Nscale’s Data Center Delays Put Delivery Risks in Focus Ahead of IPO
Nscale is facing construction delays, equipment failures and customer penalties as it seeks an initial public offering that could value the British artificial intelligence infrastructure company at as much as $35 billion.
Its flagship data center in Glomfjord, Norway, is six months behind schedule, with only 6.4 megawatts of a planned 30 megawatts operating, Bloomberg reported on Friday, citing people close to the project and public records. Cooling-system leaks, a fire and construction setbacks have hampered the facility, which serves TikTok owner ByteDance.
The problems expose a central risk for Nscale: converting more than $103 billion in contracts into operating infrastructure quickly enough to meet customer deadlines. Delays have already generated millions of dollars in contractual penalties, according to Bloomberg, while some agreements allow customers to cancel portions of their commitments if capacity arrives late.
Nscale is seeking to raise up to $3 billion in an IPO as soon as October. The company announced its US registration filing on Sep. 18, saying it had applied to list on the New York Stock Exchange under the symbol NSCL.
The reported $35 billion valuation target would be more than twice the $14.6 billion valuation attached to Nscale’s March funding round, when it raised $2 billion from investors led by Aker and 8090 Industries.
At Glomfjord, faulty pipe sealant and a filter problem contributed to repeated cooling-system leaks that forced workers to shut down rows of servers, according to the Bloomberg report. The system was replaced in June, but another significant leak occurred in September because of human error.
A December fire prompted an investigation by Norway’s Directorate for Civil Protection. The agency subsequently identified 10 safety violations, including failures to ground exposed high-voltage components, Bloomberg reported, citing public records. Nscale resolved the issues, and the inspection case was closed in September.
Norwegian labor inspectors also found inadequate records of workers at the site, a problem the company later corrected. Workers separately complained of excessive hours and insufficient training; the inspection did not assess those health and safety complaints.
The operational difficulties extend beyond facilities Nscale is building itself. At the Start Campus complex in Sines, Portugal, where it leases space to house AI chips, delays generated millions of dollars in penalties owed to Microsoft on paper, according to Bloomberg. Those charges became negotiating points in subsequent contracts.
Backup power was not ready when Microsoft gained access to the first portion of the project, the report said. An initially incomplete diagnostic system also complicated the handling of technical problems, although that system is now operational.
In Glomfjord, customers were offered improved terms on new contracts instead of outright payment of delay penalties, Bloomberg reported. Such concessions show how missed deadlines can affect the economics of future business as well as the delivery of existing projects.
Customer concentration adds to the exposure. Microsoft and Anthropic account for about 85% of Nscale’s contract value. Anthropic’s approximately $44.6 billion agreement covers AI infrastructure at the Monarch campus in West Virginia.
Nscale disclosed that it had not secured the financing or long-term chip-supply agreements needed to fulfill that contract. Anthropic can cancel portions without penalty if delivery is late.
Power availability presents another obstacle. Bloomberg reported that additional grid capacity needed for a major expansion in Korgen, Norway, was unlikely to arrive much before 2037. It also cited Guardian reporting that Nscale’s planned facility near London could have to wait until the early to mid-2030s for a grid connection.
Those constraints complicate Nscale’s ambition to control the chain from power and data centers to chips and software. Owning more of that infrastructure could improve margins, but requires the company to coordinate construction, electricity supply, equipment procurement and financing across multiple markets.
Nscale has continued to secure capital. On September 25, it announced $3.36 billion in convertible financing, comprising $2.36 billion at closing and a further $1 billion commitment from Nvidia expected to fund in mid-November. The notes automatically convert into shares when the IPO is completed.
The company has also reported progress on deployments. In an October 1 update, Nscale said it had added 24,000 graphics processing units over the preceding month, taking its deployed fleet above 50,000 across six active data centers in five countries. Its Ward County facility in Texas was operating, it said.
