The cooling of the AI infrastructure boom is throwing cold water on what was once a red-hot data center IPO.
According to people familiar with the matter, data center developer Nscale — which is backed by NVIDIA (NVDA) — is encountering strong investor resistance as it pushes toward a U.S. stock listing. The company is seeking an IPO valuation of roughly $30 billion, but a group of potential investors believes a range of $16 billion to $19 billion would be far more attractive to the market — effectively demanding a valuation nearly half the target price. At the same time, Microsoft (MSFT), one of Nscale's largest customers, has announced it is withdrawing from a UK data center agreement signed with the company, citing power supply constraints that have caused severe delays in the project's progress.
The valuation disagreement, combined with the loss of a key customer, is making Nscale's path to listing increasingly perilous. People familiar with the matter said the company publicly filed its U.S. listing application on September 18, but despite the mandatory 15-day waiting period having passed, a formal roadshow has yet to begin. Nscale is still working through feedback from the U.S. Securities and Exchange Commission (SEC) on its filing documents, and plans to launch its market promotion only after those issues are resolved. The sources emphasized that discussions are still ongoing, IPO plan details may change, and no final decision has been made.
The broader AI infrastructure sector is under pressure, casting a deeper shadow over Nscale's listing prospects. Shares of comparable companies have been hit hard recently: CoreWeave lost more than a quarter of its market value last week, with its credit risk indicators climbing to historic highs; Nebius shares have fallen 32% over the past two weeks. Rising borrowing costs and growing uncertainty over the long-term returns of AI technology are systematically suppressing market valuation expectations for AI cloud computing and chip companies.
Valuation Disagreement: $30 Billion Target Meets Realistic Pressure
Nscale is seeking an IPO valuation of approximately $30 billion, but some potential investors have recently pushed hard to lower the valuation to a range of $16 billion to $19 billion.
Investor attitudes have turned more conservative, partly because of an obvious negative reference point that recently emerged in the market — the IPO plans of Australian AI data center company Firmus collapsed, shaking the market's pricing logic for similar assets. People familiar with the matter said the gap in valuation expectations reflects a fundamental disagreement between buyers and sellers over the trajectory of financing costs and whether the industry's broader challenges can be resolved quickly. This disagreement could force Nscale to slow its listing pace.
Just as the valuation controversy continues to simmer, Nscale has suffered another major setback on the customer front.
Microsoft (MSFT) announced on Sunday that it has withdrawn from a UK data center agreement signed with Nscale, citing power supply constraints at the site that have caused project delays. Microsoft (MSFT) is one of Nscale's most important customers, and its exit has directly intensified doubts about the company's ability to execute on its business.
In addition, Nscale is developing data centers in Norway and West Virginia, among other locations. Its facility north of the Arctic Circle in Norway is positioned as the company's flagship project, but according to prior reports, the project is already six months behind schedule, with delays attributed to cooling system leaks, local regulatory restrictions, construction delays, and a fire incident.
Funding Background: $3.36 Billion Pre-IPO Round Completed Last Month
Despite obstacles in its listing process, Nscale has still shown considerable appeal at the pre-IPO financing stage.
The company completed a $3.36 billion Pre-IPO funding round last month, led by Dan Loeb's Third Point, with participation from NVIDIA (NVDA), Apollo Global Management Inc., Citadel, Hudson Bay Capital, and the Abu Dhabi Investment Council. NVIDIA's (NVDA) backing was once viewed as an important support for Nscale's valuation, but the current market environment shows that the premium effect of this halo is diminishing.
Nscale's board membership is equally star-studded, including former Meta Platforms Inc. executives Sheryl Sandberg and Nick Clegg — the latter having previously served as UK Deputy Prime Minister.
Analyzing the situation, the difficulties facing Nscale reflect a systemic shift in the valuation logic of the entire AI infrastructure sector.
CoreWeave saw its market value shrink by more than a quarter last week, with credit risk indicators rising to historic peaks; Nebius Group shares have fallen 32% over the past two weeks. Rising borrowing costs and uncertainty over the long-term commercial returns of AI technology are jointly eroding market confidence in pricing this sector.
The broader IPO market is also under pressure. Smart ring maker Oura Inc. and Bamboo Insurance Services Inc. have been forced to postpone their listings, due to persistently high interest rates combined with the Iran war weighing on market sentiment.
Meanwhile, the market expects Anthropic PBC to complete its listing as early as next month, with the potential to match or even surpass SpaceX's record-breaking debut. This is also objectively diverting investor attention away from other IPO projects, further raising the listing threshold for companies like Nscale.
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