According to Sifted, Nscale secured a £500 million investment from Nvidia less than two years after launching and was tasked by the UK government with building the country’s biggest supercomputer, a British version of the “Stargate” AI project. However, the startup is now embroiled in a copyright lawsuit it lost against two former employees over software called “Paiton,” with a Dutch court ordering Nscale to pay nearly £7,000 in costs. The company also announced an acquisition of Kontena that never actually happened, despite being promoted on its official blog and in industry press. UK shadow secretary Julia Lopez says these revelations show why the government “must ensure it is asking the right questions” of key AI infrastructure players.
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The stakes
Here’s the thing: this isn’t just some random startup drama. Nscale is positioned at the absolute center of the UK’s long-term AI strategy. We’re talking about the company responsible for building the infrastructure backbone that’s supposed to keep Britain competitive in the global AI race. When you’re handed that kind of responsibility—and half a billion pounds from a tech giant like Nvidia—you’d expect rock-solid operations. Instead, we’re seeing leadership infighting, failed deals that were publicly celebrated, and lawsuits that backfired spectacularly. It makes you wonder what due diligence was done before placing national AI ambitions in their hands.
The Paiton mess
The copyright lawsuit reads like a startup horror story. Nscale sued its former CIO Elio van Puyvelde and his partner Kian Mohadjerin, claiming they stole trade secrets to build Paiton software. But the court basically laughed them out of the room. Why? Because Mohadjerin had uploaded over 10,000 lines of Paiton code to GitHub a week before even starting work at Nscale. The judge straight-up said it “does not seem logical” that Nscale’s data was used. And those Slack messages where the ex-employees called someone a “greedy little man”? That’s just the cherry on top of this dysfunctional sundae. Losing a lawsuit you initiated and having to pay costs is embarrassing enough, but doing it while you’re supposed to be building critical national infrastructure? That’s a whole different level of concern.
The acquisition that wasn’t
Then there’s the Kontena situation. CEO Payne proudly announced the acquisition in a blog post, industry press covered it, and everyone moved on. Except the deal never actually closed. When pressed, the current CEO had to admit “Nscale does not own Kontena.” They’re now “making changes to the website” to clean up the mess. But think about what this reveals about their operational discipline. You don’t accidentally announce a major acquisition. Either there was catastrophic due diligence, financing fell through at the last minute, or someone jumped the gun spectacularly. Any of those scenarios should raise red flags for both Nvidia and the UK government about who they’re betting the country’s AI future on.
The bigger picture
Julia Lopez is absolutely right that companies in this space “should be scrutinised accordingly.” We’re heading toward a future where AI infrastructure will be controlled by just a handful of major players, and Nscale wants to be one of them. But between the internal fighting, the failed legal action, and the acquisition that vaporized, there’s a pattern here that suggests this might not be the stable partner you want for a multi-year, multi-billion pound national project. The UK’s AI ambitions are serious business. They deserve serious operators. Right now, it’s not clear that’s what they’re getting with Nscale.
