Microsoft walks away from Nscale's Loughton data center

Microsoft has pulled out of Nscale's delayed data center project in Loughton, Essex, leaving the AI cloud operator without an anchor tenant months before a planned IPO. The cause is not demand. It's the grid.

The site, announced in January 2025 with roughly $3bn of planned investment, was designed to support 50MW of AI and high-performance computing (HPC) capacity, with a total power allocation of up to 90MW. Microsoft planned to build "the UK's largest supercomputer" there as part of a $15bn UK AI infrastructure push announced alongside Nscale in September 2025.

The project was originally targeting completion in late 2026. That timeline collapsed when the site's grid connection slipped; it now isn't expected to receive a national grid power supply until the 2030s.

What does this change for Nscale?

An Nscale spokesperson told The Telegraph: "We remain committed to both the Loughton project and the UK, and we are exploring alternative power sources for the site, in addition to other expansion sites in the UK. Our relationship with Microsoft remains strong and long-term, and this unfortunate London-wide grid issue has no impact on our other contracts."

The timing hurts. Nscale is preparing an initial public offering (IPO), with reports suggesting it could seek a valuation of up to $35bn. A cohort of investors has since reportedly pushed the company to scale down and target $16bn to $19bn instead, according to the Business Times, to make the listing more attractive to buyers.

The company's IPO prospectus, published in September, shows five active data centers offering a combined 55MW, plus 12 more in various stages of development. Much of Nscale's current value rests on large capacity commitments with investment-grade customers — capital-intensive builds take years to monetize, so losing a flagship anchor tenant mid-build is exactly what it didn't need.

Microsoft still matters to the business. The company holds around $103bn in contracted revenue, of which Microsoft represents roughly 40 percent. The Loughton project accounts for only a small share of that.

A pattern of UK energy problems

This is the second high-profile withdrawal from a UK Nscale site. OpenAI dropped out of its Stargate UK project with Nscale in April 2026, citing regulations and the cost of energy rather than grid access specifically.

Nscale has also faced friction elsewhere. Its Glomfjord, Norway, project was recently reported to be delayed by six months, with some publications claiming heavy penalties. DCD understands that's inaccurate — no penalties or fines have been incurred.

Neoclouds under credit pressure

The Loughton exit lands in a hostile financing market for neoclouds (cloud providers built specifically for AI workloads). Investors have raised borrowing costs across the sector. Last week, some yields on CoreWeave bonds hit 15 percent, against an issue price of 9.67 percent.

Todd Schoenberger, chief investment officer at CrossCheck Management, told Reuters: "It's not just CoreWeave; there are several (companies) that are falling into this category because of concerns that the revenue is just not going to be there to turn a profit and maintain the amount of debt that these companies are taking on."

Firmus, another neocloud player, recently abandoned its own IPO plans in Australia, citing market volatility.

Neil Osnato, founder of infrastructure advisory firm Persistence Analytics Group, doesn't read the Firmus retreat as "evidence that AI infrastructure demand is unreal." His take: "capital markets are beginning to distinguish more sharply between future demand narratives and demonstrated execution."

That's the read on Loughton too. Microsoft didn't leave because the demand story faded. It left because the power wasn't coming until the next decade — and for a company committing billions on 2026 timelines, that's a dealbreaker. Nscale must now find alternative power, and alternative tenants, before its bankers set the IPO price.