Nscale, a startup that is less than a year old, is already trying to raise about US$2.7 billion ($3.55 billion) to build artificial intelligence infrastructure on the back of a pending partnership with ByteDance Ltd, the Chinese owner of TikTok, according to an offering document seen by Bloomberg.
The money, if Nscale follows through with the proposal, would allow the London-based company to build out data centers around the globe - filled with Nvidia Corp chips - that would be rented out by companies such as ByteDance, in order to train and operate their AI models.
The biggest chunk of the financing would be a US$1.8 billion private credit deal led by Goldman Sachs bankers, according to the offering document that was prepared for investors. Nscale has also been trying to raise another US$900 million in preferred equity and convertible shares, the document shows.
The conversations began before financial markets were rocked by President Donald Trump's tariff rollout in early April, and plans for the financing may change or be delayed, said people familiar with the matter, who asked not to be identified because the discussions are private.
In an emailed statement, a spokesperson for Nscale said: "We recognise that increasing demand for AI and keen interest in our rapidly evolving industry is generating a lot of attention for Nscale, but we do not comment on speculation."
A Goldman Sachs spokesperson declined to comment.
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The speed with which Nscale is pursuing the proposed deal - just 11 months after its founding - underscores how the AI boom has paved the way for relatively untested startups to seek enormous sums of money to expand. Headwinds to fundraising deals are mounting, though, as investors grow increasingly concerned about the sustainability of the AI spending frenzy and financial markets continue to whipsaw in the wake of Trump's tariff plan.
Nscale has been marketing its debt deal by pointing to a potential US$2 billion contract that it said it is finalizing with ByteDance, according to the document. Nscale is already working on a smaller project with ByteDance that began operating earlier this year, the document indicates.
A spokesperson for ByteDance said that the two companies have had some discussions about expanding their business together but that talk of a $2 billion contract "significantly overstates the scale of any possible cooperation."
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Nscale didn't provide further comment on the ByteDance contract.
Deals with ByteDance can be complicated because they touch on geopolitical disputes between China and the US as the two countries push for AI preeminence. US rules restrict Chinese companies from directly purchasing the most advanced AI chips from companies like Nvidia. The Trump administration has recently ramped up those curbs.
Chinese firms such as ByteDance have gotten around these restrictions by renting out chips from non-Chinese middlemen over the cloud - a dynamic that's drawn concern from regulators and politicians in Washington. The Information reported in December that ByteDance has told suppliers it planned to spend up to US$7 billion to access Nvidia chips in 2025, citing unnamed sources.
Nscale indicated in the document that it would offer ByteDance access to 27,000 Nvidia GB200 chips, the most powerful model available, and would put them in Nscale's facilities in Norway. The GB200 chips are among those that cannot be sold directly to companies in China, according to US rules. The government recently expanded those restrictions to include the less powerful H20 chips from Nvidia.
The investment-grade loans that Nscale is said to be seeking could be attractive to investors because they are set to be backed by the Nvidia chips the company plans to purchase as well as the data-center leases and contracts with customers, the document showed. That collateral would offer lenders some recourse if the business soured.
Nscale's biggest competitor, Coreweave, scaled back its initial public offering in March amid concerns among investors that AI services are not living up to the optimistic expectations of many on Wall Street.
Last year, Coreweave secured US$7.5 billion of private debt tied to chips and other assets, with the high quality loans priced at 6 percentage points over the Secured Overnight Financing Rate.
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The smaller debt deal sought by Nscale is set to be split into two different loans, the people said. The company is aiming to offer 4.50 percentage points over the benchmark for the larger investment grade loan - a better deal than Nvidia got - the document shows. The pricing is still in flux, people familiar with the matter said.
Both Nscale and Coreweave are so-called neocloud companies, building data centers to house expensive AI-focused chips that eat up enormous amounts of energy. Coreweave had more than 360 megawatts of "active power" at the end of last year, compared to the 40 megawatts that Nscale said it has at facilities in Norway and Texas, with five more sites in the pipeline.
The company was founded in May 2024 by Josh Payne, an energy entrepreneur whose last company focused on Bitcoin mining facilities, according to LinkedIn. Nscale's current funding efforts, which it is calling a Series B, adds onto the US$155 million it raised in a Series A at the end of 2024. That funding was led by the private equity firm Sandton Capital Partners.
