A leading British AI firm has suffered a significant blow after Microsoft pulled out of a deal to be the ‘anchor tenant’ at its new data centre in Essex.
In September, AI infrastructure company Nscale filed for a multibillion-dollar flotation on the New York Stock exchange, targeting a valuation of $35billion (£26.25billion).
If met, that would see board member and former deputy prime minister Nick Clegg, who owns 917,000 shares in the startup or 0.12 per cent equity, in line for a windfall of up to £30million.
But the IPO’s success is now under threat after Microsoft, one of the data centre developer’s two largest customers, informed Nscale it was pulling the plug on a deal due to concerns over construction delays and power supply.
The American tech giant is the source of 40 per cent of Nscale’s contract revenue and was due to be the ‘anchor tenant’ at the company’s first planned UK site in Loughton, Essex, where it had agreed to rent 23,000 high-end AI microchips.
The chips are used to house and run the huge physical infrastructure needed to train, test and operate the artificial intelligence models behind applications such as ChatGPT, Claude and Microsoft’s own Copilot.
The Loughton facility was originally meant to come online next year, but grid executives are now predicting no power supply until the 2030s.
The setback follows repeated delays to the data centre, with photographs in March this year showing the proposed location was still a functioning scaffolding yard.
Nick Clegg stands to receive a £30million windfall of British AI company successfully floats on the New York Stock Exchange
An artist’s impression of the finished data centre in Loughton, Essex – as of March this year, it was still a functioning scaffolding yard
The Microsoft deal was announced as part of the £22billion of investment promised during Donald Trump‘s state visit last year.
The Loughton premises was set to be the ‘largest UK sovereign AI data centre’ when Sir Keir Starmer unveiled the Labour government’s AI strategy in 2025.
Nscale is heavily backed by chipmaker Nvidia, whose revenues have soared on the back of the surge in AI investment, making them the most valuable company in the world with a market cap of $5.2trillion (£3.9trillion).
Mr Clegg was welcomed onto Nscale’s board seven months ago, after last year stepping down from his role with Facebook‘s parent company Meta.
Nscale said at the time that Mr Clegg brought ‘substantial global depth across technology, policy, operations, and governance to an already world-class collection of business leaders’. His former Meta boss Sheryl Sandberg was also offered a place on the board at the same juncture.
Mr Clegg is believed to receive a $60,000 (£45,000) annual retainer and a $260,000 (£195,000) annual share bonus from Nscale – but stands to make as much as £30million from the company floating on Wall Street.
However, his cheque is much less certain since the Microsoft deal broke down, given that the Washington-based firm was to become the main tenant at Loughton.
The former Liberal Democrat leader was thrust into the limelight in 2010 after a wave of ‘Cleggmania’ swept the UK following his polished performances in the pre-election debates.
But his popularity plummeted after entering government in coalition with the Conservatives, following a number of policy u-turns – including backtracking on a promise to oppose student tuition fees. An effigy of him was burned by student protesters later the same year.
Mr Clegg lost his constituency seat of Sheffield Hallam in 2017 and his turn to the tech sector since then has been undeniably lucrative.
He is estimated to have earned around £100million during his seven years at Mark Zuckerberg’s side, where he was dubbed ‘master of the Metaverse’ after being promoted to the company’s President of Global Affairs in 2022.
Nscale was spun out of Arkon Energy, a Melbourne-based cryptocurrency mining business.
The company pivoted to AI infrastructure, billing itself as ‘the engine of superintelligence’.
Nscale already has data centres in Norway, Iceland, which run on either hydro or geothermal power – an option not available for the Loughton site.
The firm also has data centres in Portugal and the United States, and runs a number of others with corporate partners.
Nscale has been privately valued at $15billion, but it is seeking to raise billions of dollars in a float that would more than double that figure.
All eyes will be on the outcome of its attempt as a measure of investors’ continued faith in AI companies.
Share prices of rival data centres have plunged in recent days over concerns they will struggle to pay off their debts.
A Nscale spokesman told The Telegraph: ‘We remain committed to both the Loughton project and the UK, and we are exploring alternative power sources for the site, in addition to other expansion sites in the UK.
‘Our relationship with Microsoft remains strong and long-term, and this unfortunate London-wide grid issue has no impact on our other contracts.’
Nvidia’s chief executive, Jensen Huang, praised Nscale this week at an event in London, saying: ‘You could be the most valuable UK startup they have created in the last ten years.’
Microsoft declined to comment.
