Microsoft has walked away from an option to more than double its contract with British neocloud provider Nscale for compute capacity at a Texas data center, the Financial Times reported on Thursday, November 5, 2026.

The decision is a severe blow to Nscale, which is aiming to go public at a valuation of roughly $35 billion.

Public hostility toward data centers was one of the big themes of the US midterm elections, and many political analysts count it among the reasons for the success of the Democratic Party, which campaigned heavily on a promise to curb the unchecked proliferation of this kind of infrastructure.

The vote has raised the level of uncertainty for anyone investing in the sector, and nowhere more than in Texas. Governor-elect Gina Hinojosa, a Democrat, has pledged to block new projects until the state legislature passes rules for the industry, according to Reuters.

The expansion that never happened

The Redmond-based company’s decision not to expand the contract is worth tens of billions of dollars in potential lost revenue, the Financial Times said, and will force Nscale to find new customers for that capacity.

A source close to the company said talks are already under way with several potential customers, and that Microsoft’s decision does not affect the overall $103 billion contract backlog cited in its listing documents.

That is a difficult mission, but not an impossible one for a startup whose board includes figures of the caliber of Sheryl Sandberg, formerly Mark Zuckerberg’s right hand at Meta, and Sir Nick Clegg, the former British deputy prime minister.

Microsoft made the decision several months ago, according to one of the three anonymous sources who spoke to the Financial Times. That puts it before the election, and well before Nscale filed to list on the New York Stock Exchange on September 18, 2026. The contract already in force between the two companies is unaffected.

Nscale’s complicated relationships with Big Tech

This is not the only setback Nscale’s plans have suffered recently.

Microsoft had previously backed out of a deal that would have made it the main customer of the British company’s flagship project in Loughton, in Essex. The cause there was not discontent over data centers but delays in connecting to the electricity grid, which would have left the power fully available only in the next decade.

Local community opposition, by contrast, helped delay a project for a gas-powered data center campus in West Virginia, tied to a $45 billion agreement with Anthropic.

Nscale, which counts chip giant Nvidia among its backers, now needs buyers quickly for the capacity left free.

The company rents out computing power for artificial intelligence, and it cannot do without new contracts, both to keep financing construction of its own data centers and to repair its accounts. In the first half of 2026, Nscale posted net losses of $1.02 billion on just $140.6 million in revenue.

Editor’s note

This article was originally published in Italian on money.it by Andrea Fabbri on November 06, 2026 as «Microsoft frena su Nscale, niente raddoppio del data center in Texas. Un colpo per l’IPO da 35 miliardi». It has been translated and adapted for an international audience by the Money.it International desk.