# Microsoft cancels $500MW AI data center expansion in Texas

Digest AI · Business & Funding · published 2026-11-04T23:16:00Z

Canonical: https://digestai.news/story/microsoft-cancels-500mw-ai-data-center-expansion-in-texas

## Summary

Microsoft did not exercise an option to expand its Texas data center with UK-based Nscale, a move worth tens of billions. The decision comes ahead of Nscale’s planned IPO at a $35 billion valuation and follows Microsoft’s earlier withdrawal from a $3 billion lease at Nscale’s UK facility. Nscale reported a net loss of $1 billion in H1 2026 on $141 million in revenue, with a $103 billion backlog unaffected by the cancellation.

The news contributed to a 15% plunge in Japanese semiconductor stocks, as markets reassessed AI investment momentum. Analysts linked the sell-off to broader concerns over AI capital expenditure, citing regulatory shifts in US states like Texas and a perceived slowdown in AI infrastructure spending. Toyota’s 16% gain contrasted with the downturn, driven by revised earnings forecasts and easing trade tariff expectations.

## Key points

- Microsoft canceled a $500MW expansion option with Nscale in Texas, worth tens of billions
- Nscale’s IPO at $35B valuation looms as it faces $1B H1 2026 loss on $141M revenue
- Semiconductor stocks fell 15% as AI investment caution spreads, Toyota rose 16%

## Why it matters

Microsoft’s pause signals potential cooling in AI infrastructure spending, pressuring semiconductor suppliers and reshaping market expectations for AI-driven growth.

## Sources

1. [Nikkei Average down 1,110 yen, yet TOPIX rises. Semiconductor stocks plunge around 15%, Toyota up 16%. Reading Microsoft's 'AI investment pass' and the 5% US interest rate](https://note.com/carbon4322/n/n3f8fe558347d?hl=en) (note.com, 2026-11-04)

Part of the developing story: [Microsoft Abandons Nscale Amid AI Power Crisis](https://digestai.news/thread/microsoft-cancels-deal-to-rent-23-000-nvidia-ai-chips-from-nscale-in-essex) (4 stories)

## Cite

Digest AI, "Microsoft cancels $500MW AI data center expansion in Texas", 4 November 2026, https://digestai.news/story/microsoft-cancels-500mw-ai-data-center-expansion-in-texas

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