Nscale Loses Microsoft AI Deal as Power Delays Push Projects Into the 2030s

Microsoft has abandoned plans to use a U.K. AI data center developed by Nscale, a company that emerged from the Bitcoin mining industry, after the local electricity network operator warned that the site might not receive sufficient power until the 2030s. The Nvidia-backed firm had expected to deploy more than 23,000 AI chips at the facility next year.

The proposed data center in Loughton, Essex, roughly six miles northeast of London, was designed to accommodate 23,040 Nvidia chips and provide 50 megawatts of computing capacity for Microsoft’s Azure cloud platform by early 2027. According to The Guardian, which followed an initial report by the Financial Times, UK Power Networks informed Nscale that adequate grid capacity might not be available until the early or middle part of the next decade.

Nscale announced the project last year in partnership with Microsoft, Nvidia, and OpenAI. When The Guardian visited the location in February, construction had not progressed beyond a scaffolding yard. Nscale has since cleared the site and is exploring alternative ways to secure electricity. The company said its other agreements with Microsoft remain unaffected.

Nscale originated from Arkon Energy, a company that developed infrastructure for Bitcoin mining. Founder Josh Payne used that experience in securing land and electricity to establish a business focused on providing computing infrastructure to AI companies. Across the industry, many publicly traded Bitcoin miners are pursuing a similar transition.

A CoinDesk report published in March found that publicly listed mining companies had announced more than $70 billion in artificial intelligence and high-performance computing contracts. During the same period, their combined Bitcoin holdings had fallen by more than 15,000 BTC from their respective peaks, partly because miners sold coins to finance infrastructure expansion.

The transition comes as traditional Bitcoin mining faces mounting financial pressure. The March report estimated that the average publicly listed miner’s cash cost of producing one Bitcoin approached $80,000 in the fourth quarter of 2025, while Bitcoin traded near $70,000 by March.

AI infrastructure contracts can provide miners with more predictable revenue over several years, but building facilities suitable for AI workloads requires significantly greater investment. Estimates put construction costs for AI-ready data centers at approximately $8 million to $15 million per megawatt, compared with roughly $700,000 to $1 million per megawatt for Bitcoin mining facilities. AI customers also require servers to remain operational around the clock.

Despite the size of announced deals, revenue generation has lagged behind contracted capacity. In its latest mining industry report, CoinShares estimated that the miners it tracks had more than four gigawatts of AI capacity under contract, but only around 550 megawatts were actively generating customer billings. Contract backlogs exceeded $100 billion, while annualized AI revenue was slightly above $1 billion.

Without an alternative electricity source or a significantly faster grid connection, Nscale’s cleared site could remain unused for years, delaying the planned deployment and its potential revenue.

The situation reflects a wider infrastructure challenge in the United Kingdom, where demand for electricity connections is outstripping available capacity. Energy regulator Ofgem has said data center projects have requested connections representing approximately 73 gigawatts of demand. The regulator is considering stricter requirements because some applicants may never proceed with construction, potentially delaying projects that are ready to move forward.

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