THE ESSENTIALS IN 30 SECONDS

  • The FT reports that Microsoft did not take up an option that would have more than doubled its existing Texas contract with Nscale.
  • The current deal, signed in October 2025, covers about 104,000 Nvidia GB300 GPUs; a source told Reuters it remains in place.
  • The news follows Microsoft's October exit from Nscale's Essex project and comes as Nscale pursues a New York listing.

Microsoft has turned down an option that would have more than doubled the size of its AI computing contract with Nscale in Texas, the Financial Times reported this week, citing three people familiar with the matter. Reuters, which relayed the report, said it could not immediately verify it. Neither company commented publicly.

What was on the table

Nscale signed the original agreement with Microsoft in October 2025. Coverage at the time, citing the FT, put the overall deal at up to $14 billion and said about 104,000 Nvidia GB300 chips would be installed at a Texas site leased from crypto miner Ionic Digital, with roughly 240 MW of power. The contract also gave Microsoft the right to add 700 MW of capacity from late 2027, which could have taken the campus to about 1.2 GW.

That second phase is what Microsoft has now passed on. According to Resultsense's summary of the FT story, Nscale now describes the option as closer to 500 MW, on its own land in Ward County rather than on the neighbouring Ionic site. The FT says Nscale stands to lose billions of dollars in expected revenue unless it signs another customer for the capacity.

A person familiar with the deal told Reuters that Microsoft made the call several months ago and that the existing Texas contract is unaffected. Both outlets report that Nscale is talking to other potential tenants.

A test for the IPO

The timing is awkward for Nscale. In October, Microsoft withdrew from Nscale's planned data centre in Essex, England, over concerns about grid connections. Nscale also filed for a New York Stock Exchange listing in September under the ticker NSCL.

Its filing showed first-half 2026 revenue of $140.6 million and a net loss of $1.02 billion, part of it linked to currency effects. It reported $103.4 billion in contracted value, with Microsoft agreements worth up to $43.8 billion subject to delivery conditions, and its largest customer accounting for 52% of revenue. The FT frames the Texas decision as a test of a listing valuation of around $35 billion.

What remains unclear

The reasons for Microsoft's decision have not been disclosed, and the FT's account rests on unnamed sources. This is a different issue from earlier reports that Nvidia was discussing guarantees for Nscale's debt on its West Virginia campus for Anthropic. Hyperscalers have been signing large capacity deals with GPU cloud providers, and an option left unused shows that these commitments can shrink as well as grow.