Nvidia-backed cloud provider Nscale has struck a deal with Microsoft worth up to $14bn, in a boost to the UK-based start-up’s hopes of launching a successful initial public offering as soon as next year.
The companies announced on Wednesday that Nscale will deploy about 104,000 of the latest Nvidia GB300 chips for Microsoft at a facility in Texas over the next 12-18 months. Nscale will also deliver another 12,600 graphics processing units (GPUs) for Microsoft at the Start Campus data centre in Portugal.
The move builds on Nscale’s deals last month with both Microsoft and OpenAI to build artificial intelligence infrastructure in the UK and helps position the London-headquartered company for a stock market debut — if it can complete construction of the facilities on time.
“We have public market ambitions, and execution is an enormous focus of mine,” Nscale chief executive Josh Payne told the Financial Times. He hoped to go public in the “back end of next year”, he added.
The deal is the latest indication that Big Tech companies are pushing ahead with construction of infrastructure for AI, despite growing concerns from investors that the market for it is starting to overheat.
Spun out of an Australian Bitcoin miner and relaunched as an AI cloud provider just last year, Nscale has raised $1.5bn in new funding over the past month alone, valuing it at about $3bn. Nscale planned to close its next private financing “soon . . . simply due to overwhelming demand” from investors, Payne said.
Nscale’s new deals with Microsoft build on an existing contract valued at $6.2bn for Nscale to deploy 52,000 Nvidia GPUs for Microsoft at its facility in Norway.
Nscale and Microsoft did not provide a figure for Wednesday’s deals but based on a similar contract value per GPU, the new contracts would likely generate as much as $14bn in revenue for the start-up.
Nscale’s latest Microsoft contract is a huge undertaking for a company that has quickly become one of Europe’s best-capitalised AI data centre providers. Its sudden rise has fuelled concern that Nvidia, the dominant supplier of AI chips, is using its formidable balance sheet to pump the biggest tech bubble since the dotcom boom.
Last month, Nvidia chief executive Jensen Huang said the chipmaker would invest £500mn in Nscale to accelerate its deployment of up to 300,000 of its GPUs, declaring it a “national champion for the UK”.
Huang said AI facilities running those chips could generate as much as £50bn in revenues over the next six years. “Nscale is going to be a very large UK technology company,” Huang said.
Nvidia’s backing turned investor sentiment around on Nscale very rapidly, according to Spencer McLeod, partner at G Squared. “The inflection for this business transpired in two weeks,” he said. “Suddenly everyone went from sitting on the fence to going all in.”
The Silicon Valley chipmaker is also investing in several companies that buy its GPUs — from Nscale’s cloud rivals CoreWeave and Nebius to OpenAI — to accelerate a new generation of AI-focused data centres.
Payne told the FT he had no concerns that the data centre market was overheating because it had “real hard asset value protecting your downside”.
“The larger chance we see a market slowdown is not going to be because of lack of demand, it’s going to be because of lack of power,” he said. “We’ve almost sold out our capacity for the next 12 months. And we would expect that to continue as we get into the next GPU cycle.”
As well as Nvidia, Nscale’s strategic investors include server maker Dell and networking provider Nokia, as well as private investors such as Sandton Capital, G Squared, Fidelity and Blue Owl.
Last month’s $1.1bn financing was led by Aker, the Norwegian energy and industrial group that Nscale is already working with to build a data centre that will serve customers, including OpenAI, in Narvik in northern Norway.
However, while Nscale has expanded its facility in Norway, it is yet to complete a new build from scratch.
“Nscale is a young company, there’s no question about that,” said Payne. “However, the individuals that we have involved and the resources we have are [those] of a much more experienced company.”
Payne pointed to Alex Sharp, a data centre industry veteran who is now Nscale’s chief operating officer, and David Power, chief technology officer, who has been building supercomputers for 20 years, as examples of the expertise that he has been able to recruit since publicly launching the business last year.
Securing affordable and largely renewable sources of energy has been crucial to the young company winning such big contracts.
The site in Texas, which Nscale is leasing from Bitcoin miner Ionic Digital, has 240MW of power today, sourced from the Texas grid. Microsoft had an option to add a further 700MW of capacity starting in late 2027, the two companies said.
The campus could ultimately scale up to as much as 1.2GW, Payne said, similar to the computing capacity that OpenAI is building with its Stargate project with Oracle and Crusoe in the same state. 1GW of power consumption is as much energy as 1mn typical US households consume in a year.
Jon Tinter, Microsoft’s president of business development and ventures, said: “Nscale is an ideal partner for this mission, given its deep expertise in providing AI infrastructure services at scale.”
Plenty of chips from Nvidia and big contracts from Microsoft will also help Nscale raise the capital it needs to continue its growth. “This is a high capex intensity business,” Payne said. “You’re never not fundraising.”
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