The key facts

  • Microsoft pulled out of the Loughton data center deal with AI infrastructure provider Nscale while keeping the rest of the partnership
  • According to British media reports, grid access at the site is not expected until the 2030s
  • Nscale is preparing for an IPO on the NYSE with a valuation of up to $35 billion and is continuing the Loughton project

Microsoft backs out of Loughton data center deal

Microsoft on Monday confirmed it had withdrawn from a deal for an AI data center in the UK with British startup Nscale. The American giant had agreed a year earlier to lease computing capacity from Nvidia-backed AI infrastructure provider Nscale at a planned data center in Loughton, northeast of London. A Microsoft spokesperson said the decision concerned 'one site' and added that the company remains 'committed to the partnership with Nscale'.

The deal was part of investments during Trump's visit

The agreement was announced alongside a series of multibillion-dollar investments by American tech companies during President Donald Trump's state visit to the UK last year; they were presented as a contribution to turning Britain into an 'AI superpower'. Former Prime Minister Keir Starmer called the Loughton site 'the UK's largest sovereign AI data center'.

Grid connection problems

A number of data center projects in the country are facing difficulties due to high electricity prices and long grid connection times. According to British media, grid officials told Nscale that the site would not get access to the electricity grid until the 2030s. UK Power Networks, which does not disclose information about individual connections, told AFP that 'many data centers, while they can connect to our distribution network, are waiting for works on the national transmission network, which we do not own'. Meeting the needs of large new data centers often requires large-scale infrastructure upgrades, which lengthens connection times.

Nscale's response and IPO context

An Nscale spokesperson said on Monday: 'We remain committed to both the Loughton project and the UK, and are exploring alternative energy sources for the site, as well as other sites for expansion in the UK'. He added: 'Our relationship with Microsoft remains strong and long-term, and this unfortunate grid issue, which is characteristic of London as a whole, does not affect our other contracts'. Nscale is preparing for an IPO on the New York Stock Exchange with a target valuation, according to reports, of up to $35 billion. In IPO documents, the company noted that 'a significant portion of our revenue commitments is secured by a limited number of clients with large contracts' — Microsoft and American AI giant Anthropic. According to an informed source, the Loughton deal accounted for only a small portion of Microsoft's agreements with Nscale.

OpenAI's earlier exit

Earlier this year, ChatGPT maker OpenAI withdrew from the partnership with Nscale and Nvidia to create a British version of Stargate — a large-scale AI infrastructure initiative. According to British media, OpenAI attributed the project's freeze to high energy costs and regulatory uncertainty.