Microsoft has decided not to expand its existing agreement with UK-based AI infrastructure company Nscale to rent additional computing capacity at a data center in Texas, walking away from a potential deal worth tens of billions of dollars.
Financial Times report cited by Reuters on November 5 noted that Microsoft has decided not to exercise an option that would have more than doubled its existing agreement with Nscale. The decision comes as demand for computing infrastructure continues to rise amid growing AI investments.
A person familiar with the matter told Reuters that Microsoft made the decision several months before Nscale filed for its IPO in September. The person added that the decision would not affect Microsoft’s existing Texas contract with the company.
Microsoft and Nscale struck an agreement last year under which the UK-based company would deploy around 200,000 NVIDIA AI chips across data centers in the United States and Europe.
Nscale disclosed in its IPO filing that it signed statements of work with Microsoft between September 2025 and April 2026, worth up to approximately USD 43.8 billion through December 2033. This figure excludes optional contract extensions.
Despite Microsoft’s decision not to expand the Texas agreement, Nscale’s total contract value remains unchanged at approximately USD 103 billion, according to the person familiar with the matter.
Nscale is already in discussions with several major customers to utilize the remaining capacity at its Texas data center, the person added.
The latest development follows Microsoft’s withdrawal from an agreement to anchor Nscale’s flagship data center project in Loughton, Essex.
The decision came after delays in power connections pushed the expected electricity supply timeline into the 2030s, affecting the project’s development plans.
The move marks another setback for Nscale as it works to expand its AI infrastructure business and secure customers for its data center capacity.
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Nscale is likely exploring other major business opportunities. Reuters and other media outlets reported last month that the company was in discussions to supply AI computing capacity to Anthropic, the company behind Claude.
The proposed agreement could be worth nearly USD 45 billion. Microsoft and Nscale did not respond to Reuters’ requests for comment.