According to Britain's Telegraph newspaper, the US technology giant, one of Nscale's two largest customers, recently terminated its agreement for the facility. The report, published on Sunday, did not specify the reasons behind Microsoft's decision.
The withdrawal comes after repeated delays to the project, with the newspaper reporting that national electricity grid officials had informed Nscale that a power supply for the proposed data centre might not be available until the 2030s.
The reported setback highlights the challenges facing large-scale data centre developments as demand for computing capacity accelerates, driven largely by the rapid adoption of artificial intelligence technologies.
Microsoft declined to comment when approached by Reuters. Nscale, however, sought to reassure stakeholders that its broader relationship with the technology company remained intact and that the Loughton project was still part of its plans.
"Our relationship with Microsoft remains strong and long-term, and this unfortunate London-wide grid issue has no impact on our other contracts," an Nscale spokesperson told Reuters.
The company added that it remained committed to the project and its wider UK operations, while exploring alternatives to address the site's electricity requirements.
"We remain committed to both the Loughton project and the UK, and we are exploring alternative power sources for the site, in addition to other expansion sites in the UK," the spokesperson said.
Nscale's efforts to secure alternative energy supplies could prove important as data centres require substantial and reliable electricity to support the computing systems used to train and operate advanced AI models.
The reported withdrawal is also significant for Nscale's commercial outlook. The company filed for an initial public offering in the United States last month, with its prospectus identifying Microsoft and AI company Anthropic as expected major customers.
Nscale provides infrastructure services spanning computing capacity, power, data centres and software for training and running artificial intelligence models. Backed by Nvidia, the company has emerged as a fast-growing participant in the increasingly competitive AI infrastructure market.
According to the information provided in its prospectus, Nscale's total contracted value expanded from $100 million to more than $103 billion in just two and a half years following its launch, underscoring the scale of its reported growth.
The company competes with established and emerging infrastructure providers, including CoreWeave, Nebius, Crusoe and Lambda, as technology firms race to secure the computing resources needed to develop and deploy AI systems.
While Microsoft's reported exit represents a setback for the Loughton development, Nscale's commitment to finding alternative power sources suggests the project has not been abandoned. The timeline for securing electricity and the project's eventual commercial direction, however, remain uncertain.