Firmus's IPO dream shattered, triggering a chain reaction! British AI data center developer Nscale's $30 billion valuation under pressure as investors "slash price" to $16 billion

According to The Smart Finance APP, sources reveal that after a series of setbacks faced by artificial intelligence (AI) companies in the market, Nscale is facing opposition from investors regarding its targeted valuation for its initial public offering (IPO). The sources stated that the data center developer backed by Nvidia (NVDA.US) was seeking an IPO valuation of around $30 billion. However, some of these sources indicated that a group of investors has recently urged the company to consider a valuation range of $16 billion to $19 billion, believing this range would be more attractive to buyers. One important factor influencing this view is the failure of the IPO plans for Australian AI data center company Firmus.

Firmus, the Nvidia-backed Australian AI data center operator, had initially planned to go public at an estimated valuation of about $30 billion, which would have made it one of the largest IPOs in Australia. However, due to overvaluation, insufficient investor demand, and market concerns about the massive financing needs of AI infrastructure, this highly anticipated IPO was ultimately cancelled on October 9.

Sources further indicated that Firmus and its underwriters had hoped to attract a large number of U.S.-based institutional investors for the offering. However, during roadshows, several U.S. fund managers considered the $30 billion valuation sought by the company to be too expensive. As investor demand fell short of expectations, the underwriting team considered reducing both the offering size and the valuation to rescue the deal. Reportedly, one proposal included cutting the fundraising amount to approximately $3 billion and lowering the company’s valuation to between $20 billion and $25 billion. Nevertheless, even after these adjustments, the underwriters were still unable to secure sufficient support from U.S. investors, leading to the IPO’s eventual cancellation.

Nscale publicly submitted its application for a U.S. listing on September 18. Despite the prescribed 15-day waiting period having elapsed, the company has yet to begin formal market roadshows. Sources say the company is currently addressing comments from the U.S. Securities and Exchange Commission (SEC) regarding its filings and plans to launch market presentations once these issues are resolved. Discussions surrounding the IPO are still ongoing, and the specific details of the plan may change, with no final decision made yet.

Nscale is developing data centers in locations such as Norway and West Virginia in the United States. Reports from August indicated that the company expected to raise up to $3 billion in the IPO. Its flagship project is the Norwegian data center located north of the Arctic Circle, but reports state that construction is already six months behind schedule due to issues such as cooling system leaks, local regulatory requirements, construction delays, and a fire incident.

The London-headquartered company just last month completed a $3.36 billion pre-IPO funding round led by Dan Loeb’s Third Point, with additional investment participation from Nvidia, Apollo Global Management (APO.US), Citadel, Hudson Bay Capital, and the Abu Dhabi Investment Authority.

However, as borrowing costs rise and uncertainty grows over the long-term returns on massive AI investments, investor sentiment toward AI infrastructure companies—including chip makers and cloud computing firms—has shifted. Several of Nscale’s peers have recently experienced sharp declines in share prices. CoreWeave (CRWV.US) saw its market value plunge by a quarter last week, with its credit risk indicators reaching record highs; Nebius (NBIS.US) shares have dropped 32% over the past two weeks.

The gap in expectations between companies seeking IPOs and potential investors may force firms to slow down their listing processes. The so-called "valuation gap" may reflect differences in views over future financing costs and whether the challenges faced by the entire sector can be quickly resolved.

Disagreements over valuation will further add to the challenges Nscale faces for its proposed IPO in the near term. One of Nscale's largest clients, Microsoft (MSFT.US), announced last Sunday it would withdraw from a UK data center deal with Nscale after delays in the data center project caused by power supply constraints.