Nscale reveals $5.5 billion debt and wider loss ahead of IPO

Key points

• Nvidia-backed Nscale disclosed $5.5 billion of debt in an updated IPO filing that also shows a widening loss.
• The third-quarter net loss reached $1.69 billion on $307.5 million of revenue, up 1,344% year over year.
• Nvidia (NVDA) shares were down 3.78% at midday, and Nscale says it still needs more cash before its listing.

Nvidia-backed neocloud Nscale has revealed $5.5 billion of debt in an updated regulatory filing tied to its planned initial public offering on the New York Stock Exchange. The filing also says the company needs more cash and relies more on Nvidia than it had previously disclosed.

The pressure matters because the listing is the company's route to new funding while its losses grow. Financial Times reported that Nscale told investors it must obtain additional financing to fulfil its Anthropic contracts, and that the offering is pegged at $35 billion. The company has not said how much it intends to raise.

In the updated prospectus, Nscale put its third-quarter net loss at $1.69 billion on revenue of $307.5 million, up 1,344% year over year. The loss widened from $1.02 billion in the second quarter, when revenue was $140.6 million, up 1,252%.

Customer news is mixed. Anthropic exercised its right in late September to contract for additional computing power at an Nscale site in West Virginia. Microsoft walked away from a data center in England that it had planned to use, and Darren Hardman, Microsoft's U.K. and Ireland chief executive, said in October that the decision had to do with Nscale's access to electricity. CNBC reported that Microsoft also decided against renewing a contract with Nscale in Texas, a claim not confirmed on the record. The filing still expects Microsoft to be a significant customer in future periods.

The sector is unsettled. Jensen Huang resigned as Nvidia's chief executive on Thursday after admitting he had been unfaithful to his wife, and Nvidia is investigating his relationship with a woman that intelligence agencies have called a Chinese spy. Huang had overseen Nvidia's investments in the neocloud market, which rents out access to Nvidia graphics chips.

Peers moved sharply. CoreWeave pulled back about 7% on Thursday after rising almost 25% on Wednesday on strong results, while Nebius fell about 17% after issuing light full-year guidance.

NVDA shares are down 3.78% today as of 12:00 p.m. ET.

Sources: Bloomberg, CNBC, Financial Times