Nscale races toward a $35 billion IPO as its West Virginia computing campus exposes construction and financing risks

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Nscale is one of Britain's highest-valued startups, and its large US data project—the very project underpinning its $35 billion IPO plan—has suffered a series of setbacks and mounting financing risks.

The "neocloud" company, backed by Nvidia and whose board includes former Meta executive Sheryl Sandberg and former UK Deputy Prime Minister Sir Nick Clegg, is pinning most of its future revenue hopes on a rural tract of land in West Virginia.

Records reviewed by the media show that the project, called the "Monarch Compute Campus," is planned to cover 2,250 acres with up to 8 gigawatts of power supply, and is currently mired in construction problems, local opposition and regulatory scrutiny. Satellite imagery shows that as of October 20, about 400 acres were under development.

The project was initially promoted as a "net-zero," hydrogen-powered campus; after the original developer lobbied to change state law, the first 2-gigawatt phase switched to power from 864 gas engines. Under its approved emissions allowance, the campus would rank among the top 20 greenhouse gas emitters in the United States, on par with numerous coal-fired power plants.

Anthropic has signed a $45 billion order to lease computing capacity from Nscale's first West Virginia data center—more than 40% of the British company's $103 billion in contracted but unrecognized revenue. The two sides are in talks to double the order's size using a second, or even a third, data hall.

A report commissioned by Nscale from EY estimates that phase one of the Monarch project, comprising three data centers and 2 gigawatts of gas-fired power facilities, will cost up to $69.2 billion to build.

Nscale disclosed in its IPO filing that funding to build and equip the data hall serving Anthropic has not yet been secured; if financing is not obtained within the specified deadline, the AI lab has the right to terminate the partnership.

As global investors grow increasingly wary of an AI infrastructure boom built on debt-fueled expansion, the project's mounting troubles add uncertainty to Nscale's plans for a New York listing.

This month Microsoft withdrew from a computing-capacity lease agreement for a planned data center in Essex because the UK site will not have power until the 2030s, making the West Virginia project even more critical to Nscale. People familiar with the matter said the Essex project accounted for about $3 billion in contracted but unrecognized revenue.

In the first half of 2026, Nscale generated $141 million in revenue and a net loss of $1 billion. The company also has projects in Portugal, Norway and Texas. Including the Monarch campus, it says it has about 10 gigawatts of potential power capacity with clear expectations of being delivered.

Nscale CEO Josh Payne reassured employees that market demand for the company's computing services remains "insatiable."

"Our projects are backed by long-term customer contracts and a sound capital structure," he wrote in an internal memo last week, signing off with the company's popular slogan: "LFG."

Floods and local resistance

In September, a week before Nscale formally filed for its IPO, West Virginia regulators issued a stop-work order to the startup, requiring a full three-day halt at the campus. Stormwater runoff from the massive project repeatedly flooded surrounding properties and damaged residents' homes.

Regulators had already ordered a partial halt at the campus in July, and the company has received 10 violation notices in total, centered on inadequate stormwater controls.

"There are a lot of violations, and it's a poor record—one of the reasons local residents are so upset," said Nathaniel Hitt, a senior scientist at the West Virginia Rivers Coalition. "Communities nearby have been hit by flooding multiple times this year, and the direct cause is this construction activity."

People close to Nscale said the September flooding was caused by extreme weather, that the company complied with all regulatory directives and has repaired the damage caused.

Residents are also concerned about the 864 gas-fired generators, each roughly the size of a shipping container, which will power Nvidia AI processors around the clock. The units have a total installed capacity of 2.16 gigawatts, roughly equal to two large nuclear reactors. Some exhaust stacks are only about 800 feet from the nearest homes.

Under the draft permit, at full load the units would be allowed to emit 271 tons of formaldehyde a year—about five times the 2024 emissions of the largest comparable industrial source registered with the US Environmental Protection Agency. Formaldehyde is a known human carcinogen.

The units would also emit 10 million tons of greenhouse gases a year, roughly equal to total emissions from all motor vehicles in West Virginia. People close to Nscale said the campus would operate at an average load of about 55% of permitted capacity.

