Microsoft rejected an option that would have more than doubled its contract to rent AI computing power at Nscale's Ward County, Texas site, the Financial Times reported on November 5, citing three people familiar with the matter. The option could have been worth tens of billions of dollars to Nscale.
Nscale told the newspaper the option was closer to 500 megawatts and related to leasing extra capacity at its own site. A person familiar with the matter said Microsoft made the decision several months ago, before Nscale filed for its IPO in September, and that the existing Texas contract between the two companies remains in place and unchanged.
The decision will not affect Nscale's total backlog of about $103 billion, according to the report. Nscale's IPO filing shows that between September 2025 and April 2026 it signed statements of work with Microsoft valued at up to about $43.8 billion through December 2033, excluding optional extensions.
Key facts
- 01Microsoft rejected an option to more than double its Nscale compute contract at the Ward County, Texas site, the Financial Times reported November 5.
- 02The option could have been worth tens of billions of dollars to Nscale.
- 03Nscale says the option was closer to 500MW; its existing Microsoft Texas contract remains in place.
- 04Nscale reports a $103B backlog, $141M first-half 2026 revenue and a $1B net loss.
- 05Nscale filed for an IPO in September and is preparing a listing at up to about $35B.
The broader 2025 Microsoft agreement covers around 200,000 Nvidia AI chips across Europe and the United States. In October 2025, Nscale announced a deal to lease Microsoft about 240 megawatts at an adjacent Texas site being developed by Ionic Digital, with an option on a 700-megawatt second phase. Microsoft still holds a right of first refusal on the remaining Ionic capacity, according to Ionic's SEC filings.
Nscale now needs other customers for the extra Ward County capacity. The company already has a September deal with robotics company Figure and undisclosed agreements with other companies at the site, and a person close to Nscale said it is in talks with several more potential customers.
Texas is the second Nscale project where Microsoft has stepped back. Microsoft withdrew from a plan to anchor Nscale's flagship data center in Loughton, Essex, after power connection delays pushed that site's expected supply date into the 2030s.
The timing matters because Nscale is preparing a public listing that would ask investors to value the company at up to about $35 billion. Its filing shows $103.4 billion in active and contracted value, of which $2.6 billion is active, along with first-half 2026 revenue of $140.6 million and a net loss of about $1.02 billion.
Nscale's other large anchor is Anthropic. Its West Virginia site is central to a roughly $45 billion computing deal with the Claude developer, and Nscale is in talks to expand that agreement to a second 460-megawatt data center there.
Microsoft and Nscale did not respond to requests for comment made outside regular business hours.
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