Key Points
- Microsoft will not exercise an option to more than double its Texas data center agreement with Nscale.
- The Financial Times reported the forgone extension would have been worth tens of billions of dollars to Nscale.
- It is Microsoft's second retreat from an Nscale project in weeks, after the Essex pullout.
The latest:
Microsoft has decided against exercising an option that would have more than doubled the computing power it rents from AI cloud provider Nscale at a Texas data center, a person familiar with the matter told Reuters. The decision was taken several months ago, before Nscale filed for its initial public offering in September, and the existing Texas contract is unaffected, the person said.
Details:
- The forgone deal: The Financial Times, which reported the decision first on Thursday, said a potential extension of the Texas agreement would have been worth tens of billions of dollars to Nscale. Microsoft’s option would have more than doubled the size of the computing capacity it currently rents at the site.
- The timing: The person familiar with the matter said the decision predates Nscale’s September IPO filing by several months, placing it well before the listing process rather than as a response to it. That person declined to be named because the matter is confidential.
- The existing contract: Nscale’s current Texas agreement with Microsoft is not affected by the decision, according to the source. The two companies struck a deal last year for Nscale to deploy around 200,000 Nvidia AI chips across data centers in Europe and the United States under an expanded arrangement.
- The numbers: Nscale disclosed in its IPO filing that between September 2025 and April 2026 it signed statements of work with Microsoft worth up to about $43.8 billion running through December 2033, excluding optional extensions. The source said the decision leaves Nscale’s total disclosed contract value of roughly $103 billion unchanged.
- The Essex pullout: The move follows Microsoft’s withdrawal weeks earlier from a deal to anchor Nscale’s flagship data center project in Loughton, Essex. Power connection delays had pushed the project’s expected supply date into the 2030s, according to Reuters.
- Replacement customers: Nscale was already in discussions with several major customers for the remaining data center capacity in Texas, the person familiar with the matter said. Neither the identities of those customers nor a timeline for any agreement was disclosed.
- The Anthropic talks: Reuters and other outlets reported last month that Nscale was in talks to sell AI computing power to Anthropic, the developer of the Claude models, in a new deal that could be worth about $45 billion. That arrangement has not been confirmed as signed.
- No comment: Microsoft and Nscale did not respond to requests for comment made outside business hours, Reuters said.
Background:
Nscale is an AI cloud provider that rents out GPU capacity to large technology customers. Microsoft is its anchor client, and the agreements disclosed in Nscale’s IPO filing account for a substantial share of the company’s roughly $103 billion in total contracted value.
Between the lines:
Two Microsoft retreats in weeks — Essex and now the Texas option — concentrate attention on how much of Nscale’s $103 billion book depends on a single buyer. The source’s insistence that the total is unchanged underlines the point rather than settling it. The reported $45 billion Anthropic talks, if converted, would be the clearest test of whether Nscale can diversify beyond Microsoft.
What’s next
Watch whether the reported Anthropic deal is signed, whether Nscale names buyers for the unsold Texas capacity, and any updated contract disclosures tied to its IPO process.
