According to reporting by the Financial Times on Thursday, Microsoft has opted not to exercise an expansion option for computing capacity it leases from Nscale at a data centre located in Barstow, Texas. The decision represents a significant missed opportunity for the London-based AI cloud infrastructure provider, which sources told the FT could have generated tens of billions of dollars in additional value.
The expansion option was included as part of an agreement between the two companies finalised in October 2025. Under the original terms, Nscale committed to delivering approximately 200,000 Nvidia GB300 chips—the processors essential for training and deploying AI models—to Microsoft across multiple locations spanning both the United States and Europe.
The Barstow facility formed the cornerstone of this arrangement. Nscale operates a 240-megawatt campus at the site, which it leases from bitcoin miner Ionic Digital, and was scheduled to supply roughly 104,000 chips to Microsoft beginning in the third quarter of 2026. When the deal was announced, Nscale indicated that Microsoft retained the right to activate a second phase at the location, a 700-megawatt expansion that would have become available from late 2027.
The decision to forgo the expansion option came several months before Nscale initiated its initial public offering process in September, according to someone with knowledge of the matter. The underlying Texas contract between the two companies remains active.
This development marks the second setback in the Microsoft-Nscale partnership. In October, Microsoft withdrew from an agreement to serve as the anchor tenant for Nscale's planned data centre in Loughton, Essex, which was positioned as the United Kingdom's largest AI facility. Grid infrastructure delays have pushed the site's power connection into the 2030s.
Nscale, which has backing from Nvidia, is seeking a valuation of up to $35 billion for its New York listing. Prior to filing, the company raised $3.36 billion in a pre-IPO funding round and highlighted a substantial pipeline of contracted future revenue to potential investors.
Aker, the Norwegian conglomerate holding approximately 23 percent of Nscale, has downplayed the significance of losing the Essex contract. Aker chief executive Øyvind Eriksen stated: "That was one, relatively speaking, minor contract in a bigger portfolio."
Separately, Nscale is in discussions with Anthropic regarding a computing arrangement that could be valued at approximately $45 billion, according to reports from last month.
Source: The Next Web
