Microsoft Pulls Out of Major UK AI Data Centre Deal

Microsoft has withdrawn from a crucial deal to be the primary tenant at a new artificial intelligence data centre in Loughton, Essex, operated by the British AI infrastructure firm Nscale. The decision, attributed to concerns over construction delays and power supply, jeopardizes Nscale's planned multibillion-dollar flotation on the New York Stock Exchange, which had aimed for a valuation of $35 billion.

Nscale, which had agreed to rent 23,000 high-end AI chips for the facility, relied on Microsoft for 40% of its contract revenue from the project. The withdrawal is a significant blow to the company's ambitions, particularly as the Loughton facility faces power supply issues predicted to extend into the 2030s, despite an original target for operational readiness next year. Photographs from March showed the site still under construction.

Former Deputy Prime Minister Nick Clegg, a board member at Nscale, stood to gain a substantial financial windfall of up to £30 million from the company's IPO, based on his 0.12% equity stake. His potential earnings are now less certain following Microsoft's decision.

The Loughton data centre was intended to be the largest UK sovereign AI data centre, a project previously highlighted in the Labour government's AI strategy. Microsoft's involvement was initially announced as part of a broader £22 billion investment promise during former President Donald Trump's state visit.

Clegg joined Nscale's board seven months ago, having previously served as Meta's President of Global Affairs. Nscale, spun out of a cryptocurrency mining business, has been expanding its AI infrastructure operations, with existing data centres in Norway, Portugal, Iceland, and the US. The company has been privately valued at $15 billion and is seeking billions in its IPO.

Despite the setback, Nscale stated its commitment to the Loughton project and the UK, exploring alternative power sources and other expansion sites. A spokesperson emphasized that the issues do not impact other Nscale contracts and that the relationship with Microsoft remains strong.

Nvidia CEO Jensen Huang recently praised Nscale, calling it potentially "the most valuable UK startup they have created in the last 10 years."