Microsoft Passes on Nscale Texas Expansion Option: Reports
Microsoft reportedly will not exercise an option to more than double its computing agreement with Nscale at a Texas data center, forgoing an expansion potentially worth tens of billions of dollars while leaving the existing contract intact.
The decision was made several months ago, before Nscale filed for a US initial public offering in September, Reuters reported on Nov. 5, citing a person familiar with the matter. The Financial Times first reported that Microsoft had declined the expansion.
The unused option does not affect the roughly $103 billion in total contract value Nscale disclosed in its IPO filing, the person told Reuters. Nscale was already discussing the remaining Texas capacity with several other major customers.
The scale of the proposed expansion was substantial. In its October 2025 announcement, Nscale said the initial Texas deployment would comprise about 104,000 Nvidia GB300 graphics processors at a roughly 240-megawatt campus leased from Ionic Digital. Microsoft held an option on a second phase comprising 700 megawatts, starting in late 2027.
That Texas project formed part of a broader agreement to supply Microsoft with about 200,000 Nvidia GPUs across the US and Europe. Nscale’s announcement also outlined deployments in Norway, Portugal and the UK.
For Nscale, Microsoft’s decision removes a potential source of additional business as the AI cloud provider prepares to go public. It also leaves the company seeking customers for capacity that Microsoft could have taken under the option.
Nscale said in its IPO filing that statements of work signed with Microsoft between September 2025 and April 2026 were worth up to about $43.8 billion through December 2033, excluding optional extensions.
The report follows Microsoft’s withdrawal from a separate Nscale project in Loughton, Essex. Delays in securing electricity had pushed the expected power-supply date into the 2030s. The Texas decision, however, had already been made months earlier.
Nscale has also been pursuing other large customers. It was reported in October that the company was in talks to supply computing power to Anthropic, the developer of Claude, under a potential agreement worth about $45 billion.
