Key Moments
- Microsoft chose not to exercise an option to more than double its current Texas data center agreement with Nscale, according to a person familiar with the matter.
- The decision was made several months before Nscale filed for its IPO in September and does not alter the existing Texas contract or the total disclosed contract value of about $103 billion.
- Nscale has been in talks with other major customers for remaining Texas capacity and was previously reported to be discussing a roughly $45 billion AI compute deal with Anthropic.
Microsoft Holds Line on Texas Capacity
Microsoft will not move ahead with an option to significantly expand its existing arrangement with AI cloud provider Nscale for additional computing resources at a Texas data center, a person familiar with the situation said.
The option would have allowed Microsoft to more than double the current agreement tied to the Texas facility. The Financial Times, which initially reported on the development on Thursday, said a possible extension of the arrangement could have been worth tens of billions of dollars to Nscale.
According to the person, who requested anonymity due to the confidential nature of the discussions, the decision not to proceed with the expansion was reached several months ago, prior to Nscale’s initial public offering filing in September. The person added that the existing Texas contract between the two companies remains in place and unchanged.
Existing Global AI Infrastructure Agreement
Last year, Microsoft and Nscale entered into a broader agreement under which Nscale would deploy approximately 200,000 Nvidia AI chips as part of an expanded collaboration. That arrangement spans Microsoft-linked data centers across both Europe and the United States.
Context: Data Center Projects and IPO Disclosures
The move regarding the Texas option follows recent changes in another major project involving the two companies. In recent weeks, Microsoft withdrew from a separate plan to serve as the anchor customer for Nscale’s flagship data center development in Loughton, Essex. That decision came after power connection delays pushed the anticipated supply timeline for that site into the 2030s.
In its IPO filing, Nscale stated that between September 2025 and April 2026 it signed statements of work with Microsoft valued at up to about $43.8 billion through December 2033, excluding any optional extensions.
The person familiar with the matter said Microsoft’s choice not to exercise the Texas expansion option does not change Nscale’s previously disclosed total contract value of about $103 billion in the IPO filing.
Texas Capacity and Customer Pipeline
The same person indicated that Nscale was already engaged in talks with multiple large customers regarding the remaining capacity at the Texas data center, suggesting that the company has been seeking alternative buyers for that portion of its infrastructure.
| Item | Detail |
|---|---|
| Texas expansion option | Microsoft decided not to exercise an option to more than double its existing agreement with Nscale |
| Statements of work (Microsoft – Nscale) | Up to about $43.8 billion through December 2033 (excluding optional extensions) |
| Total contract value disclosed in IPO filing | About $103 billion, reportedly unaffected by Texas option decision |
Other Strategic Discussions
Separately, Reuters and other outlets reported last month that Nscale had been in negotiations to supply AI computing power to Claude-maker Anthropic in a new arrangement that could be worth about $45 billion.
Company Responses
Microsoft and Nscale did not respond to requests for comment made outside regular business hours.
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