Microsoft Withdraws from Major UK AI Data Centre Deal, Impacting Potential Payout for Nick Clegg

Microsoft has pulled out of a significant deal to be the primary tenant at an artificial intelligence data centre being developed by Nscale in Loughton, Essex. The decision, attributed to concerns over construction delays and issues with power supply, represents a substantial setback for the British AI firm.

Nscale, which filed for a multibillion-dollar flotation on the New York Stock Exchange in September with a target valuation of $35 billion, had planned for Microsoft to be the anchor tenant at its first UK site. The American tech giant was set to rent 23,000 high-end AI chips for the facility. These chips are crucial for housing and operating the vast physical infrastructure required to train and run advanced AI models, including those powering applications like ChatGPT and Microsoft's own Copilot.

The Loughton data centre was originally slated to become operational next year. However, Nscale has faced repeated delays, with initial construction on the site still in its early stages as of March. Furthermore, electricity grid executives now anticipate that power will not be available until the 2030s.

The withdrawal of Microsoft, which accounts for 40 percent of Nscale's contract revenue, could impact a potential windfall for Nscale board member Nick Clegg. The former Deputy Prime Minister holds 917,000 shares in the company, representing 0.12 percent equity. A successful IPO at the targeted valuation could have yielded him up to £30 million. The success of Nscale's IPO is now under threat following this development.

Microsoft's planned involvement in the Loughton facility was announced as part of a broader £22 billion investment pledge made during Donald Trump's state visit last year. The site was intended to be the 'largest UK sovereign AI data centre' as part of Labour's AI strategy unveiled in 2025.

Nscale is heavily backed by chipmaker Nvidia, whose market capitalization has surged due to the boom in AI investment. Nvidia's CEO, Jensen Huang, recently praised Nscale, calling it potentially 'the most valuable UK startup they have created in the last 10 years.'

Clegg joined Nscale's board seven months ago, stepping down from his role at Meta, Facebook's parent company. He is reported to receive an annual retainer of $60,000 and a $260,000 annual share bonus from Nscale, in addition to the potential IPO payout.

Nscale, which spun out of a cryptocurrency mining business, has pivoted to AI infrastructure. The company also operates data centres in Norway, Iceland, Portugal, and the United States, utilizing renewable power sources where available. In response to the Microsoft withdrawal, an Nscale spokesman stated the company remains committed to the Loughton project and the UK, exploring alternative power sources and additional UK expansion sites. The spokesman also emphasized that the grid issue does not affect other contracts and that the relationship with Microsoft remains strong.

Microsoft declined to comment on the matter.