Microsoft exits Nscale deal as UK’s biggest AI site waits on power

The short answer is power. UK Power Networks, the company that runs the local electricity network, said the site’s grid connection would not be ready for its 2026 target because of capacity problems further up the network. Grid officials have since told Nscale not to expect power until the 2030s.

Neither company has officially said the power delay is the reason Microsoft left, but the timing speaks for itself. Microsoft has stressed that the decision is narrow. “This decision relates to a single site,” a Microsoft spokesperson said, adding that the company remains committed to its partnership with Nscale.

Nscale says the same. A spokesperson called the problem an “unfortunate London-wide grid issue” and said it has no impact on the company’s other contracts. Nscale says it is looking at other ways to power the Loughton site and at other locations in the UK.

The plan was big by any measure. Nscale announced the site in September 2025 as part of a reported $24 billion contract with Microsoft that also covered projects in Texas, Portugal and Norway. Those other sites are still believed to be on track.

• Chips: 23,040 Nvidia GB300 graphics processors, the high-end chips used to train and run AI models.
• Power: 50 megawatts of AI computing at first, with room to grow to 90 megawatts.
• Timing: the first chips were due in the first quarter of 2027.
• Investment: Nscale had pledged £2 billion to build and run the facility.

The project was also part of Microsoft’s wider £22 billion commitment to UK AI infrastructure, and the government had held it up as a flagship of its AI strategy. The project hasn’t been formally cancelled, but without power or a replacement customer, its timeline is now anyone’s guess.

Nscale is a London-founded “neocloud”, a company that builds data centers stuffed with AI chips and rents that computing power to big customers, competing with giants such as Amazon Web Services, Microsoft Azure and Google Cloud. It is backed by Nvidia, and its board includes former UK deputy prime minister Nick Clegg and former Meta executive Sheryl Sandberg.

Nscale wants its shares to trade in New York as NSCL, and it is reportedly hoping to raise about $3 billion at a valuation of about $35 billion. That is far above its last private valuation: it was valued at roughly $14.6 billion in a funding round in March.

Here’s the problem. Nscale depends on very few customers. Microsoft and Anthropic make up about 85% of its contract value, according to its IPO filing, and Microsoft alone accounts for 40% of the revenue currently contracted to Nscale, according to a Telegraph report. The company’s own filing warns that losing a major customer, or a big cut in spending by one, could hurt its business. In the first half of the year it reported a net loss of $1 billion on revenue of $141 million, with most of that loss from non-cash charges.

It isn’t the only trouble spot. Nscale’s data center in Glomfjord, Norway, is reported to be six months behind schedule, with only 6.4 megawatts of a planned 30 megawatts running after cooling leaks, regulatory hurdles and a fire.

For people in Britain, the lesson is that the bottleneck for AI is no longer just chips or cash. It’s the grid. The UK government’s own AI Growth Zones policy calls timely grid connections the single biggest obstacle to building them. Data centers like this one need as much power as a small town, and connection queues can run for years. Expect more announcements of “AI hubs” to come with fine print about where the electricity will come from.

For investors in the US, UK and Canada, the Nscale news is part of a wider wobble around companies that borrow heavily to build AI capacity before the revenue arrives. CoreWeave shares fell more than 25% last week on worries about its financing needs, and Australia’s Firmus scrapped its own IPO after weak demand. Global AI debt issuance reportedly fell from $113 billion in June to $23 billion in September. None of that means the AI boom is over, but it does mean companies with only one or two big customers carry real risk. This isn’t investment advice; it’s a reason to read an IPO filing’s risk section before buying in.

Three things to watch: whether Nscale finds another power source or another site in the UK, whether it signs a new tenant for the Loughton capacity, and whether its New York listing goes ahead on the expected timetable. Nscale has not given a revised opening date for Essex.