Microsoft has rejected an option to double the size of its Texas data centre lease with the Neocloud Nscale, according to the Financial Times.

Citing three people familiar with the matter, the publication noted that Microsoft’s rejection means Nscale will incur billions of dollars in lost revenue unless it can find an alternative customer.

Microsoft currently rents around 104,000 GPUs from Nscale, contained in a 240MW data centre in Ward County, Texas that the neocloud leases from the crypto miner and high-performance computing firm Ionic Digital.

This deal, signed in October 2025, always included an option for Microsoft to rent a further 700MW of chips from late 2027, part of a 1.2GW expansion Nscale has planned for the site.

A source with knowledge of the deal separately told Reuters that Microsoft made its decision to turn down the expansion option several months ago.

This is the second major setback for Nscale in as many weeks, with Microsoft having cancelled its involvement in the neocloud’s £2 billion Essex data centre in October over grid connection concerns.

Texas has become a hotspot for data centre construction within the US. OpenAI, Oracle and SoftBank’s $500 billion Stargate Project has so far led to the construction of over 600MW of data centre buildout in Abilene, Texas, with multiple gigawatts of construction also underway in Shackelford and Milam counties.

Nexus Data Centers is also constructing Nexus Hubbard, a 6.4GW data centre intended to primarily serve Anthropic, in Texas.

Microsoft ‘turns down Nscale Texas data centre expansion’

Microsoft has rejected an option to double the size of its Texas data centre lease with the Neocloud Nscale, according to the Financial Times.

Citing three people familiar with the matter, the publication noted that Microsoft’s rejection means Nscale will incur billions of dollars in lost revenue unless it can find an alternative customer.

Microsoft currently rents around 104,000 GPUs from Nscale, contained in a 240MW data centre in Ward County, Texas that the neocloud leases from the crypto miner and high-performance computing firm Ionic Digital.

This deal, signed in October 2025, always included an option for Microsoft to rent a further 700MW of chips from late 2027, part of a 1.2GW expansion Nscale has planned for the site.

A source with knowledge of the deal separately told Reuters that Microsoft made its decision to turn down the expansion option several months ago.

This is the second major setback for Nscale in as many weeks, with Microsoft having cancelled its involvement in the neocloud’s £2 billion Essex data centre in October over grid connection concerns.

Texas has become a hotspot for data centre construction within the US. OpenAI, Oracle and SoftBank’s $500 billion Stargate Project has so far led to the construction of over 600MW of data centre buildout in Abilene, Texas, with multiple gigawatts of construction also underway in Shackelford and Milam counties.

Nexus Data Centers is also constructing Nexus Hubbard, a 6.4GW data centre intended to primarily serve Anthropic, in Texas.

The scale and speed of data centre construction has prompted protest and pushback across the US and has been cited by political analysts as a major factor for Democratic voters in Tuesday’s midterm elections.

An exit poll by NBC found that AI data centres were cited as a “crucial” or “major” factor for 56 per cent of voters, particularly among those who voted Democrat.

In Texas, Democratic candidates explicitly pledged to take on local data centre construction.

Gina Hinojosa, who won her election to become Texas’ governor-elect, promised on the campaign trail to impose a moratorium on data centre approvals “until laws can be passed by the Legislature to protect Texans”.

Due to take office on 19 January, Hinojosa has pledged to work with the newly Democrat-controlled Texas House to require data centre operators protect water supplies, create union jobs and provide Texans with more choice on if and where data centres are constructed in the state.

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