Microsoft pulls out of Nscale's Essex AI data centre

What happened

According to the Telegraph on October 18, Microsoft, one of Nscale's two largest customers, recently informed the company that it was pulling out of the Loughton deal (Telegraph). Microsoft was to be the site's anchor tenant and, according to the paper, had agreed to rent 23,000 Nvidia AI chips there. It was the site's only announced customer. Microsoft declined to comment to the BBC (BBC).

Nscale says it is sticking with the project. A spokesperson said the company is exploring alternative power sources for the site, as well as other expansion sites in the UK. It called its relationship with Microsoft “strong and long-term” and said the “London-wide grid issue” has no impact on its other contracts.

Power is the bottleneck

The Guardian reports that UK Power Networks, which runs the grid across London and the south-east of England, told Nscale earlier this month that it could not supply enough power to the site until the early to mid-2030s (The Guardian). According to the BBC, the data centre was originally due to receive power at the end of this year. Nscale is now looking at generating power on site and at speeding up the connection.

The project carries political weight. The UK government presented it in 2025 as the country's “largest UK sovereign AI datacentre”. Nscale pledged £2bn for it, and the site is expected to create 250 permanent jobs once it opens. Microsoft's involvement was part of its £22bn ($30bn) UK investment pledge.

What it means for Nscale

The Telegraph says more than 40% of Nscale's $103bn in contracted revenue comes from Microsoft, although the UK deal is believed to be a small part of that. Anthropic is another major customer. The timing is awkward: Nscale is preparing a Wall Street listing at a valuation of up to $35bn, while rival data centre developers have seen their shares fall sharply over the past week on worries about repaying their debts.

According to the BBC, the two companies are still working together on projects in Norway, Portugal and the United States.

The takeaway

The case shows that for AI infrastructure, a grid connection can be as tight a constraint as chips. A customer and funding do not help if the power arrives years late, and the tenant will look for capacity elsewhere. Anyone planning on European AI capacity should ask providers about their power timeline, not just their delivery promises.