Nscale faces a setback to its roughly $35 billion IPO plans after Microsoft rejected an option to expand its existing agreement for computing capacity at a Texas data center by more than twice its size. The potential expansion, involving billions of dollars, leaves Nscale seeking new customers for the Ward County site. The decision follows Microsoft’s earlier withdrawal from a $3 billion UK leasing deal and comes as investors scrutinize debt-heavy AI infrastructure firms, including neoclouds. Nscale reported a $1 billion net loss on $141 million of revenue in the first half of 2026, although Microsoft’s decision does not affect its reported $103 billion backlog. The company is also facing construction delays and local opposition at its flagship West Virginia site, linked to a potential $45 billion computing deal with Anthropic.