Nscale IPO: Why the $35bn Valuation Target Looks Too High Against CoreWeave and Nebius
Nscale booked $140.6 million of revenue and a $1.02 billion net loss in the first half. It says it holds $103.4 billion of contracts, but only $2.6 billion is active, and 85% of the total comes from two customers whose payments are "up to" amounts tied to delivery. The desk expects the IPO to price below $30 billion, or not this year.
In October 2025 Nvidia paid $60 million for warrants in Nscale with an exercise price of one cent. What it gave in return, according to Nscale's registration statement, was a guarantee of up to $860.3 million of Nscale's rent on a data center in Ward County, Texas, for the first five years of the lease. That footnote explains a good deal of how the London company got to a $35 billion IPO target. Its biggest supplier is also a shareholder, a new noteholder and the backstop to its landlord.
Nscale filed for a New York Stock Exchange listing under the ticker NSCL on September 18. Fortune reported on Thursday that it wants a valuation of about $35 billion. That is a target; no price range has been filed yet. The desk thinks it is too high by at least a seventh, and that the gap between contracted and running revenue is where investors will push back.
The income statement is short and ugly. Revenue for the six months to June 30 was $140.6 million, up from $10.4 million a year earlier. Annualise it and Nscale runs at about $281 million. At $35 billion, that is roughly 124 times sales. The net loss was $1.02 billion, 7.3 times revenue, though $457 million of it is a non-cash fair-value charge on convertible instruments. Strip that out and the operating loss is still $492 million, on cost of revenue ($189.6 million) that alone exceeded revenue. Adjusted EBITDA was minus $199 million.
The public comparisons are unkind. CoreWeave, which listed in March 2025 at $40 after cutting its range, closed on Thursday at $90.13, a market value of about $49.7 billion on trailing revenue of $7.59 billion: 6.5 times sales. Nebius is worth $66.7 billion on trailing revenue of $1.36 billion, about 49 times, a multiple investors have granted because it is growing fast and already slightly profitable. Lambda remains private. To justify $35 billion at CoreWeave's multiple, Nscale would need about $5.3 billion of annual revenue, 19 times its current run rate.
Nscale's answer is the backlog, and it is a big one. As of August 31 the company reported $103.4 billion of "active and contracted" total contract value under take-or-pay agreements, up from $38.0 billion at the end of 2025, supporting about 461,000 GPUs. Of that, $2.6 billion is active. The other 97.5% depends on Nscale building and energising capacity it does not yet have. Two contracts dominate. Statements of work signed with Microsoft between September 2025 and April 2026 provide for payments of "up to approximately $43.8 billion through December 2033", and Anthropic agreements signed on August 25 provide for "up to approximately $44.6 billion". Both are subject to Nscale meeting delivery and availability requirements. Together they are $88.4 billion, or 85% of the total. Take-or-pay protects Nscale once a hall is running. Before that, the risk that a site is late sits largely with Nscale, which is why Oracle's power problems in New Mexico this week are relevant to its IPO.
The Microsoft work is concrete. Nscale has deployed more than 12,600 Nvidia Grace Blackwell Ultra GPUs at the first building of its Sines campus in Portugal, and plans more than 66,000 Vera Rubin NVL72 GPUs there from late 2027. At $35 billion, buyers pay about 34 cents per dollar of contract value. That sounds cheap until you remember that each dollar of it requires capital that Nscale has to raise first.
It has been raising it fast. Investing outflows were $3.29 billion in the first half. On the filing's own list, Nscale has lined up about $9 billion of GPU facilities, credit lines and Dell Financial Services equipment leases, plus the $3.1 billion of convertible notes agreed on September 15, of which $1 billion goes to Nvidia. Operating cash flow was positive at $1.69 billion in the half, but that is mostly customer prepayments, which are money for capacity it still has to deliver. The filing says reliance on uncommitted financing "initially raised substantial doubt" about Nscale's ability to continue as a going concern, a doubt management considers resolved because it could cut capital spending. Cutting capex is also how a contracted backlog stops converting.
Then depreciation. Nscale depreciates "technology equipment", mainly GPUs, over five to six years. The Microsoft contract runs to December 2033, which roughly matches a six-year life for chips arriving in late 2027. If buyers decide the economic life of an AI accelerator is closer to four years, the annual charge on the same fleet rises by half. First-half depreciation was $174 million and will grow with every site that goes live.
The bull case is not frivolous. CoreWeave's IPO was also doubted, priced below range, and has more than doubled. Nscale's growth from $0.5 billion of active contracts in December to $2.6 billion in August is real, its customers are among the best credits in the industry, and 10 gigawatts of owned or controlled power pipeline is scarce. Anyscale, the Ray software company it agreed to buy in July, gives it a software story beyond renting chips. CoreWeave listed with billions of revenue already running and a multiple in single digits. Nscale is asking for Nebius-plus pricing with CoreWeave-style customer concentration and a fraction of either company's revenue.
The Nvidia loop is the last issue. Nvidia is the primary manufacturer of the GPUs Nscale deploys, a holder of more than 5% of its shares, a lender through the new notes and a guarantor on a lease, backed by $470 million Nscale keeps in escrow for it. Jensen Huang told Fortune that without Nvidia's support Nscale "wouldn't be where they are today". Vendor support has made Nscale easier to finance. It also means part of the valuation rests on Nvidia continuing to provide it.
Winners if the deal prices at target: Nvidia, whose penny warrants and note would mark up; Microsoft and Anthropic, which get capacity without putting it on their balance sheets; and the underwriters. Losers would be the buyers at 124 times sales. London loses too: a British AI infrastructure company is listing in New York.
The desk expects Nscale to price at a valuation below $30 billion, or to postpone into 2027, in the way SB Energy pushed back its listing this week when investors balked above $50 billion. Checkpoints: the amended filing with a price range, which will show the exact share count; SB Energy's rescheduled pricing, now targeted for mid-to-late October at the earliest; CoreWeave's third-quarter results, expected around November 9; and closing of the Anyscale deal alongside the offering. A price range implying $35 billion or more that is then oversubscribed would prove the desk wrong. A Microsoft or Anthropic delivery date slipping in the next filing would push fair value lower still.