contracted backlog and customer concentration, and Microsoft's two pullbacks leave the Anthropic talks as the most closely watched deal in Nscale's pipeline before it sets terms for its offering.