According to people familiar with the matter, Nscale is encountering investor resistance to its targeted IPO valuation following a series of setbacks across AI-related companies.
These sources said the data center developer, which is backed by Nvidia (NVDA.US), had been pursuing an IPO valuation of roughly US$30 billion. However, some of these individuals noted that a group of investors recently urged the company to consider a valuation range of US$16 billion to US$19 billion, arguing that this level is more likely to attract buyers, with one key factor being the collapse of Australian AI data center company Firmus's IPO plans.
Firmus, an Australian artificial intelligence (AI) data center operator also backed by Nvidia, had originally planned to list at a valuation of approximately US$30 billion, which would have made it one of Australia's largest IPOs. Yet due to excessive valuation, insufficient investor subscription demand, and market concerns over the massive financing needs of AI infrastructure, the highly anticipated listing was ultimately canceled on October 9. According to people familiar with the matter, Firmus and its underwriting team had hoped to attract a large number of U.S. institutional investors, but during the roadshow, multiple American fund managers considered the US$30 billion valuation the company sought to be too expensive. As subscription demand fell short of expectations, the underwriting team at one point considered reducing the offering size and lowering the valuation to salvage the deal. It is understood that the relevant proposals included cutting the fundraising scale to about US$3 billion and lowering the company's valuation to between US$20 billion and US$25 billion. Even after adjusting the terms, however, the underwriting team still failed to secure sufficient support from U.S. investors and ultimately had to cancel the IPO.
Nscale publicly filed for a U.S. listing on September 18. Although the stipulated 15-day waiting period has passed, the company has yet to begin a formal market roadshow. People familiar with the matter said the company is currently addressing comments from the U.S. Securities and Exchange Commission (SEC) on its filing and plans to launch the roadshow once these issues are resolved. These individuals also said that discussions regarding the IPO are still ongoing, that specific details of the IPO plan may change, and that no final decision has been made yet.
Nscale is developing data centers in locations including Norway and West Virginia in the United States. An August report said the company expected to raise up to US$3 billion in the IPO. Its Norway data center, located north of the Arctic Circle, is hailed as the flagship project of this British data center developer, but reports say the project's construction progress is already six months behind schedule due to reasons including a leak in the cooling system, local regulatory rules, construction delays, and a fire.
The London-based company just completed a US$3.36 billion pre-IPO funding round last month, led by Dan Loeb's Third Point, with participating institutions also including Nvidia, Apollo Global Management (APO.US), Citadel, Hudson Bay Capital, and the Abu Dhabi Investment Council. However, as borrowing costs rise and uncertainty grows over the long-term returns of massive AI investments, investor sentiment toward AI infrastructure companies—including chipmakers and cloud computing firms—has shifted. Several of Nscale's peers have seen their share prices battered recently. CoreWeave (CRWV.US) lost a quarter of its market value last week, with its credit risk indicator rising to a record high; Nebius (NBIS.US) shares fell 32% over the past two weeks.
The gap in expectations between companies seeking IPOs and potential investors may force businesses to slow down their listing processes. The so-called "valuation gap" may reflect differing views between the two sides on the future trajectory of financing costs and whether the challenges facing the entire industry can be resolved quickly. Divergence over valuation will further intensify the near-term challenges facing Nscale's proposed IPO. One of Nscale's largest customers, Microsoft (MSFT.US), said last Sunday that it withdrew from a UK data center deal with Nscale after the relevant data center project faced delays due to power supply constraints.
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