Microsoft scraps tens-of-billions Texas AI deal with Nscale

Microsoft kills Texas expansion

Microsoft has spurned an option to more than double the AI computing capacity it rents from Nscale in Barstow, Texas. Had it gone ahead, the deal could have pumped tens of billions of dollars into the London-based startup. The decision landed months before Nscale’s planned September 2026 IPO filing, according to reports in The Next Web and ET Tech.

Under an October 2025 contract, Nscale is already on the hook to ship roughly 200,000 Nvidia GB300 chips to Microsoft sites across the US and Europe. Texas was earmarked as the crown jewel: 104,000 chips starting in Q3 2026, with Microsoft holding a second-phase option for another 700-megawatt campus from late 2027. That option is now dead.

Grid delays dog UK project, Texas expansion scrapped

This is the second time in less than a year that Microsoft has walked away from a major Nscale build. In October 2026 it bailed on anchoring the UK’s largest AI data centre in Loughton, Essex. Grid delays meant power would not arrive until the 2030s—too late for a company racing to train models. Aker chief executive Øyvind Eriksen downplayed the loss, calling the Essex project a "minor contract" in Nscale’s wider book.

Both pull-outs trace back to infrastructure hang-ups. In Texas, the holdup was not grid power but Microsoft’s appetite to commit another 700 megawatts. Critics say the repeated exits expose a pattern: Nscale’s timetables clash with the sprint pace of frontier AI labs.

IPO looms, Anthropic talks heat up

Nscale still has a live October 2025 contract worth tens of billions in total value, but its IPO narrative now leans harder on new customers. The company is chasing a $45bn computing-power deal with Anthropic and closed a $3.36bn pre-IPO round before filing for a New York float aiming for a $35bn valuation.

Nvidia and Norwegian conglomerate Aker are anchor backers, giving Nscale a deep balance sheet. Yet with two headline Microsoft deals now off the table, investors will ask how much of the remaining contracted revenue is truly locked in.

What this means

Lazyfounder analysis — our interpretation, not reported fact.

Microsoft’s rejection removes a blockbuster revenue stream just as Nscale prepares to pitch public investors, raising the stakes for its remaining customer talks—especially the $45bn Anthropic negotiation.

Key takeaways

• Microsoft’s decision to skip the Texas expansion wipes tens of billions in potential future revenue off Nscale’s IPO projections.
• Both Microsoft pull-outs—Texas and Essex—stem from infrastructure delays, showing how grid and power risks shape cloud deals.
• Nscale is racing to lock in alternate customers like Anthropic to offset the lost Microsoft biz before its September 2026 listing.
• Aker’s Øyvind Eriksen calls the UK exit a 'minor contract,' but two high-value walk-backs in quick succession weaken Nscale’s narrative of rapid scale.

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