Microsoft Drops Nscale AI Deal – Is Its AI Spending Strategy Changing?

Microsoft (MSFT) has reportedly walked away from a potential multibillion-dollar AI deal with UK-based Nscale. Microsoft's decision raises questions about its AI spending, while delays across its data center network point to a more careful approach to new deals. However, this does not mean the company is cutting its AI spend. The move is a setback for Nvidia (NVDA)-backed Nscale as it prepares for a planned stock market listing this year.

Microsoft Turns Down Extra AI Capacity

According to a Financial Times report, Microsoft has rejected an option to lease more computing power at Nscale's data center site in Ward County, Texas.

In October 2025, Nscale said Microsoft had agreed to lease about 240 megawatts (MW) of capacity at the site, with an option to take more. The extra capacity was later said to be closer to 500 MW. Microsoft chose not to take up that option, leaving Nscale to find other customers for the site.

Data Center Delays Add to the Challenge

This is not the first time Microsoft has stepped back from an Nscale project. In October, the company pulled out of a separate deal to lease 50 MW of capacity at Nscale's planned data center in Essex, UK.

That move came after delays in securing a power link pushed the site's expected power supply date into the 2030s. Microsoft said the decision related to one site and that it remained committed to its wider work with Nscale.

Delays Extend Beyond Nscale

Microsoft is also facing capacity delivery delays across its wider network of AI infrastructure partners. In its September quarter, Microsoft reported capital spending and finance leases of $45.2 billion, below its earlier expectations of around $50 billion. CFO Amy Hood attributed the shortfall to delays in capacity deliveries from third-party providers. Microsoft also lowered its 2026 capital spending outlook from $175 billion to $170 billion.

A November 4 report by Business Insider pointed to possible delays at projects linked to Nebius (NBIS) and IREN (IREN). Research firm Aterio flagged potential delays of around 140 MW at a Nebius-linked data center in New Jersey, while an IREN facility in Texas was still missing key equipment needed for its planned year-end delivery.

These issues show the problems AI data center firms face, from power supply and equipment shortages to regulatory approvals.

Is MSFT a Good Stock to Buy Now?

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