AI trade pullback and Microsoft's canceled order deal a double blow: Nscale reportedly considering delaying its $35 billion US IPO.

Title context: AI trade pullback and Microsoft's canceled order deal a double blow: Nscale reportedly considering delaying its $35 billion US IPO. Text: Nscale, a UK data center developer, is reportedly considering delaying its $35 billion US listing plan to next year. According to reports, company executives are evaluating whether to pause an initial public offering (IPO) in New York that was originally scheduled to take place soon. No final decision has been made yet. Nscale submitted its listing application to the New York Stock Exchange in September, targeting a valuation of up to $35 billion. A funding round earlier this year valued it at $14.6 billion. Some investors now believe its value may be less than half of its IPO target. Why the listing window is narrowing at this point is not a question of demand. Microsoft Corporation abandons expansion order, Nscale's contract structure under pressure Reports recently said that Microsoft Corporation (MSFT.US) will not exercise its option to more than double the scale of leased computing capacity at a Texas data center under its existing agreement with Nscale. According to a person familiar with the matter, the potential expansion deal, if completed, would bring Nscale tens of billions of dollars in revenue. The person said Microsoft Corporation's decision not to expand the contract was made several months ago, earlier than Nscale's September IPO filing, and added that Microsoft Corporation's existing Texas contract with Nscale was unaffected. The two companies reached an agreement last year. Under the expanded agreement with Microsoft Corporation, Nscale will deploy about 200,000 NVIDIA Corporation (NVDA.US) AI chips across Microsoft Corporation's data centers in Europe and the United States. The news came weeks after Microsoft Corporation withdrew from a deal anchoring Nscale's flagship data center project in Loughton, Essex, because delays in grid access pushed its expected power supply date into the 2030s. Nscale previously said in its IPO filing that between September 2025 and April 2026 it signed statements of work with Microsoft Corporation valued at up to about $43.8 billion through December 2033, excluding optional expansion terms. The source said Microsoft Corporation's decision not to exercise the option has no impact on the total contract value of about $103 billion disclosed by Nscale in its IPO filing. The person said Nscale has been in talks with several major customers about the remaining computing capacity at the Texas data center. However, reports last month said Nscale was in talks to sell AI computing power to Claude developer Anthropic in a potential deal worth about $45 billion. Listing window squeezed by multiple pressures According to reports, the direct reason for Nscale's IPO delay is the global tech stock selloff, with investor interest in AI infrastructure companies clearly cooling. On November 5, the Nasdaq Composite fell about 5.5% in a single day, while the Nasdaq 100 plunged 6.36%, wiping out about $2.3 trillion in market value. On the same day, competitor CoreWeave (CRWV.US) fell 9.83%, Nebius (NBIS.US) fell 14.94%, and Cipher Digital fell 14.62%. But the real trigger is not the disappearance of computing demand, but a reassessment of policy variables. Democrats won both the Senate and the House in the US midterm elections and won governorships in Texas, Ohio, Nevada, Georgia, Michigan, and Pennsylvania. These states together account for about 45% of planned US data center capacity, with Texas alone accounting for 25%. UBS Group AG estimates that about 30% of new US capacity in 2028 could be affected by construction pauses; New York State imposed restrictions on projects above 50 megawatts as early as July. There are concerns that Democrats may slow the pace of data center expansion, putting greater pressure on heavily indebted AI infrastructure companies. What supports the $35 billion valuation? What supports this valuation is, first, its rapidly expanding asset scale. As of the end of August, the company had about 1.37 gigawatts of operating and under-construction capacity, including 1 gigawatt of owned sites, 200 megawatts leased, and 165 megawatts hosted; about 25,000 GPUs in operation, with about 461,000 in operation and under construction combined. But the cost of scale expansion is rising losses and leverage in tandem. First-half revenue rose 1,252% year on year, with a net loss of $1.02 billion, bringing cumulative losses to $1.86 billion; in September it separately issued at least $3.1 billion in convertible bonds, of which $2.1 billion were unsecured convertible bonds. At the same time, the market's reference point is shifting lower. CoreWeave's bond yield once exceeded 15%, and its credit default swap spread hit a record high, as the market's pricing of new cloud companies shifts from the computing narrative to contract fulfillment and financing costs. For Nscale, delaying the listing is trading time for a valuation anchor; but the more concentrated the orders and the heavier the capital expenditure, the shorter the time it can afford to wait.