Microsoft Abandons Nscale's Loughton AI Data Centre Over Power Delays

Key points

• Microsoft cancelled its lease for Nscale’s Loughton site after it became clear the facility would not receive power until after 2030.
• The Loughton project was part of a £22bn UK investment and was set to deploy 23,000 Nvidia GB300 chips.
• Nscale, backed by Nvidia and former Meta executives, is targeting a $35bn valuation for a New York IPO this year.
• The UK grid operator, Ofgem, has pushed back connection dates for 315 data centres demanding 73GW of power.
• Nscale’s other major customer, Anthropic, has a $45bn deal that could also be at risk if delivery timelines are missed.

Background

This development follows Nscale’s recent $3.36bn pre-IPO funding round and its pivot from mining to AI infrastructure. It occurs amidst a broader wave of skepticism toward AI infrastructure valuations, exemplified by the recent withdrawal of Firmus Technologies from its Australian IPO. Additionally, local disputes over data centre land use in London, such as the Charlton proposal, underscore the growing tension between digital infrastructure expansion and urban planning.

How outlets are covering it

The Financial Times and The Guardian both report that Microsoft’s exit is a significant blow to Nscale’s IPO ambitions, noting that the company has lost its only publicly announced customer for the Loughton site. The Telegraph first reported the cancellation, while The Guardian had previously highlighted that the site was still an operational scaffolding yard in March. Nscale’s spokesperson frames the issue as a 'London-wide grid issue' that does not impact other contracts, whereas investors and analysts view it as a symptom of the heavy debt burdens and delivery risks facing the AI infrastructure sector, as seen in the recent share price drops of CoreWeave and Nebius.

Why it matters

The cancellation underscores the critical bottleneck of UK energy infrastructure, which is struggling to meet the power demands of the AI boom. It signals potential risks for other large-scale AI projects and may influence regulatory decisions regarding grid connection fees and timelines. For Nscale, the loss of an anchor tenant could jeopardize its ability to meet financing milestones for its planned IPO, reflecting broader market concerns about the sustainability of debt-heavy AI infrastructure expansion.

What to watch

Nscale is exploring alternative power sources for the Loughton site and other expansion locations in the UK. Microsoft has not commented on the cancellation but is expected to continue its relationship with Nscale at other sites, including in Norway and Texas. Regulators may further scrutinize data centre power demands, potentially imposing higher connection fees as proposed by Ofgem. Investors will closely watch Nscale’s ability to secure new tenants or alternative power solutions to maintain its IPO timeline.