Microsoft walks away from Nscale's flagship UK AI data center, weeks before Nscale's IPO

Microsoft has pulled out of its deal to be the anchor tenant at Nscale's planned AI data center in Loughton, Essex, the Telegraph reported on Sunday, Oct. 18, 2026, a setback for the British neocloud as it prepares to go public.

A data center is a building, a power line and a customer, and Loughton just lost the customer because it can't get the power line. That's the quiet bottleneck under the AI boom: chips ship in months, grid connections in years. For Nscale the timing is brutal: it's pitching Wall Street on a multibillion-dollar float while two customers make up most of its book and one just walked from its showcase British site. For Britain, the "largest sovereign AI datacentre" is now a scaffolding yard waiting on the grid. Nscale says the relationship is fine. Investors will want to see the next contract.

Microsoft has pulled out of its agreement to be the anchor tenant at Nscale's planned AI data center in Loughton, Essex, the Telegraph reported on Oct. 18, 2026. An anchor tenant is the big customer a project is built around. A neocloud is a newer company that rents out rooms of AI chips rather than a general-purpose cloud. The Guardian, independently, reported that Microsoft told Nscale it was ending the agreement over concerns about power supply. Microsoft has not commented. Those lines are the Telegraph's and the Guardian's.

The Telegraph reported that authorities have told Nscale not to expect a power supply to the site until the 2030s, and that Microsoft had been set to rent roughly 23,000 Nvidia AI chips there. Those figures are the Telegraph's.

When the project was announced in 2025, the UK government highlighted Loughton as the "largest UK sovereign AI datacentre." It was planned to open next year, in 2027. The Guardian reported in March that the site was still an operational scaffolding yard, and that power-supply problems emerged about a month ago. Those lines are the Guardian's.

The Guardian says the deal's end means Nscale has lost its only publicly announced customer for the Essex site. It is understood Microsoft remains on board for another Nscale project in Norway.

Bloomberg, citing Nscale's IPO filing, reports that Nscale relies on Microsoft and Anthropic for about 85% of its contracts. Nscale is seeking to raise as much as $3 billion in a US IPO as soon as this month. The Guardian cites a potential valuation of $35 billion, or about £26 billion. Bloomberg also reports that Nscale's flagship site in Norway is six months behind schedule, with 6.4 megawatts of a planned 30-megawatt data center running. A megawatt is a measure of electrical power — enough for a small town, or a slice of a chip hall. Those figures are Bloomberg's and the Guardian's.

An Nscale spokesperson told the Telegraph and the Guardian: "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." That quotation is Nscale's. Microsoft did not comment to the Telegraph and had not responded to Bloomberg at the time of its report.

Nvidia is a backer of Nscale. The move lands in a jittery week for AI-infrastructure suppliers: Bloomberg reports CoreWeave shares fell about 25% for the week, its worst since November, and that Australian data-center company Firmus scrapped its IPO. Those market lines are Bloomberg's.

In plain terms, the Telegraph and the Guardian reported on Sunday that Microsoft walked away from being the lead tenant at Nscale's planned Essex AI data center, with the Guardian citing power-supply concerns. The Telegraph says the site may not get grid power until the 2030s. Nscale says it is still committed to Loughton and to Microsoft. Microsoft has not commented. The British government had billed the site as the country's largest sovereign AI data center.