Microsoft declines option to expand Nscale's Texas data-center contract

Microsoft will not exercise an option to more than double its existing Nscale agreement for computing power at a Texas data center, according to a person familiar with the confidential matter. The person said the underlying Microsoft contract remains in force. The decision rejects additional capacity; it does not cancel the base deal.

For Nscale, the declined option removes an expansion from its pipeline as the British AI infrastructure provider pursues an initial public offering. The person said it does not change the $103.4 billion in active and contracted total contract value that Nscale disclosed as of Aug. 31.

The Texas decision is limited to optional capacity. It is separate from Microsoft’s withdrawal from Nscale’s Loughton data-center project, where the base agreement ended after a grid delay.

Nscale’s September registration statement says statements of work signed with Microsoft between September 2025 and April 2026 provided for payments of up to about $43.8 billion through December 2033. That figure excludes optional extensions and remains subject to delivery and service-availability requirements. Nscale filed the Form S-1 with the U.S. Securities and Exchange Commission on Sept. 18.

According to the person, Microsoft decided against the Texas option several months before that filing. Nscale announced the base Texas deployment in October 2025 as a roughly 240-megawatt campus holding about 104,000 Nvidia GB300 graphics processors, with phased service for Microsoft scheduled to begin in the third quarter of 2026.

An Ionic Digital regulatory filing describes a 126-month lease to Nscale covering 234 megawatts at the Ward County site, with about $1.95 billion in contracted lease revenue. It also says Nscale granted Microsoft an option for additional power if it became available from the second half of 2027, while Nscale retained a right of first refusal over further capacity.

The person said Nscale is discussing the remaining Texas capacity with several major customers. Microsoft and Nscale did not respond to requests for comment made outside business hours.