Microsoft Walks Away From Nscale Texas Data-Center Deal
Microsoft rejected an option to more than double its Nscale contract for Texas data-center compute, walking away from a deal worth tens of billions, the FT reported.
Microsoft has rejected an option to more than double the size of its existing agreement with Nscale to rent computing power at a data center site in Texas, the Financial Times reported Thursday, citing people familiar with the matter. The decision walks Microsoft away from a potential deal worth tens of billions of dollars.
The report comes weeks after Microsoft pulled out of a deal to anchor Nscale's flagship data center project in Loughton, Essex, after power connection delays pushed its expected supply date into the 2030s, according to Reuters. Nscale, which is backed by Nvidia, filed for a US initial public offering in September, with Microsoft and Anthropic expected to be among its major customers. Reuters reported last month that Nscale was in talks to sell AI computing power to Anthropic in a deal that could be worth about $45 billion.
Microsoft and Nscale did not immediately respond to requests for comment outside business hours, and Reuters said it could not immediately verify the report. Nscale has said its relationship with Microsoft remains strong and long-term.
Microsoft shares were up 6.68% in delayed trading at $555.80. For Nscale, the loss of a second Microsoft commitment raises questions about its IPO plans and its reliance on a small set of customers: Microsoft and Anthropic account for roughly 85% of Nscale's contract value, according to its IPO filing cited by SiliconANGLE.
What remains unclear is whether Nscale can replace the Texas capacity with another customer, and whether the IPO proceeds on schedule. The neocloud's expansion depends on securing billions of dollars in funding to build data centers and buy equipment, leaving it exposed if delivery schedules slip or projects are canceled.