Microsoft has turned down an option that would have more than doubled its computing lease with Nscale at a Texas data center, the Financial Times reported on Thursday, Nov 5, 2026, citing three people familiar with the matter. Nscale is the Nvidia-backed British AI infrastructure company that has filed for a US stock offering. Neither Microsoft nor Nscale had answered requests for comment when Reuters summarized the FT report, and Reuters wrote that it "could not immediately verify the report."
The FT story is behind a paywall, so the details below come from Reuters and from Investing.com's summary of the FT report. Each claim is attributed to the FT through those summaries.
What the FT reported
According to the FT, as summarized by Investing.com, the option would have "more than doubled the size of its existing contract to rent computing power at the Ward County site, a potential deal worth tens of billions of dollars." The FT adds that Nscale must now find new customers for the capacity or lose out on billions of dollars in future revenue.
The FT also reports that Nscale signed a deal in September with the robotics company Figure and has undisclosed deals with other customers at its Ward County site. A person close to the company said Nscale is in talks with several other potential customers for that site, according to Investing.com's summary.
The size of the option is in question. In October 2025 Nscale announced a lease of about 240 megawatts to Microsoft at an adjacent site being developed by the crypto miner Ionic Digital, with an option on a second phase of 700 megawatts. Investing.com says Nscale told the FT this week that the option was "closer to 500 megawatts" and covered extra capacity at Nscale's own site. The FT also reports that Nscale has not yet secured power for the remaining capacity at the Ionic site, where Microsoft still holds a right of first refusal, according to Ionic's filings with the US Securities and Exchange Commission.
On the company's finances, the FT reports that Nscale made a net loss of $1 billion on revenue of $141 million in the first half of 2026. It also reports that Microsoft's decision will not affect Nscale's total backlog of $103 billion.
The second Microsoft pullback within three weeks
The Texas decision follows Microsoft's exit from Nscale's Loughton project in Essex, England. The Guardian reported on Oct 18 that Microsoft had told Nscale it was pulling out of its agreement, which left Nscale without its only publicly announced customer for that site. The Guardian says the Telegraph reported the exit first.
The Guardian tied the exit to power. It reports that UK Power Networks told Nscale it could not supply enough electricity to Loughton until the early to mid-2030s. An Nscale spokesperson told the Guardian: "Our relationship with Microsoft remains strong and long-term, and this unfortunate London-wide grid issue has no impact on our other contracts." The Guardian adds that Microsoft is understood to remain on board for another Nscale project in Norway.
Only Investing.com's summary of the FT report puts a dollar figure on the Essex deal, at $3 billion. The Guardian does not give a figure.
West Virginia and Anthropic
The FT report also covers Nscale's West Virginia campus, which is central to its computing deal with Anthropic. According to Investing.com's summary, the flagship site has "faced construction delays and local opposition," and Nscale is in talks with Anthropic to expand its deal to lease a second 460-megawatt data center there. Investing.com puts the existing Anthropic deal at $45 billion.
Local reporting describes some of the problems at the site. The Charleston Gazette-Mail reported on Oct 17 that the West Virginia Department of Environmental Protection issued violation notices over sediment and stormwater controls at the Monarch campus site. A company spokesperson told the paper that Monarch has added water trucks and street sweepers and replaced a dirt road with rock to reduce dust.
We covered how that site is financed in Nvidia in Talks to Back Nscale Debt for Anthropic Site. We also reported that a Texas pause stalled a bond sale for an Anthropic data center.
Politics and financing
Investing.com says the report arrives as wariness grows over debt-heavy AI infrastructure building, "particularly by so-called neoclouds such as CoreWeave and Nebius." Its summary of the FT report also states that "new contracts are key to the ability of AI computing-rental firms to keep borrowing to fund data center construction." We reported earlier on how Microsoft capacity delays hit CoreWeave and Nebius stocks.
Investing.com's summary also gives a political backdrop. It says incoming Democratic governors, including in Texas, have called for an immediate moratorium on data center development. Our earlier post on the midterm results and data center bans covers the local ballot measures that passed on Nov 3.
What is still unknown
None of the sources say why Microsoft declined the option. Investing.com's summary does not quote Microsoft or Nscale, and Reuters says both had not responded. The two sides also describe the option differently: the original announcement gave a second phase of 700 megawatts, while Nscale now says the option was closer to 500 megawatts and covered extra capacity at its own site.
Readers who want to follow the story should watch for three things: a statement from Microsoft or Nscale, any new customer announced for Ward County, and an update to Nscale's public IPO filing. The Guardian says the Essex exit could undermine Nscale's ambition to list on Wall Street this year at a potential valuation of $35 billion.
Sources
- Reuters via StreetInsider: Microsoft rejects multibillion-dollar AI deal with UK's Nscale, FT reports
- Investing.com: Microsoft declines Nscale Texas expansion ahead of $35 bln IPO
- The Guardian: Microsoft pulls out of AI datacentre project in Essex over power supply concerns
- Charleston Gazette-Mail: DEP permit bids detail significant Mason County data center environmental impacts
