Microsoft pulls out of delayed Nscale data center in Loughton, Essex
Microsoft has withdrawn from a data center project in Loughton, Essex, that was being developed with Nscale, citing delays in grid connection.
The two companies revealed their partnership in September 2025, with Microsoft planning to establish "the UK's largest supercomputer" at the site. The data center project was initially targeting completion in late 2026, but access to a grid connection has been significantly delayed, with power supply now not expected until the 2030s.
Power delays
When announced in January 2025, the Loughton project was set to receive around $3bn investment and support 50MW of AI and high-performance computing capacity, with total power allocation up to 90MW. Energy infrastructure issues in the UK were previously cited by OpenAI as the motivation to drop out of its Stargate UK project with Nscale in April 2026.
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.
IPO challenges
Nscale is currently preparing for an initial public offering with reports suggesting it could seek a valuation of up to $35bn. However, a cohort of investors has reportedly suggested the company scale down its IPO to a valuation between $16bn and $19bn to make it more attractive to buyers.
The company has around $103bn in contracted revenue, with Microsoft comprising approximately 40 percent of this total. The Loughton project represents only a small proportion of this figure. Nscale published its IPO prospectus in September, noting it has five active data centers offering 55MW combined capacity, with 12 more in various stages of development.
Market uncertainty
The neocloud sector is facing challenging market conditions, with investors displaying increased uncertainty. Borrowing costs have risen, with yields on CoreWeave's bonds reaching 15 percent last week, up from their initial 9.67 percent.
Another neocloud player, Firmus, recently abandoned its IPO plans in Australia, citing market volatility. Neil Osnato, founder of Persistence Analytics Group, believes capital markets are beginning to distinguish more sharply between future demand narratives and demonstrated execution.
Related
