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Oct 27, 2026

The Capacity Will Have to Go Where the Power Is

Microsoft's exit from Nscale's Loughton site, delayed listings and strained neocloud balance sheets all trace back to capacity sold before it could be energized. The demand will move to where firm power already exists.

Category
Industry Analysis
Author
Jason Brink, Co-Founder & Chief Strategy & Systems Officer
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The Capacity Will Have to Go Where the Power Is

Over the two weeks to October 23, the gap between AI capacity that has been sold and AI capacity that is switched on moved out of the small print of prospectuses and into share prices, listing decisions and a hyperscaler's choice of where to put its compute. Microsoft walked away from a flagship neocloud site in England after the local network operator reportedly said it could not power the site until the 2030s. Two planned AI infrastructure listings were pushed back, three others have been postponed, pulled or paused, and CoreWeave, the best-known listed neocloud, lost more than a third of its value over the month. Interest rates did part of the damage, but the common thread underneath is that GPUs, customers and capital were all lined up before anyone could say when the electricity would arrive. In our view the next stage of the AI build-out will be decided by where firm power already exists, and the demand will have to move to meet it.

What happened at Loughton

Nscale announced its Loughton campus in Essex in January 2025, with a target to open in the fourth quarter of 2026.1 It was planned at 50 MW, expandable to 90 MW, and was to house 23,040 Nvidia GB300 GPUs for Microsoft Azure.2 It was one of the most prominent projects attached to the US$30 billion UK investment Microsoft announced during the US state visit in September 2025.1

On October 18 The Telegraph reported that Microsoft had withdrawn as the site's anchor customer, and Nscale confirmed the contract had ended.2,3 Microsoft has not given a reason in public. The reporting ties the exit to the grid: UK Power Networks reportedly told Nscale it could not supply enough electricity to the site until the early to mid 2030s.1,2 Microsoft said the decision "relates to a single site" and that it remains committed to its partnership with Nscale. Nscale says the project has not been cancelled, that it is looking at other sources of power, and that what it called a London-wide grid issue has no effect on its other contracts.1

The grid problem at Loughton was known in the summer. In July The Telegraph reported that the 90 MW connection would not be ready for the planned opening, and that Nscale was talking to Bloom Energy about fuel cells to bridge the gap.4 What changed in October is that the customer left. A site with a signed hyperscale tenant, GPUs scheduled for delivery and a public listing in preparation lost that tenant, and the reporting so far points to the power date as the reason. An analyst at Dell'Oro, Alex Cordovil, put it to Data Center Knowledge in one line: "Contracted capacity is meaningless until it's energized capacity."2

Two weeks in October

Loughton came at the end of two weeks that had already gone badly for the sector. On October 9 Firmus withdrew its planned listing on the Australian Securities Exchange. Investors objected to the valuation and the company's future funding needs, and one fund manager summed up the capacity question by pointing out that Firmus had "46 megawatts operating out of 912 megawatts scheduled."5,6

In mid-October Bloomberg reported that Nscale's site at Glomfjord in Norway was six months behind schedule, with 6.4 MW of a planned 30 MW running.3 CoreWeave's shares fell more than a third over October. Its unsecured bonds now yield about 15 percent, and investors are focused on the roughly US$52 billion of debt it has taken on to build data centers.7

On October 22 Reuters reported that Nscale and the data center operator Switch had pushed their listings back to later in the year, and noted that SB Energy had postponed its offering and that Firmus and the AirTrunk REIT had pulled or paused theirs.8 Reuters attributed the retreat to rising interest rates, a sell-off in the shares and bonds of AI operators, and growing scrutiny of how much capital data centers need and whether future demand will justify it. One person told Reuters that Nscale's delay was partly about answering comments from SEC staff.

Rates and sentiment explain a lot of what investors were willing to pay in October. They explain less about why investors kept asking the same question of different companies, which was how much of what had been sold is actually running. Nscale's S-1 reported about US$103.4 billion of active and contracted contract value at the end of August, of which about US$2.6 billion was active, meaning online and earning revenue.2,9 Firmus's investors put that question to Firmus a two weeks earlier, and at Loughton Microsoft appears to have reached its own answer and left.

Why the neocloud model feels this first

A neocloud raises debt against customer contracts, orders GPUs, and starts billing only when the hall is energized. Every month the power date slips, interest keeps accruing, the GPUs age, and the customer is free to reconsider. Cordovil's point to Data Center Knowledge was that a neocloud typically has a more concentrated customer base and a higher cost of capital than a hyperscaler, so a single delayed site does more damage.2 Nscale's agreements with Microsoft (up to US$43.8 billion) and Anthropic (up to US$44.6 billion) make up about 85 percent of that US$103.4 billion.2,9

The hyperscaler sits on the other side of that trade. Microsoft can take the demand it had placed at Loughton and put it somewhere else, and its statement that the decision relates to one site is consistent with that. The company's chief financial officer told investors a year ago that Microsoft was not short of GPUs but "short the space or the power" to run them.10 That constraint has not gone away. In our reading, Loughton is what it looks like when a hyperscaler decides it will not wait years for a grid connection that was promised for 2026.

The obvious objection is that this is a financing story more than a power story, and that Loughton is one site at the edge of an unusually congested grid. Financing conditions plainly matter, and Nscale itself describes the problem as a London-wide grid issue. Higher rates would make a neocloud's listing harder, but they are a weaker explanation for a hyperscaler giving up a signed site whose reported problem was its power date, and the next section shows the same grid constraint building in Southeast Asia.

