If Britain’s Neocloud Nscale goes public, it will test public investors’ appetite for a stock whose profits are tied to two main customers.
Nscale has amassed $103 billion worth of contracts since its spinout from Australian crypto mining company Arkon Energy two years ago, according to its IPO filing. However, there is a catch. Most of that, about 85%, comes from a deal to supply Microsoft with $43.8 billion worth of computing through 2033 and another $44.6 billion worth of supply agreement with Anthropic.
Additionally, Anthropic’s contract is contingent on Nscale obtaining financing, and AI Labs reserves the right to withdraw from the transaction or cancel the contract if Nscale fails to meet milestones explicitly categorized as “rigorous” in the application.
Nscale’s customer focus is a reminder of how interconnected the AI industry is. A recent paper by credit hedge fund Sona Asset Management, featured in the Financial Times, found that many AI infrastructure providers rely heavily on a limited number of customers. For example, Nscale’s competitor CoreWeave derives 67% of its revenue from Microsoft, and data center builder Applied Digital derives 67% of its revenue from Oracle and 30% from CoreWeave.
While Sona said this interconnectedness is not necessarily a bad thing, a single setback or change in strategy by a major company can easily affect the entire industry.
According to Bloomberg, NScale, which plans to list on the New York Stock Exchange, is expected to be valued at $35 billion, and is aiming to raise $3 billion in an initial public offering, the Financial Times reported.
The company reported revenue of $140.6 million for the six months ended June 30, compared to $10.4 million in the year-ago period. Net loss jumped to $1.02 billion from $369 million in the same period.
Earlier this month, Nvidia, one of Nscale’s major investors, agreed to provide the company with $1 billion in convertible debt as part of a larger $3.1 billion financing deal. The startup was valued at $14.6 billion when it raised $2 billion in Series C led by Aker ASA and 8090 Industries.
In addition to CoreWeave, Nscale’s competitors include Nebius, Lambda, and Crusoe, the latter of which announced last week that it had raised $3.9 billion at a valuation of $30.9 billion.
Nscale operates data centers in Norway, Portugal, Texas, and West Virginia. The board includes former Meta executives Sheryl Sandberg and Nick Clegg, and former OpenAI executive Fiji Simo.
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