Markets & Business
Nscale's IPO tests Wall Street's taste for concentrated AI bets
Nscale, a British neocloud whose revenue relies heavily on Microsoft and Anthropic, is going public in an IPO that will test investors' appetite for customer-concentrated AI infrastructure stocks.
Since it was spun out of Australian cryptocurrency mining company Arkon Energy two years ago, Nscale has amassed over $103 billion worth of contracts, according to its IPO filing. But there’s a catch: about 85% of that comes from a deal to supply Microsoft with $43.8 billion worth of compute through 2033, plus another supply agreement worth $44.6 billion with Anthropic. Anthropic’s agreement is contingent on Nscale obtaining financing, and the AI lab retains the right to walk away from or cancel the deal if Nscale fails to hit milestones the filing explicitly categorizes as “stringent.”
Nscale’s customer concentration underscores how interconnected the AI industry has become. A recent paper by credit hedge fund Sona Asset Management, featured in the Financial Times, found that many AI infrastructure providers depend heavily on a limited number of customers. Nscale’s competitor CoreWeave, for example, generates 67% of its revenue from Microsoft, while data center builder Applied Digital derives 67% of its revenue from Oracle and 30% from CoreWeave. Sona noted that such interconnectedness isn’t necessarily bad, but warned that a single setback or strategic shift by a major player could easily ripple across the entire industry.
Nscale, which plans to list on the NYSE, expects to be valued at $35 billion, the Financial Times reported, and is seeking to raise $3 billion in the offering, according to Bloomberg. The company reported revenue of $140.6 million for the six months ended June 30, up sharply from $10.4 million a year earlier. Net losses jumped to $1.02 billion from $369 million over the same period.
Earlier this month, Nvidia — one of Nscale’s major investors — agreed to provide the company with $1 billion in convertible debt as part of a larger $3.1 billion financing deal. The startup had been valued at $14.6 billion when it raised a $2 billion Series C led by Aker ASA and 8090 Industries. Aside from CoreWeave, Nscale’s competitors include Nebius, Lambda, and Crusoe — the latter said last week it raised $3.9 billion at a $30.9 billion valuation. Nscale operates data centers in Norway, Portugal, Texas, and West Virginia, and its board includes former Meta executives Sheryl Sandberg and Nick Clegg, as well as former OpenAI executive Fidji Simo.
Why it matters
A high-profile listing that leans on just two customers gives public investors a direct read on how much confidence Wall Street still has in the AI infrastructure boom’s underlying economics.