Nvidia-backed Nscale faces IPO valuation cut after Microsoft exits UK data center deal

According to reports from Bloomberg and Reuters, Nscale, a UK-based artificial intelligence infrastructure company backed by Nvidia, is facing significant headwinds in its preparation for a US initial public offering (IPO). The company had originally sought a valuation of approximately $30 billion, but some investors now suggest that $16 billion to $19 billion is more appropriate given the deteriorating market sentiment, implying a potential valuation drop of 37% to 47%.

The immediate pressure on valuation stems from the loss of a key customer. Reports indicate that Microsoft withdrew from a data center lease agreement with Nscale regarding a site in Roughton, Essex, UK, on October 18. Microsoft was slated to be the primary tenant for this facility. Although Microsoft did not disclose specific reasons, the site had previously faced severe power supply delays, with local authorities informing Nscale that full power availability might not occur until the 2030s.

Beyond the setbacks in the UK, Nscale’s critical hub in Norway has also experienced delays. Reuters cited sources stating that only 6.4 megawatts (MW) of the targeted 30 MW capacity are currently operational, with the overall schedule lagging by six months. Issues including cooling system leaks, local regulatory hurdles, construction delays, and fires have contributed to the stalled progress.

Changing market conditions have exacerbated Nscale's difficulties. The cancellation of the IPO plan by Australian AI data center operator Firmus Technologies further dampened investor confidence in similar assets. As borrowing costs rise and doubts about long-term AI profitability grow, investment sentiment in semiconductor and cloud infrastructure sectors has cooled noticeably. Comparable peers include CoreWeave, whose market cap fell by about 25% last week with credit risk indicators hitting record highs, and Nebius Group, whose shares dropped 32% over two weeks.