Microsoft has withdrawn from a UK data center deal with neocloud startup Nscale, which had been aiming for a $3 billion IPO as early as late October. The 8:30 hosts Pras Subramanian, Jake Conley and Julie Hyman discuss Microsoft's reasons for pulling out.
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MSFT
▼ Likely negativeMicrosoft
Relevance: medium
| Market | US stocks |
|---|---|
| Sector | Information Technology |
| Industry | Systems Software |
| Market cap | $4.0T |
| Close on 10/16/2026 | 528.95 |
| Change that session | -1.94% |
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Related news
- Microsoft Scraps UK Data Center Deal With Nscale, Telegraph Says
The Telegraph reports that Microsoft has pulled out of a planned data center deal with the British neocloud Nscale at Loughton, Essex, without giving a specific reason. The newspaper said the site has faced a series of delays, and authorities have told Nscale they don't expect a power supply there until the 2030s. Nscale's flagship site in Norway is also six months behind schedule, with only 6.4 megawatts of its intended 30-megawatt data center running. According to an IPO filing, Microsoft and Anthropic account for around 85% of Nscale's contracts, and Microsoft's withdrawal comes as Nscale prepares an IPO seeking up to $3 billion. Nscale says it remains committed to the Loughton project and its relationship with Microsoft is strong, and that the London-wide grid issue has no impact on its other contracts.
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- Microsoft exits data centre deal in blow to UK AI ambitions
Microsoft has confirmed it has withdrawn from a deal with British start-up Nscale to lease computing capacity at a planned AI data centre in Loughton, northeast of London, a setback for the UK's AI ambitions. The company said the decision relates to a single site and that it remains committed to its partnership with Nscale. Nscale said it is still committed to the Loughton project and is exploring alternative power sources, after UK media reported the site would not have power until the 2030s due to grid connection delays. Ahead of a planned New York IPO targeting a valuation of up to $35 billion, Nscale said its committed revenue relies heavily on Microsoft and Anthropic. The article also notes that OpenAI earlier withdrew from a UK Stargate partnership, citing high energy costs and regulatory uncertainty.
- Microsoft Walks Away From Nscale’s UK Data Center as the Grid Runs Out of Power
According to Reuters citing The Telegraph, Microsoft (MSFT) has withdrawn from an AI data center in Loughton, Essex that Nscale was building for it, though no reason was given. Grid officials reportedly told Nscale power would not be available until the 2030s, and Nscale says it remains committed to the site and is exploring other power sources. The site was planned to house about 23,000 Nvidia chips, roughly 11.5% of a program of about 200,000 chips. Meanwhile, Microsoft's cash capex in the June quarter reached $35.80 billion, more than double the year-earlier figure. The article argues the problem is grid timing rather than AI demand, and Microsoft reports results on October 28.
- Microsoft pulls out of UK data centre deal with Nscale, Telegraph reports
According to the Telegraph, Microsoft has withdrawn from a planned agreement to be the anchor tenant of Nscale's proposed data centre in Loughton, Essex, though no specific reason was established. The project has faced delays and power supply problems, with authorities reportedly suggesting a grid connection might not come until the 2030s. Nscale's flagship data centre in Norway is also about six months behind schedule, with only 6.4 megawatts of its planned 30-megawatt capacity operational. The setback comes ahead of a possible IPO that could raise as much as $3 billion as early as October, while Microsoft and Anthropic account for about 85% of Nscale's contracts. Nscale says it remains committed to Loughton and that its relationship with Microsoft is strong, while Microsoft has not commented publicly.
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Microsoft agreed a 20-year power supply deal with NiSource for 1,100 MW to serve its expanding AI data centers. Meanwhile, the UK Competition and Markets Authority is preparing to label parts of Microsoft's business software as having strategic market status, and Microsoft, Apple and Palantir face possible new US Congressional oversight and hearings on their partnerships and operations. The article says the power deal helps reduce execution risk for the roughly US$175b to US$190b of 2026 capex that Microsoft's investment narrative relies on, while the regulatory moves add political and regulatory risk. Key items to watch are future disclosures linking data center expansion and power contracts to AI and Azure usage, along with any quantified costs from UK rules or US hearings.
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