AI data center builder Nscale raises $3.36B ahead of IPO

Nscale Ltd. today announced that it has secured $3.36 billion in funding to support its data center construction push.

The capital will arrive in two tranches. Nscale expects to receive $2.26 billion in the near future from a consortium that includes Third Point, Apollo, Citadel and more than a dozen other institutional investors. Nvidia Corp. will provide the remaining $1 billion in mid-November.

“This marks a milestone for Nscale as we continue scaling our full-stack AI infrastructure to meet unprecedented global demand,” said Nscale founder and Chief Executive Officer Josh Payne. “With the backing of these world-class investors, we are strongly positioned to accelerate our data center buildouts globally.”

Nscale is raising the capital by issuing convertible notes, short-term debt instruments that investors can exchange for stock. The notes will turn into shares immediately after the company’s forthcoming initial public offering. Nscale reportedly hopes to raise $3 billion at a $35 billion valuation.

The company’s pitch to Wall Street revolves around the more than $103 billion in total contracted value, or TCV, that it has on the books. TCV is a metric that forecasts future revenue from data centers. Nscale expects most of that revenue to come from contracts with Microsoft Corp. and Anthropic PBC.

Nscale builds artificial intelligence data centers with what it describes as a vertically integrated approach. It designs and constructs not only the facilities themselves but also the supporting power infrastructure. In West Virginia, for example, Nscale is building an AI campus with an on-site microgrid. The system will be capable of generating 2 gigawatts of power when it comes online in early 2028.

It also plans to equip the facility with energy storage infrastructure. The equipment will help offset potential fluctuations in the on-site microgrid’s energy generation capacity. According to Nscale, the West Virginia campus won’t draw any electricity from the public grid.

The company’s data center network also includes 16 other sites. Nscale owns five of the campuses while the rest are operated by partners. According to the company’s IPO prospectus, its construction strategy prioritizes locations where electricity prices are often “approximately 70% lower than major U.S. power markets.”

Custom software development is another major focus of Nsccale’s technical roadmap. Last month, the company detailed that it has built an AI tool to automatically troubleshoot issues in its graphics card clusters. When recovering a server requires physical repairs, the software identifies which specific part needs to be fixed and how.

In June, Nscale acquired Anyscale Inc. for $1.65 billion to enhance its software capabilities. The deal bought it a platform designed to improve the efficiency and reliability of AI clusters. It’s possible Nscale will use some of the proceeds from today’s investment to make additional acquisitions.

Photo: Nscale