Nscale Exposes Multiple Risks Ahead of IPO: Data Centers Barely Operational, Actual Compute Capacity Less Than 1% of Target

Odaily News: AI data center developer Nscale plans to raise up to $3 billion through an IPO as early as this month, but has been revealed to be facing challenges including construction delays, equipment failures, regulatory issues, and employee complaints. Its flagship project—originally planned to build a 30-megawatt data center—is approximately 6 months behind schedule overall, and to accelerate construction, the company arranged for hundreds of construction workers to stay in a floating hotel. Additionally, the project has experienced liquid cooling system leaks and transformer fires. Local safety inspections also identified 10 violations, including ungrounded exposed components in high-voltage systems.

Nscale was spun off from crypto mining company Arkon Energy in 2024. It has secured over $103 billion in contracts but has almost no data centers in operation. As of August, its actually built target compute capacity was less than 1% of its overall plan, relying heavily on leased capacity from other data center operators to fulfill contracts. The company's IPO filings show that Microsoft and Anthropic account for approximately 85% of its contract scale; Anthropic has committed to spending approximately $44.6 billion on dedicated AI chip infrastructure for the Monarch campus in West Virginia, but Nscale has yet to secure the financing and long-term chip supply agreements needed to fulfill that contract.

Meanwhile, Nscale is seeking an IPO valuation of up to $35 billion. CEO Josh Payne previously summarized its model as "owning land, power, data centers, chips, and software," but multiple projects have yet to achieve this vertically integrated model, with power supply, grid connection, construction progress, and customer delivery all constituting potential bottlenecks. (Bloomberg)