AI Cloud Service Provider Nscale Sees Surging Debt Before IPO, Increasing Dependence on Nvidia (NVDA.US) for Funding and Chip Supply

According to reports from zhihui财经APP, British AI cloud computing service provider and data center developer Nscale disclosed in its latest regulatory filing ahead of its initial public offering (IPO) that the company's debt level has surged significantly. Nscale will still need to raise substantial funds in the future to fulfill customer contracts, and its reliance on Nvidia (NVDA.US) is higher than previously disclosed. With Nvidia CEO Jensen Huang's sudden resignation, the market is becoming increasingly concerned over whether this AI chip giant will shift its financing support for emerging AI cloud computing service providers.

On Thursday evening, Nscale submitted an amended S-1 registration statement, nearly two months since the company first revealed its IPO plans. The filing shows that as of September 30, Nscale’s debt had reached $5.5 billion, a nearly 39-fold increase from $137.4 million at the end of June.

Meanwhile, Nscale also disclosed more details about Nvidia's investment. As one of Nscale’s major shareholders and a key equipment supplier to its AI data centers, Nvidia committed $2 billion out of a more than $3 billion convertible financing agreement reached in September. Nscale's previous IPO filing had only revealed Nvidia’s commitment of $1 billion.

However, Nscale emphasized in the latest filing that Nvidia is under no obligation to provide it with priority supply, discount pricing, or early access to new products. Nscale declined to comment beyond the content of the IPO filing and currently cannot guarantee that it will ultimately move forward with its IPO plans.

Nscale’s financial situation and its deepening reliance on Nvidia highlight the risks facing emerging AI cloud computing service providers as they rapidly expand computing infrastructure. These companies typically need massive capital outlays to purchase AI chips and build data centers, then lease out their computing power to AI developers to achieve long-term revenue growth.

However, as investors become increasingly cautious about the sustainability of the AI investment boom—and especially after Jensen Huang’s sudden resignation this week—the market has begun to pay attention to whether Nvidia will reduce its funding support for these emerging cloud computing providers in the future.

Despite facing funding pressure, Nscale has made some progress in fulfilling existing customer contracts. According to the latest IPO filing, the contract value corresponding to currently operational data center capacity is about $6.4 billion, up from $2.6 billion at the end of August. However, compared with the company's total contract value of about $106 billion, the contract value for currently operational capacity only accounts for about 6%.

The new capacity mainly comes from a data center in Texas, USA, a project backed by funding support from Microsoft (MSFT.US).

By contrast, Nscale's large-scale capacity supply contract with Claude chatbot developer Anthropic is becoming a key source of future funding needs and project execution risk for the company.

Nscale stated it must secure a substantial amount of additional financing to purchase Nvidia equipment for the Anthropic data center project, or it may face penalties for contract default. As Nscale’s largest customer, Anthropic signed a six-year contract worth $44.6 billion with the company. According to the agreement, Nscale will provide Anthropic with 460 megawatts (MW) of computing capacity, with facilities scheduled to begin phased operation at the end of 2027.

To date, Nscale has committed about $1 billion to build a data center serving Anthropic in Monarch, West Virginia, USA. However, to complete the entire project, the company will require at least another $30 billion in additional funding.

Under the contract terms, if Nscale fails to secure the required financing or does not deliver the project on time, Anthropic has the right to terminate the contract. In addition, Anthropic is in negotiations with Nscale regarding use of a second building at the Monarch data center campus, meaning the scale of future cooperation between the two parties could further expand.

Nscale pointed out in its IPO filing that capital expenditure commitments—mainly driven by equipment procurement needs—have increased significantly in the short term. However, there is no guarantee the company will be able to secure additional funding when needed, nor that any financing terms will be acceptable to the company.

In addition to Anthropic and Microsoft, Nscale is also expanding its customer base in other AI fields. The latest IPO filing further disclosed a computing supply agreement signed with humanoid robot developer Figure AI.

According to the agreement, this $3.5 billion contract will be paid half in cash (about $1.75 billion) and half in Figure AI equity, with final transaction terms depending on Figure AI’s valuation.

For Nscale, although the massive scale of customer contracts reflects strong market demand for AI computing power, how to raise enough funds, complete data center construction on time, and translate signed contracts into actual revenue remain critical questions it needs to address for investors before going public. Especially with Nvidia serving simultaneously as a core equipment supplier and a key financial supporter, any changes in the chip giant’s future strategic or capital allocation could have a significant impact on Nscale’s business expansion.