Bloomberg reported on Thursday 5 November, citing anonymous sources, that Microsoft has become more cautious about neoclouds. Neoclouds are companies that build data centres specialising in AI computing and rent out their GPU capacity to others. Bloomberg said Microsoft has been the sector’s most important early customer.

Microsoft is now tightening oversight of some Nebius, IREN and Nscale projects, the sources said. Microsoft is also considering whether to sign new neocloud deals, but has not ruled them out entirely.

Delays disrupt investment plans

Chief Financial Officer Amy Hood said on Microsoft’s latest earnings call that some capacity from outside suppliers had arrived late and disrupted the company’s investment plans. Bloomberg said it was the third time she had raised the issue. Microsoft has sent staff to Nscale’s and IREN’s Texas sites, among others, to make sure construction meets its requirements.

At IREN’s Texas project, some of the recent problems have involved cabling, Bloomberg reported. Last week the companies agreed a new timetable that could push completion back by weeks or months. In its earnings report, IREN said it was delaying some deliveries of AI infrastructure to Microsoft because of requested changes to the network design, Reuters reported. IREN said it would not face financial penalties for the delays.

Sources: Texas expansion dropped before IPO filing

The Financial Times first reported that Microsoft will not exercise an option to more than double its Texas agreement with Nscale. Microsoft is already using the roughly 230 megawatts of first-phase capacity, agreed in October 2025, at Ionic Digital’s campus in Barstow, DCD reported.

Sources give different figures for the size of the option. TheEnergyMag reported that Nscale announced a 700-megawatt second-phase option in October 2025. DCD, citing the FT, said the option was closer to 500 megawatts and covered a separate site owned by Nscale. DCD’s source said Nscale offered capacity from its neighbouring site because Ionic Digital has not received approval to bring the power needed for the expansion to its campus.

An anonymous source told Reuters that Microsoft made the decision months ago, before Nscale filed for its IPO in September. DCD’s source said the discussions took place months ago. Both sources said the decision does not affect Nscale’s backlog of about $103 billion. DCD’s source said Microsoft still accounts for about 40 per cent of it. Bloomberg reported that some of the capacity went to the robotics company Figure AI.

Microsoft also dropped a letter of intent under which it would have leased 1.35 gigawatts from Nscale in West Virginia, Bloomberg reported. In October, Microsoft cancelled a deal worth about $3 billion for Nscale’s Loughton data centre in England because the grid connection has been delayed into the 2030s, Bloomberg’s sources said.

Shares fell in a broad sell-off

A Microsoft spokesperson told Reuters: ‘Our approach to infrastructure is built on flexibility and optionality, combining Microsoft-owned data centers, leased facilities and strategic partnerships with third-party providers to help us bring capacity online reliably and efficiently.’

IREN and Nebius shares fell about 20 per cent on Thursday amid a broad sell-off in AI infrastructure stocks, Bloomberg reported. Reuters said IREN closed the day about 17 per cent lower and Nebius about 14 per cent lower.

Texas’s incoming governor, Gina Hinojosa, adds to the uncertainty, Reuters reported. Hinojosa has said she will ban new data centre projects until state lawmakers approve rules for the industry.