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Microsoft will not extend an existing agreement with Nscale to rent more computing power at a Texas data center, Reuters reported.
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The companies struck a deal in 2025 for Nscale to deploy around 200,000 Nvidia AI chips with Microsoft across its data centers in Europe and the U.S.
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Retail sentiment for MSFT flipped to 'bearish' from 'bullish.'
Microsoft Corp. (MSFT) will not exercise an option to more than double its existing agreement with AI cloud provider Nscale to rent more computing power at a Texas data center, Reuters reported on Thursday, citing a person familiar with the matter.
The companies struck a deal last year for Nscale to deploy around 200,000 Nvidia (NVDA) AI chips with Microsoft across its data centers in Europe and the U.S.
The reported development signals more pain for the IPO-bound Nscale. Last month, Microsoft pulled out of a deal to anchor Nscale's flagship data center project in Essex, the UK, after power connection delays pushed its expected supply date into the 2030s.
Nscale, backed by Nvidia, filed for an IPO in September, although a report last month said it faced opposition from investors over its $130 billion IPO valuation target.
Reuters reported that Microsoft's decision to not expand the Texas contract was made several months ago, before Nscale filed for its IPO, and that its existing workflow, as per the original, was not affected.
Cloud Industry Faces Pressure
The development comes as the cloud industry faces increased scrutiny. In recent weeks, the debt-heavy model of neocloud firms such as CoreWeave has come under the scanner even as concerns prevail over overcapacity.
The decisive midterm win by the Democrats, who are seen to be pro-AI regulation, has added concerns that new data centers will be harder and costlier to build. That could stifle the growth in cloud capacity essential to support AI.
Meanwhile, the delays in bringing new cloud capacity online are also drawing attention. The Information reported on Wednesday that delays from IREN Ltd (IREN) contributed to Microsoft spending less than it had earmarked in capital expenditures last quarter.
Retail View On MSFT
On Stocktwits, retail sentiment for MSFT flipped to 'bearish' from 'bullish.'
"$MSFT microsoft jumped 6% today on a bet the build slows down. seems like the best ai news left is less ai spending, and a rally for not building tells you where the capex story actually stands," a trader wrote.
Year to date, MSFT stock is up 15.6% as of its last close.
For updates and corrections, email newsroom[at]stocktwits[dot]com.
Yuvraj Malik has no position in any of the stocks mentioned in this article. StockTwits' news team content is for informational purposes only and is not intended as investment advice. For more, see our editorial policy . This article was originally published on StockTwits .
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