Microsoft exits data centre deal in blow to UK AI ambitions

Microsoft has announced it will withdraw from a planned UK AI data centre deal with British start-up Nscale, a move seen as a setback to the country's ambitions in artificial intelligence. Last year, Microsoft agreed to lease computing capacity from Nscale, an AI infrastructure provider backed by chip giant Nvidia, at a data centre located in Loughton, northeast of London.

The US tech giant stated the decision pertains to a single site, but affirmed its ongoing commitment to the partnership. The Loughton site was promoted as the largest UK sovereign AI data centre by former Prime Minister Keir Starmer. However, the project has faced challenges due to high electricity prices and delays in connecting to Britain's power grid.

Nscale is preparing for an initial public offering on the New York Stock Exchange, with a potential valuation of up to $35 billion. The company attributes a large portion of its committed revenue to major customers including Microsoft and US AI giant Anthropic; however, the Loughton data centre accounted for a small share of Microsoft's contracts with Nscale.

OpenAI recently exited a partnership with Nscale and Nvidia to develop a UK AI infrastructure initiative, citing high energy costs and regulatory uncertainty.