Southeast Asia is next in line

The same arithmetic is arriving in our region. On October 23 BMI, a unit of Fitch Solutions, said Johor faces the most severe electricity supply constraints of the major data center hubs in Asia-Pacific. It found that access to the grid may hold projects back more than total generation, that Johor's data centers could take more than 90 percent of the additional electricity Peninsular Malaysia generates over the next five years, and that their demand could reach about 30 TWh a year by 2031, roughly 18 percent of the peninsula's supply against 6 percent in 2026.11 Tenaga Nasional has a large grid upgrade planned, and BMI notes that major grid projects typically take five to ten years.11

Thailand has its own questions to answer. In early September a national data center board called for 49 projects under construction and 117 awaiting approval to pause while new rules were written, and officials later said the government could not order construction to stop.12 The country's framework for private on-site power supply is still being finalized.14 A region that builds campuses first and waits for the grid afterwards should expect some of its projects to stall the way Loughton did.

Where Vailinor stands

Vailinor builds AI compute at operating renewable biomass power plants in Thailand, supplied behind the plant's meter. The first phase of our portfolio in Thailand covers 157.1 MW of renewable behind-the-meter power across eleven operating host plants, most of which have been generating for over a decade.13 That figure describes site capacity, and the IT load we can run from them is lower once cooling and the plant's own needs are taken out.

The plants are already built, have years of operating history, and are already connected to the grid, which serves as backup. Putting a data hall beside one of them does not need a new grid connection to get started, so the timeline is set by construction, funding and Thailand's rules for on-site supply, rather than by a utility's connection queue. Our first site, with Kaona Power Supply in Ubon Ratchathani, is targeted for service in late 2027, subject to funding and customer commitments.13,14 We are not exempt from the questions in this article. Our sites are individually smaller than the campuses in the headlines, Thailand's rules for this kind of supply are still being written, and we expect to be measured on how much capacity we actually energize.

October suggests that compute buyers will go where power can be delivered on a date they can rely on, and that the capacity will follow the power rather than the other way around. At our eleven host plants the generation is already built and operating, beside communities that have lived with the plants for years. Once funded, we are ready to put compute beside it and energize the next wave of AI capacity in Southeast Asia.

References

  1. Data Centre Review, "Microsoft pulls out of Nscale's Essex AI data centre amid grid delays," 20 Oct 2026. https://datacentrereview.com/2026/10/microsoft-pulls-out-of-nscales-essex-ai-data-centre-amid-grid-delays/
  2. Data Center Knowledge, "Nscale Loses Microsoft Deal as Power Delays Threaten AI," 19 Oct 2026. https://www.datacenterknowledge.com/build-design/microsoft-exits-nscale-data-center-deal-over-uk-power-delays
  3. The Next Web, "Microsoft reportedly quits Nscale's UK data centre weeks before its IPO," 18 Oct 2026 (reporting The Telegraph and Bloomberg). https://thenextweb.com/news/microsoft-pulls-out-nscale-loughton-data-centre-ipo
  4. Data Centre Review, "Nscale's £2bn Essex data centre hit by grid delays," 14 Jul 2026, summarizing The Telegraph, 13 Jul 2026. https://datacentrereview.com/2026/07/nscales-2bn-essex-data-centre-hit-by-grid-delays/
  5. Yahoo Finance, "Firmus withdraws $7.1 billion IPO," 9 Oct 2026 (quoting, via the Sydney Morning Herald, Minotaur Capital's Armina Rosenberg). https://finance.yahoo.com/technology/ai/articles/firmus-withdraws-7-1-billion-151554787.html
  6. ABC News, "How Firmus, the biggest IPO in three decades, fell over," 10 Oct 2026. https://www.abc.net.au/news/2026-10-10/how-firmus-the-biggest-ipo-in-three-decades-fell-over/107247100
  7. Yahoo Finance (from BeInCrypto), "From Crypto Roots to AI Selloff: Why CoreWeave Is Under Pressure," 26 Oct 2026. https://finance.yahoo.com/technology/ai/articles/crypto-roots-ai-selloff-why-043000019.html
  8. Reuters (Echo Wang), "Anthropic IPO stands alone as AI market jitters sideline others," 22 Oct 2026, via The Globe and Mail. https://www.theglobeandmail.com/investing/article-anthropic-ipo-stands-alone-as-ai-market-jitters-sideline-others/
  9. Nscale Ltd, Form S-1, US SEC, 18 Sep 2026. https://www.sec.gov/Archives/edgar/data/2110365/000119312526395475/ck0002110365-20260918.htm
  10. Microsoft FY2026 Q1 earnings call, 29 Oct 2025, transcript. https://www.fool.com/earnings/call-transcripts/2025/10/29/microsoft-msft-q1-2026-earnings-call-transcript/
  11. Free Malaysia Today, "Johor's data centre boom faces power supply crunch," 23 Oct 2026 (BMI research). https://www.freemalaysiatoday.com/category/highlight/2026/10/23/johor-s-data-centre-boom-faces-power-supply-crunch
  12. The Nation (Thailand), 5 Sep 2026 and 15 Sep 2026. https://www.nationthailand.com/business/tech/40070670 and https://www.nationthailand.com/business/tech/40071042
  13. Vailinor, company website. https://www.vailinor.com/
  14. Vailinor, "Consent Comes Before Power," 13 Oct 2026. https://www.vailinor.com/blog/consent-comes-before-power/

Published on vailinor.com by Jason Brink, Co-Founder & Chief Strategy & Systems Officer, Oct 27, 2026.