Nscale Faces Multiple Risks Ahead of IPO, Data Center Nearly Non-Operational

AI data center developer Nscale plans to raise up to $3 billion through an IPO as early as this month, but it faces challenges including delays in data center construction, equipment failures, regulatory issues, and employee complaints. The overall progress of the planned 30-megawatt data center project is about six months behind schedule, and to expedite construction, hundreds of workers have been arranged to stay in floating hotels. The project has experienced incidents such as liquid cooling system leaks and transformer fires, and local safety inspections have identified ten violations, including some components of the high-voltage system not being grounded. Nscale was spun off from crypto mining company Arkon Energy in 2024 and has secured contracts worth over $103 billion, but as of August, its actual computing capacity is less than 1% of the overall plan, mainly relying on leased capacity from other data center operators. Its IPO documents indicate that Microsoft and Anthropic account for approximately 85% of the contract volume; Anthropic has committed to spending about $44.6 billion on dedicated AI chip infrastructure for the Monarch Park in West Virginia, but Nscale has yet to secure the financing and long-term chip supply agreements needed to fulfill this contract. Nscale is seeking a maximum IPO valuation of $35 billion, with CEO Josh Payne stating that its model involves "owning land, power, data centers, chips, and software," but multiple projects have yet to achieve this vertical integration, with power supply, grid connection, construction progress, and customer delivery all posing potential bottlenecks.

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