Microsoft Walks Away From Nscale's Essex Data Center Because the UK Grid May Not Deliver Power Until After 2030, Raising Fresh Doubts Ahead of Nscale's IPO

Microsoft (MSFT) has canceled its lease at a planned AI data center in Essex, England, after learning the site may not get grid power until after 2030, the Financial Times reported on Sunday, Oct. 18. The Loughton campus, developed by Nvidia-backed Nscale, was meant to house about 23,000 Nvidia (NVDA) GB300 chips and anchor Microsoft’s wider £22 billion UK investment. Nscale, which is preparing a New York IPO at a $35 billion valuation, says its relationship with Microsoft “remains strong and long-term” and that the grid problem does not affect its other contracts. Microsoft did not immediately comment, and the reported reason is the electricity connection, not chips or demand.

What happened at Loughton

The FT said the Loughton lease was a small share of Microsoft’s total contracts with Nscale, which also include sites in Texas and Norway. The Telegraph is reported to have been first with the news of Microsoft’s exit. Other coverage describes the site as holding a 90MW grid agreement, a larger figure than the 50MW Microsoft was to lease, so the exact capacity at stake depends on the source.

The real problem is the grid

The delay is not new. In July, Nscale learned that power would not arrive in time for a 2027 opening, and in late September the Guardian reported that UK Power Networks had told the company the grid could not deliver enough electricity until the early to mid 2030s. UK Power Networks has said many data centers connecting to its network are waiting on upgrades to the wider national transmission system, and National Grid has said it is working with the system operator to speed up connections. Nscale has said it is looking at on-site power, and earlier reports said it had discussed gas fuel cells as a stopgap.

The queue explains why. Ofgem has said about 315 data centers are waiting for grid connections, together requesting about 73GW, compared with a national peak demand of about 45GW. In July it proposed charging data centers substantial fees to connect, which the FT put at hundreds of millions of pounds. The queue suggests that a site with secured power is the scarce asset, and a site without it is a liability.

What it means for Nscale’s IPO

Nscale filed in September to list on the New York Stock Exchange, reportedly targeting a $35 billion valuation and a raise of up to $3 billion, after raising $2 billion in March, the largest such round for a European tech start-up. Its pitch is a contract backlog of about $103 billion, but reporting on its filing shows that only about $2.6 billion of those contracts were active and generating revenue at the time, and that roughly 25,000 of around 461,000 GPUs it classes as active or contracted were live. The FT put its operating chips at about 25,000 in August against nearly 500,000 planned.

The company also depends heavily on two customers. Reports on the filing say Microsoft and Anthropic account for roughly 85% of contract value, with Microsoft contracts worth about $43.8 billion. Anthropic’s separate agreement, worth about $45 billion for a West Virginia project, could be canceled if Nscale misses financing or delivery deadlines, according to the FT, and the filing shows Nscale still needs to secure binding financing for it. Nscale faces industry-standard penalties for late delivery.

The read-through for investors

For Microsoft and Nvidia, this is a small, site-specific setback: Microsoft keeps expanding capacity across many sites and vendors, and the problem is electricity, not appetite for GB300 chips. The bigger message is for the developers that rent out AI capacity. The FT noted that CoreWeave and Nebius shares have each fallen about 24% in the past five days as investors worry about heavy debt loads in the sector, and a high-profile tenant leaving over power delays adds to those doubts. Our read is that investors will increasingly ask developers one question first: does this site have secured power and a creditworthy tenant, with a date attached to both? Projects that answer yes should hold up better than projects that rely on promised grid connections.