Microsoft Tightens Oversight of Neocloud Data Centre Projects at Nebius, IREN and Nscale

People familiar with the matter described the changes to Bloomberg News on Thursday. They said Microsoft is also debating internally whether to sign any new contracts with neoclouds, the specialist operators that build GPU clusters and rent the capacity to large AI customers. A Microsoft spokesperson said that changing plans as circumstances change is a normal part of managing large infrastructure projects, according to accounts of the report. IREN declined to comment.

The neocloud business relies heavily on a small number of very large customers, and Microsoft has been one of the biggest. Any sign that it will rent less from third parties goes straight to these companies' revenue outlook. Shares of IREN and Nebius fell steeply after the report. Estimates of the losses during Thursday trading ranged from about 13% to about 20%, depending on the time. TipRanks put both stocks down about 17% in the afternoon, with IREN at roughly $18 and Nebius at about $118. CoreWeave also fell.

The report said the problems at IREN involve cabling at a data centre the company is developing for Microsoft in Texas. The two companies agreed last week to revise the timetable, and the project could finish weeks or months late. Microsoft inspectors also visited a Nebius site in New Jersey, which was recently fined $1 million for running generators without approval, TipRanks said, citing the Bloomberg report.

Microsoft's dealings with Nscale have already shrunk. It has decided not to use an option that would have more than doubled its agreement for an Nscale data centre in Texas. It also recently stopped being the anchor customer for Nscale's planned site at Loughton in Essex, after delays in connecting the site to the power grid pushed delivery back into the 2030s.

These supplier problems are already visible in Microsoft's spending. The company spent $45.2 billion on capital projects and finance leases in its most recent quarter. That was less than it had projected and less than Wall Street expected, and Microsoft blamed delays at third-party capacity providers for the gap. Finimize described the shift as Microsoft putting more weight on its own data centres and using outside capacity more selectively, rather than walking away from neoclouds altogether.

The report arrived on a day when US-listed AI infrastructure stocks were already falling after Democrats' gains in the midterm elections. Voters approved restrictions in most of the 45 data centre ballot measures held around the country, according to the tracker Data Centers on the Ballot. UBS analysts estimated that possible construction pauses could put roughly 30 percent of planned US data centre capacity additions in 2028 at risk. In Texas, where IREN's delayed project is located, governor-elect Gina Hinojosa has said she would pause new projects until lawmakers set rules for the industry.

Microsoft has not said publicly whether it will sign more neocloud contracts. The revised IREN timetable in Texas will be the first test of whether these suppliers can hit the dates Microsoft now expects of them.