Submitted by Peter Tchir of Academy SecuritiesWe have been attacking this issue orthogonally for the past few weeks.Last weekend’s Cheap China Compute brought up several issues facing the AI Spend.On Thursday we published Braggawatts (which should probably be BragCompute or something), but the concept is that a lot of the announced deals are missing some, or all of the following:
Enough electricity, especially at peak usage times, to fulfill their commitments.Access to water and other resources to function.Getting the various chips on time, connected and installed (hearing China is threatening to restrict exports of fiber-optic cables (another, in a long list of reasons why the U.S. (and others) need to pursue ProSec™).Municipal, State, or even Federal regulatory approval (to the extent they are necessary).To the extent this is true (and we also see construction cost overruns and delays) this is probably good for credit spreads, but negative for equity valuations.Indirectly, we have been addressing two issues, for even longer. While these issues have been in the background, they are rising to the forefront more quickly than anticipated:Market structure (ETFs, leveraged ETFs, 0DTE options, etc.).The need for the AI industry to rapidly adopt far better community outreach! Our somewhat silly, AI-generated, picture of workers (dressed for casual Friday), carrying torches, storming a data center, seems less silly by the day. The AI Revolution is growing faster than we thought and is already influencing state and local politics coming into the midterms.
