Microsoft has decided not to expand its existing artificial intelligence infrastructure agreement with UK-based Nscale, turning down an optional extension reportedly worth tens of billions of dollars.
The proposed expansion would have more than doubled Microsoft’s existing agreement to rent additional computing capacity at Nscale’s Texas data centre.
According to a source familiar with the matter, the decision was made several months ago, before Nscale filed for its planned initial public offering (IPO) in September. However, Microsoft’s existing contract with the company remains unaffected.
Existing Partnership Remains Intact
Microsoft and Nscale previously agreed to deploy approximately 200,000 Nvidia AI chips across data centres in the United States and Europe.
Nscale disclosed in its IPO filing that agreements signed with Microsoft between September 2025 and April 2026 were worth up to $43.8 billion through December 2033, excluding optional extensions.
Its total contracted value remains approximately $103 billion despite Microsoft’s decision.
Nscale Looks for New Customers
The development follows Microsoft’s withdrawal from a separate agreement involving Nscale’s proposed data centre project in Loughton, Essex, UK, after electricity supply delays pushed the expected connection timeline into the 2030s.
Nscale is now exploring opportunities with other major customers to utilise the remaining capacity at its Texas facility.
The company has also reportedly held discussions with Anthropic, the developer of Claude AI, over a potential computing infrastructure deal worth approximately $45 billion.
The latest development highlights the growing challenges of financing and expanding AI data centres, particularly amid rising electricity demands and the need for long-term commercial commitments.
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