Microsoft AI Deal Falls Through for Bitcoin Mining Offshoot Nscale Amid Power Delays

Microsoft has abandoned a planned AI data center project in the United Kingdom operated by Nscale after electricity network constraints threatened to delay power availability until the 2030s. The Nvidia-backed company had planned to install 23,040 AI chips at the facility, but the extended timeline has derailed its original deployment schedule.

The site in Loughton, Essex, around six miles northeast of London, was expected to supply 50 megawatts of computing capacity to Microsoft’s Azure cloud platform by early 2027. However, UK Power Networks reportedly warned Nscale that sufficient electricity capacity might not be available until the early or middle part of the 2030s, according to The Guardian, following earlier reporting by the Financial Times.

Nscale announced the development last year in partnership with Microsoft, Nvidia, and OpenAI. When The Guardian visited the location in February, it was reportedly still being used as a scaffolding yard. Nscale has since cleared the site and is investigating alternative options for obtaining power. The company said its other Microsoft contracts remain unaffected.

Bitcoin Miners Accelerate Their Move Into AI Infrastructure

Nscale grew out of Arkon Energy, a company that developed sites for Bitcoin mining. Founder Josh Payne used his experience securing land and electricity to build a business providing computing infrastructure to artificial intelligence companies. Other publicly traded mining firms are pursuing similar strategies as they seek to diversify their revenue streams.

A CoinDesk report published in March found that listed Bitcoin miners had announced more than $70 billion in AI and high-performance computing contracts. Their combined Bitcoin holdings had also declined by more than 15,000 BTC from peak levels, partly as companies sold tokens to fund their transition into AI infrastructure.

The shift comes amid mounting pressure on conventional mining operations. According to the March report, the average listed miner’s cash cost of producing one Bitcoin approached $80,000 in the fourth quarter of 2025. Bitcoin was trading near $70,000 by March, highlighting the financial challenges facing the sector.

AI contracts can provide more predictable revenue over several years, but developing facilities capable of supporting advanced computing workloads requires significantly more capital. Estimates place AI data center construction costs at $8 million to $15 million per megawatt, compared with roughly $700,000 to $1 million per megawatt for Bitcoin mining facilities.

AI customers also expect uninterrupted service, making reliable electricity and round-the-clock server operations essential.

AI Contracts Are Growing Faster Than Revenue

Despite announcing large agreements, mining companies have yet to convert much of their planned AI capacity into active revenue-generating operations.

CoinShares’ latest mining report identified more than four gigawatts of AI capacity under contract among the miners it tracks. However, only approximately 550 megawatts were actively billing customers. Contract backlogs exceeded $100 billion, while annualized AI revenue stood at just over $1 billion.

Nscale’s setback demonstrates how electricity shortages can prevent companies from delivering contracted computing capacity on schedule. Even major partnerships and substantial investment plans cannot guarantee timely deployment when grid connections remain unavailable.

Unless Nscale finds another source of electricity or secures an earlier connection date, the cleared site in Loughton could remain unused for several years.

U.K. Power Shortages Threaten Data Center Development

The project’s difficulties reflect a broader challenge facing Britain as demand for data center infrastructure continues to rise.

Energy regulator Ofgem has said proposed data center projects have requested grid connections representing approximately 73 gigawatts of demand. It is considering stricter requirements because some applicants may never proceed with construction, potentially leaving projects that are ready to build waiting for electricity capacity.

For Bitcoin miners moving into AI computing, access to power is becoming just as important as financing, customers, and advanced chips. Nscale’s delayed project highlights how grid constraints can derail major technology plans, postpone revenue, and complicate the industry’s transition from cryptocurrency mining to AI infrastructure.