Physix FrontierPhysix Frontier · News Briefing Card (IT Home · Nov 5, 2026)
Microsoft declines option to expand Nscale Texas compute lease
KEY FACTS
- Microsoft has decided not to exercise its option to expand its compute lease at Nscale's Texas data center.
- The option covered roughly 500MW of capacity and could have more than doubled the contract's size.
- Nscale is preparing for an IPO this year at a target valuation of $35 billion.
- Nscale posted $141 million in revenue and a $1 billion net loss in the first half of this year.
- Nscale said Microsoft's move does not affect its $103 billion order backlog.
KEY DATA
$35 billionTarget IPO valuation
$141 millionFirst-half revenue
$1 billionFirst-half net loss
$103 billionOrder backlog
PHYSIX OBSERVATION
Microsoft pulling back at the last moment exposes the soft spot of the new cloud vendors: long-term contracts are the collateral for financing and valuation, and the moment a customer hesitates, the IPO story gets marked down. Nscale's order backlog is thick, but the capacity left vacant at the Texas campus and the loss figures will make public-market investors price AI infrastructure more cautiously.
Source: IT Home report