Microsoft cancels a computing capacity deal with neocloud Nscale in the UK

Microsoft has cancelled the agreement under which it was going to be the main customer of an artificial intelligence data center that Nscale is building in Loughton, in the county of Essex (United Kingdom). The British newspaper The Telegraph published it first, and Microsoft confirmed it on Monday, October 19, according to the news agency Reuters. Nscale, backed by NVIDIA, is what the industry calls a neocloud: it offers computing capacity, energy and data centers, plus software for training and operating AI models.

The reason is electricity. According to Reuters, the people in charge of the power grid have told Nscale they do not expect to supply the site until the 2030s. The project was aiming to be finished by late 2026, the deadline Nscale had agreed with UKPN, the distribution network operator, according to DatacenterDynamics (DCD); National Grid told that outlet it had not accepted that date. The center was supposed to start operating in early 2027 with 23,040 NVIDIA GB300 AI chips and 50 megawatts of computing capacity for Azure, Microsoft's cloud services, in the United Kingdom.

Nscale unveiled the project in January 2025, with an investment of about $3 billion and up to 90 megawatts of allocated power, according to DCD. In September 2025, during Donald Trump's visit to the country, Microsoft and Nscale announced they would work together there: Microsoft planned to set up in Loughton what was going to be Britain's largest supercomputer, as part of a $15 billion investment in AI infrastructure in the United Kingdom.

"This decision relates to a single site," a Microsoft spokesperson said, adding that the company is still committed to its partnership with Nscale. Nscale, in statements to The Telegraph and to Reuters, replied that its relationship with Microsoft "remains strong and long-term" and that this power grid problem, which affects the whole of London, does not touch its other contracts. It added that it is keeping the Loughton project and its commitment to the United Kingdom, that it is looking for other energy sources for that plot and that it is studying other places in the country to grow.

Loughton is a small part of what Nscale has signed. According to Reuters, its contracts add up to more than $103 billion, compared with $100 million two and a half years ago; Microsoft now accounts for around 40% of that figure, according to DCD. Its IPO prospectus, published in September, lists five data centers in operation, with 55 megawatts between them, and another 12 at various stages of development. It competes with CoreWeave, Nebius, Crusoe and Lambda.

The withdrawal comes as Nscale prepares to go public in the United States, after filing last month. According to the prospectus, Microsoft and Anthropic are expected to be among its main customers; between them they make up close to 90% of its order backlog, the Financial Times Lex column, published in Spanish by Expansión, points out, adding that those contracts depend on deploying 461,000 GPUs, almost 20 times as many as it has today. Several reports point to a target valuation of up to $35 billion, and some investors have reportedly suggested lowering it to between $16 billion and $19 billion, according to Business Times as cited by DCD.

This is not the first Nscale project in the United Kingdom to lose its partner over energy: in April 2026, OpenAI left its Stargate UK project with Nscale and blamed regulation and the cost of electricity, according to DCD. Reuters adds that queues to connect to the grid are delaying some data center projects in the country by as long as 13 years.