AI data center developer Nscale files for IPO: 85% of $103.4B contracts from Microsoft and Anthropic, active contracts under 3%

By [Your News Desk]

Nscale (NSCL.US), a UK-based AI data center developer, filed an S-1 registration statement with the U.S. Securities and Exchange Commission last Friday, planning to list on the New York Stock Exchange under the ticker "NSCL."

The headline figure in the prospectus is a staggering $103.4 billion in total contract value — a number that, for a company founded just two years ago, rivals established infrastructure giants. But a closer look reveals a far more complex story.

Customer Concentration: Two Clients Account for 85% of Contracts

According to the filing, Microsoft (MSFT.US) and Anthropic together represent 85% of Nscale's total contract value:

• Microsoft: Signed multiple agreements since late 2025, totaling approximately $43.8 billion, with performance periods extending through 2033.
• Anthropic: Signed a $44.6 billion computing capacity lease agreement in August, covering server racks and equipment at Nscale's flagship data center in West Virginia.

Revenue concentration is even more pronounced:

• In the first half of 2026, Nscale's single largest customer contributed 52% of revenue. The company declined to disclose the customer's name in the filing.
• In 2025, Microsoft accounted for approximately 73% of Nscale's revenue.
• The company's risk factors state: "A significant portion of our revenue is driven by a limited number of customers."

This structural dependency is not unique to Nscale. Estimates from March show:

• Microsoft and Meta (META.US) account for roughly half of Nebius' (NBIS.US) annual sales.
• Microsoft contributed approximately 67% of CoreWeave's (CRWV.US) revenue in 2025.

While these new cloud providers generally attempt to use "customer diversification" to counter concerns about over-reliance on Silicon Valley giants, the actual data does not support that narrative.

The $103 Billion Backlog: Only $2.6 Billion Is Active

Of the $103.4 billion in total contract value, only $2.6 billion — or less than 2.5% — was in "active" status as of the end of August, meaning it has been built and is generating revenue. The vast majority consists of multi-year commitments on paper, awaiting data center completion, chip delivery, and power connectivity before they can be realized.

First-Half 2026 Financials

| Metric | Value | |---|---| | Revenue | $140.6 million (up >12x YoY) | | Net Loss | $1.02 billion (7x revenue) | | Cost of Revenue | $189.6 million (exceeds revenue) | | Gross Profit | Negative |

The company's cost-to-revenue ratio is inverted: cost of revenue exceeded revenue itself, meaning Nscale failed to achieve even a gross profit.

Balance Sheet Pressure

As of the end of August:

• Liabilities exceeded $8 billion, not including financing from Dell (DELL.US).
• The prospectus includes a notable disclosure: management expressed "substantial doubt" about the company's ability to "continue as a going concern," citing reliance on uncommitted debt and equity financing to meet projected funding needs.
• While management ultimately concluded that delaying or cutting capital expenditures could mitigate this risk, the appearance of "going concern" language in an IPO filing sends a significant signal.

Nvidia: Shareholder, Supplier, and Implicit Guarantor

Nscale's relationship with Nvidia (NVDA.US) extends far beyond that of a chip supplier:

• Equity: Nvidia holds more than 5% of Nscale's outstanding shares.
• Supply Chain: Nvidia is the exclusive GPU supplier for Nscale's data centers, with a $1.2 billion capacity lease agreement.
• Financing: Nvidia participated in multiple funding rounds, including a $3.1 billion convertible bond issuance earlier this month, of which $1 billion was subscribed by Nvidia.
• Credit Support: Nvidia agreed to guarantee up to $860 million in obligations for Nscale's lease agreement at a facility in Ward County, Texas.

This multi-dimensional entanglement creates a concerning structure: Nvidia is simultaneously Nscale's shareholder, supplier, and backstop for its lease obligations. Nscale acknowledges in the prospectus that its close relationship with Nvidia "does not eliminate supply chain risks" — uncertainty remains over whether the latest AI accelerators can be delivered to data centers on time.

The Specter of "Circular Transactions"

Nscale's case points to a broader issue within the AI infrastructure industry: a prevalence of circular transactions.

In this model:

1. AI labs commit to purchasing computing capacity from new cloud providers.
2. Those cloud providers buy chips from Nvidia.
3. Nvidia makes equity investments back into the AI labs and cloud providers.

Funds and orders circulate within a closed loop, inflating valuations and contract sizes across the board.

Key Data Points

• Nvidia's total involvement in AI investments, financing arrangements, and partnership projects exceeds $750 billion.
• Nvidia CFO Colette Kress has stated that demand from AI labs receiving Nvidia funding accounts for approximately one-quarter of the company's business next year.

The Bank for International Settlements highlighted this dynamic in its annual report. Some analysts draw parallels to the "circular chain" transactions of the 1980s U.S. savings and loan crisis, where interconnected deals masked real risk and amplified systemic vulnerabilities, ultimately leading to the collapse of roughly one-third of S&L institutions.

The Anthropic Deal: Not a Done Deal

Nscale's $44.6 billion contract with Anthropic is far from guaranteed. The prospectus explicitly states that the agreement includes milestone conditions and strict computing consistency requirements. If Nscale fails to meet these, the contract can be terminated.

More directly, Nscale acknowledges that it has not obtained binding financing commitments for the Anthropic contract. The company plans to build an 8-gigawatt data center campus in West Virginia, with only the first 2 gigawatts expected to come online by 2028 — a long runway before the contract begins generating revenue.

A Key Client Steps Back

In April, OpenAI withdrew from Nscale's Stargate infrastructure projects in Norway and the UK. Microsoft took over the Norway data center, while Google (GOOGL.US) plans to replace OpenAI on the UK project. Earlier reports also suggested Nscale had discussed computing capacity supply with ByteDance, TikTok's parent company, but Nscale's S-1 filing makes no mention of this.

IPO Valuation and Market Context

Nscale is targeting a $35 billion valuation for its IPO — more than double the $14.6 billion valuation from its March funding round. Based on an annualized revenue of approximately $140 million from the first half of 2026, this implies a price-to-sales ratio of roughly 50x.

IPO underwriters include Goldman Sachs, JPMorgan Chase, and Morgan Stanley.

Market Headwinds

The market environment has shifted:

• CoreWeave, a direct competitor, has seen its stock price decline more than 10% over the past month.
• Nebius has remained roughly flat.

Rothschild & Co. Redburn initiated coverage on Nscale's listed competitors on Monday with a "Sell" rating, warning that these companies face high leasing costs and reliance on debt financing. The firm noted that sales growth is "closely tied to the availability of funding, and therefore growth cannot be taken for granted."