Firmus's failed listing triggers a chain reaction! UK AI data center developer Nscale's $30 billion valuation under pressure as investors "haggle" it down to $16 billion.

According to people familiar with the matter, Nscale is facing investor opposition to its IPO valuation target following a series of market setbacks for artificial intelligence (AI) companies. The data center developer, backed by NVIDIA Corporation (NVDA.US), has been seeking an IPO valuation of about $30 billion, the people said. But some of them said a group of investors recently urged the company to consider a valuation range of $16 billion to $19 billion, believing that range is more likely to win over buyers, with a significant factor being the collapse of Australian AI data center company Firmus's IPO plans. Firmus, an Australian artificial intelligence (AI) data center operator backed by NVIDIA Corporation, had originally planned to list at a valuation of about $30 billion, which was expected to be one of Australia's largest IPOs. However, due to an excessively high valuation, insufficient investor demand and concerns about the massive financing needs of AI infrastructure, the closely watched listing plan was ultimately canceled on October 9. According to people familiar with the matter, Firmus and its underwriting team had hoped to attract a large number of U.S. institutional investors to subscribe, but during the marketing process, several U.S. fund managers considered the $30 billion valuation the company was seeking too expensive. As subscription demand fell short of expectations, the underwriting team at one point considered reducing the offering size and lowering the valuation to salvage the deal. The plans reportedly included cutting the fundraising size to about $3 billion and lowering the company's valuation to between $20 billion and $25 billion. However, even after adjusting the terms, the underwriting team still failed to secure enough support from U.S. investors and ultimately had to cancel the IPO. Nscale publicly filed for a U.S. listing on September 18. Although the required 15-day waiting period has passed, the company has not yet begun its formal market marketing. The people said the company is currently addressing comments from the U.S. Securities and Exchange Commission (SEC) on its filing and plans to launch marketing once those issues are resolved. The people also said discussions about the IPO are still ongoing, details of the IPO plan may change, and no final decision has been made. Nscale is developing data centers in locations including Norway and West Virginia in the United States. Reports in August said the company expected to raise up to $3 billion in the IPO. The Norway data center, located north of the Arctic Circle, has been billed as the flagship project of the British data center developer, but reports said construction is already six months behind schedule due to factors including a leak in the cooling system, local regulatory rules, construction delays and a fire. The London-based company just completed a $3.36 billion pre-IPO funding round last month, led by Dan Loeb's Third Point, with participation from NVIDIA Corporation, Apollo Global Management Inc (APO.US), Citadel, Hudson Bay Capital and the Abu Dhabi Investment Council. However, with rising borrowing costs and growing uncertainty over the long-term returns of massive AI investments, investor sentiment toward AI infrastructure companies, including chipmakers and cloud computing companies, has shifted. Shares of several of Nscale's peers have recently been hit hard. CoreWeave (CRWV.US) lost a quarter of its market value last week, and its credit risk indicator rose to a record high; Nebius (NBIS.US) shares have fallen 32% over the past two weeks. The gap in expectations between companies seeking IPOs and potential investors could force companies to slow down the listing process. The so-called "valuation gap" may reflect differing views between the two sides on the future trajectory of financing costs and whether the challenges facing the entire industry can be resolved quickly. The valuation disagreement will further add to the near-term challenges facing Nscale's proposed IPO. One of Nscale's largest customers, Microsoft Corporation (MSFT.US), said last Sunday that it had withdrawn from a UK data center deal with Nscale after the relevant data center project faced delays due to power supply constraints.