Microsoft has rejected an option to more than double its existing agreement with British artificial intelligence infrastructure company Nscale to rent computing power at a data centre in Texas, walking away from a potential deal worth tens of billions of dollars, the Financial Times reports.
The decision marks another setback in the relationship between the two companies, coming weeks after Microsoft reportedly withdrew from a separate agreement to become the anchor customer for Nscale’s flagship data centre project in Loughton, Essex, United Kingdom.
The latest report, published on Thursday and citing people familiar with the matter, said Microsoft’s decision involved an option to significantly expand its existing arrangement with Nscale for computing capacity at the Texas facility.
The proposed expansion could have more than doubled the size of the current agreement, potentially making it worth tens of billions of dollars. However, Microsoft has opted not to proceed, according to the newspaper.
Reuters said it could not immediately independently verify the report. Microsoft and Nscale did not immediately respond to requests for comment outside business hours.
The development follows Microsoft’s reported withdrawal in October from the Loughton data centre project, where it had been expected to serve as the anchor customer.
That decision was linked to delays in securing a power connection for the facility, with the expected availability of electricity reportedly pushed into the 2030s.
The delay raised questions about the project’s ability to meet the power-intensive requirements of large-scale artificial intelligence computing.
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Data centres have become central to the global AI race, as technology companies invest heavily in specialised chips, servers and computing infrastructure needed to develop and operate advanced AI models.
The scale of these investments has also placed growing pressure on electricity supplies, with data centre operators facing challenges securing suitable sites, power connections and infrastructure quickly enough to meet demand.
Nscale, which is backed by US chipmaker Nvidia, is positioning itself as a major supplier of computing infrastructure for AI companies. The firm filed for an initial public offering in the United States in September, with Microsoft and AI company Anthropic expected to be among its major customers.
The company is also pursuing other large-scale computing contracts. Reuters reported last month that Nscale was in talks with Anthropic, the developer of the Claude AI chatbot, over a cloud computing agreement that could be worth approximately $45bn.
The reported negotiations underline the growing demand for computing capacity among AI developers, even as major technology companies reassess the timing, cost and location of their infrastructure commitments.
Microsoft’s latest reported decision does not, by itself, establish that the company has ended its existing Texas agreement with Nscale. Rather, the Financial Times report concerns its refusal to exercise an option to expand that arrangement.
About the Author
Cecilia Attah is a tech analyst with a degree from Benue State University. She covers tech news and startups at TechRegard with a focus on how technology is transforming Africa and shaping the global landscape.
