Microsoft walks away from option to double its Texas deal with Nscale, FT reports
What's the deal? Microsoft has decided not to exercise an option that would have more than doubled the size of its existing contract to rent computing power from Nscale at a data centre site in Texas, the Financial Times reported on 5 November, citing three people familiar with the matter. The option was part of a potential deal worth tens of billions of dollars, so the London-based, Nvidia-backed AI infrastructure company now has to find other customers for that capacity to avoid losing billions in future revenue.
Context: When Nscale announced its expanded Microsoft agreement in October 2025, it said it would deliver about 104,000 Nvidia GB300 GPUs at a roughly 240 MW campus in Texas from the third quarter of 2026, and that Microsoft held an option on a second, 700 MW phase starting in late 2027. The FT report comes weeks after Microsoft pulled out of a roughly $3 billion deal to anchor Nscale's flagship Loughton campus in Essex, after grid connection delays pushed power supply into the 2030s. Nscale's West Virginia campus, tied to an expected deal of around $45 billion with Anthropic, has also faced delays and local opposition.
The IPO angle: Nscale filed for a US IPO in September at a valuation that could reach $35 billion. It reported a net loss of about $1 billion on revenue of $141 million in the first half of 2026, against a contracted backlog of $103 billion that one person told the FT would not be affected by Microsoft's decision. Norway's Aker is a major shareholder. Microsoft and Nscale declined to comment to the FT, and Reuters said it could not immediately verify the report.
Why it matters: One of Europe's most valuable AI infrastructure startups is going to market just as its anchor customer scales back for the second time in a few weeks, a test of how much of the neocloud boom rests on a handful of hyperscaler contracts.
Read more: Reuters via CNA, Zonebourse, Nscale (October 2025 Microsoft agreement)
Image: Microsoft data centre in Middenmeer, the Netherlands, Hay Kranen via Wikimedia Commons, CC BY 4.0
