Nscale plans to list on the New York Stock Exchange with a valuation of $35 billion, even though 85% of its contract value relies on two customers.
The company was spun out of Arkon Energy two years ago and now holds over $103 billion in contracts. Most of this figure comes from a deal to supply Microsoft with $43.8 billion of compute capacity through 2033 and an agreement worth $44.6 billion with Anthropic.
Anthropic’s deal is contingent on Nscale securing financing. The AI lab can cancel the contract or walk away if the company fails to meet milestones listed in the IPO filing as “stringent.”
Concentration in AI infrastructure
Nscale’s reliance on a few major clients highlights how interconnected the AI industry has become. A paper by Sona Asset Management, published in the Financial Times, found that many infrastructure providers depend heavily on a limited number of customers.
Nscale’s competitor CoreWeave generates 67% of its revenue from Microsoft. Data centre builder Applied Digital derives 67% of its revenue from Oracle and 30% from CoreWeave.
Sona noted that this interconnectedness is not necessarily negative. However, a single setback or strategic shift by a major player can easily affect the entire industry.
Nscale expects to raise $3 billion in the offering. The company reported revenue of $140.6 million for the six months ended June 30. This is an increase from $10.4 million the previous year. Net losses rose to $1.02 billion from $369 million in the same period.
Earlier this month, Nvidia agreed to provide $1 billion in convertible debt. This was part of a larger $3.1 billion financing deal. The startup was valued at $14.6 billion when it raised a $2 billion Series C led by Aker ASA and 8090 Industries.
Aside from CoreWeave, competitors include Nebius, Lambda, and Crusoe. Crusoe said last week it raised $3.9 billion at a $30.9 billion valuation.
Nscale operates data centres in Norway, Portugal, Texas, and West Virginia. Its board of directors includes former Meta executives Sheryl Sandberg and Nick Clegg, as well as former OpenAI executive Fidji Simo.
What it means
Investors are being asked to back a business model where success hinges on the continued spending habits of two specific companies. If Microsoft or Anthropic change strategy or cut costs, Nscale’s stock could face immediate pressure regardless of its overall growth.