The gas units at the Monarch campus still need final state air emissions permits; the company also needs permits to fill about 28 acres of wetlands and nearly three miles of streams to build the second and third data centers.

Local grassroots groups voiced opposition at recent public hearings. "Our strategy is to use every legal means to slow the project down. Nscale itself is not what you'd call a stable company," said Elaine Matheny, an organizer with the residents' group Mason WV United.

Nscale responded: "Under the leadership of the new management team, we have comprehensively raised our operating standards, and construction progress at the Monarch campus is consistent with our commitments to customers.

We take our responsibility to surrounding residents seriously and have equipped the facility with advanced emissions control equipment that can keep actual emissions far below federal standards, with reductions of up to 70% or even more in most scenarios... We will continue to actively collaborate with the local community."

The West Virginia deal game

Residents have very limited means to stop the project. A state law pushed by Governor Patrick Morrisey and effective in 2025 allows data centers to build their own off-grid power plants, stripping local governments of the power to veto or regulate such projects.

The original developer of the Monarch campus was Texas company Fidelis New Energy, headed by Dan Shapiro, which pushed for the law's passage. When Fidelis announced the project in 2023, it billed it as a hydrogen energy campus; at the time, state law required such off-grid projects to use only renewable energy.

By 2025, Fidelis began lobbying to repeal that provision. Shapiro and other company executives made political donations to Morrisey. The relevant demands were incorporated into an omnibus data center bill, which the governor signed at the Monarch campus site. He said at the time: "You all put a lot of work into this, and today is an important day for Fidelis."

State Senator Glenn Jeffries, who supported the bill, said he went through repeated negotiations with Fidelis and many long nights. Mimicking the motion of sending a text message, he said: "Before the bill passed, the messages never stopped."

Fidelis co-founder Bengt Jarlsjo praised the bill as "transformative." Fidelis subsequently abandoned the hydrogen plan and switched to natural gas power.

Jeffries told the media that he consulted multiple experts to understand the core demands of data center developers, and said he is "committed to promoting West Virginia's economic development."

Morrisey did not respond to a request for comment. People close to Nscale said Fidelis's core demand was to eliminate the restriction allowing only renewable energy.

In March of this year, the project's various arrangements were finalized. Major gas utility Hope Gas announced a $250 million investment to build a gas pipeline serving the campus; Shapiro's company exercised its right to buy the 700 acres of land that form the core of the Monarch campus for $15 million.

At the end of that month, Nscale stepped in to acquire the project, paying $88 million in cash plus $693 million in stock. The startup valued the land at $91 million and valued the "power usage rights" corresponding to the not-yet-energized land at $743 million.

After the deal closed, Shapiro and Jarlsjo joined Nscale. Shapiro is now Chief Power and Energy Officer, with Jarlsjo serving as his deputy.

Preparing for an IPO

Nscale was founded only two years ago and has grown rapidly. In a funding round in March of this year, investors including Nvidia, Nokia and Dell invested a total of $2 billion, valuing the company at $14.6 billion.

Sandberg, who helped Facebook (later renamed Meta) grow into a social and advertising giant, joined the board earlier this year. Two people familiar with the matter said she is helping the company improve its operating systems ahead of the IPO.

Sources said some of the new hires recommended by Sandberg were given ranks higher than existing employees, causing internal friction. Another source said Sandberg is an active board member and an adviser to Payne.

Two other former Meta executives who worked closely with Sandberg—Clegg and Figi Simo—also joined Nscale's board this year.

The latest heavyweight Meta executive to join is Justin Osofsky, who became Nscale's Chief Operating Officer this month. People close to Nscale said Osofsky was selected through a public recruitment process.

This team must lead the company forward in a difficult financing environment, as investors are selling off the bonds and stocks of more mature neocloud peers such as CoreWeave.

Three people familiar with the company's financing plans said the company's IPO target valuation remains $35 billion; but one of them acknowledged that the recent sector selloff could "reset the valuation system for the entire industry."

The company and its advisers are also closely watching the results of the U.S. midterm elections and Anthropic's IPO process to choose the timing for launching its offering.

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