Ministers have talked up its Essex data centre project as emblematic of the UK’s AI ambitions, and have lobbied local councillors to push it through.
Microsoft’s backing for the project formed part of £22bn in UK investments promised by the tech company last year during Donald Trump’s state visit. Sir Keir Starmer said it was a step towards Britain “becoming a world leader in AI”.
The data centre site, which contains thousands of high-end Nvidia AI chips, was originally intended to come online next year.
However, it has faced repeated delays, with grid bosses telling Nscale that they do not expect a power supply until the 2030s.
Microsoft’s cancellation leaves the site in apparent limbo. The company was its only announced customer, having agreed to rent 23,000 Nvidia AI chips at the facility. Financing for the data centre boom hinges on securing long-term commitments from AI giants to buy up capacity.
More than 40pc of Nscale’s $103bn in contracted revenue comes from Microsoft, although the UK deal is believed to be a small part of that. Anthropic is another major customer.
Nscale, which boasts heavyweights including former Facebook executives Sheryl Sandberg and Sir Nick Clegg on its board, has been privately valued at $15bn.
It is seeking to raise billions of dollars in a float that could value it at more than twice that, making it one of Britain’s most valuable AI companies.
However, its plans have clashed with a major sell-off in AI infrastructure businesses amid questions about the data centre building boom.
Tech analyst Gartner said last week that $3.5tn could be written off by 2030 if the AI boom fails to deliver on its promises.
Separately, Nscale has also faced delays at a flagship data centre in Norway, reportedly leading to heavy penalties.
Australian rival Firmus cancelled plans for a $20bn IPO earlier this month, citing market conditions. Other “neocloud” companies such as CoreWeave and Nebius have seen their shares and bonds slump.
Neoclouds are heavily dependent on raising new investment and debt to keep building, and soaring market interest rates have increased concerns about the sustainability of their business models.
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