Here's what @elonmusk misses with his most recent comments about neo-clouds being doomed. Thanks to his recent Anthropic deal, which is the first of many such upward rerates of $/GPUhr, every neo-cloud is set to thrive if they can get the power. Projects with certainty of power will remain well funded.
Here is the interesting calculus for $NUAI:
Wider credit spreads for neoclouds make financing harder but not impossible.
What if neoclouds’ historical contracts are well below spot?
And if the only way to improve their credit rating is developing more compute and selling today at high spot rates?
And what if their (and the DC developer’s) credit ratings respond instantly and favourable to new compute they bring online?
That’s exactly what’s happening and the same is true for frontier labs.
Those with vast amounts of power have all the leverage. Neoclouds/frontier labs should pay high lease rates because power is scarce and is the panacea for what ails them.
Here are the resulting economics for $NUAI and $IREN: they can contract at high rates reflecting high counterparty credit risk on day zero, then instantly refinance at lower cost of capital as risk drops—insane margins for the DC owner. Said another way, these CDS spikes are a boon for DC developers because it’s heightens the demand for power.
For the right projects like TCDC, ample tenant demand and liquidity exist.
Don’t overthink it.
Yes, but only temporarily. No stranded power and no newer gen GPU is going to go unused for long, in today’s market. One should expect greater market inefficiency on the front end of the AI buildout.
For certainty, this isn’t going to be the case of China building ghost cities. Our capital markets cannot sustain that for long.
If fact, you should expect the opposite. Unlike in China, US public sector debt is a tax on datacenters today thanks their crowing out effect in the credit markets.
Here is the interesting calculus for $NUAI:
Wider credit spreads for neoclouds make financing harder but not impossible.
What if neoclouds’ historical contracts are well below spot?
And if the only way to improve their credit rating is developing more compute and selling today at high spot rates?
And what if their (and the DC developer’s) credit ratings respond instantly and favourable to new compute they bring online?
That’s exactly what’s happening and the same is true for frontier labs.
Those with vast amounts of power have all the leverage. Neoclouds/frontier labs should pay high lease rates because power is scarce and is the panacea for what ails them.
Here are the resulting economics for $NUAI and $IREN: they can contract at high rates reflecting high counterparty credit risk on day zero, then instantly refinance at lower cost of capital as risk drops—insane margins for the DC owner. Said another way, these CDS spikes are a boon for DC developers because it’s heightens the demand for power.
For the right projects like TCDC, ample tenant demand and liquidity exist.
Don’t overthink it.
If you think stock prices only go up and not down, you’re in the wrong game.
If you hope stock prices only go up and not down, hopium isn’t a strategy.
If you know stock prices go up and down and still plan to stay long because your original thesis hasn’t changed, you have a fighting chance of success.
The rest is just noise.
NFA
Customer lease prepayments used to be a dream for data center developers.
We first saw massive prepayments for GPU financing, with $IREN becoming a poster child for its success with $MSFT.
Since then, prepayments have become more common, and not just for GPUs.
Lease prepayments for data center triple-net turnkey solutions have risen from 6 months to 12-18 months, with the latest approaching 24 months.
I’m expecting a lot more of this support from the pristine balance sheets out there.
There is no alternative #TINA
I spend a lot of time in the private markets, and the recent madness around financing challenges for DCs and neoclouds is pure FUD.
Yes, there is a shortage of traditional lender capital, but many pristine balance sheets in Silicon Valley, elsewhere, and across sectors have strong incentives to participate and fill that void.
AI is a moment when everything as we knew it changes.
Every single business…
in every single sector…
across every P&L line item…
will be profoundly impacted…
by this new god-like capability.
Every balance sheet in the world will contribute to AI development over time, and AI datacenters benefit because of their lock on power.
So why the debt scare? The datacenter/neocloud market is being crowded out by public sector debt issuance. If you agree with my earlier proclamation about AI affecting everything, private sector enterprises will contribute their balance sheets to AI development in two ways:
1) As the next source of debt/equity financing for DC developers and compute providers (probably not voluntarily), thereby lowering DC cost of capital;
and/or
2) By consuming tokens far faster than supply, raising $/GPUhr for compute and lease rates for DCs.
Path 1, lowing the cost of capital, seems logical, but massive public sector debt woes will keep financing costs elevated for a long time, making path 2 equally a necessity:
Higher debt/equity rates are offset by higher DC lease rates.
Higher lease rates are offset by higher $/GPUhr or a larger share of those $/GPUhr economics.
In an expanding TAM, prices rise quickly as demand outstrips supply. If AI’s TAM is expanding, $/GPUhr should be high, right? Sort of. It’s a tale of two cities: the haves and the have-nots.
Most of today’s AI economics (outside GPU makers) go to the incumbents: hyperscalers. They have large, highly creditworthy balance sheets from decades of capital-light models, diverse and growing revenue, and strong margins, serving the world’s largest and successful enterprises. Hyperscalers are the most trusted providers of enterprise-grade/scale compute—an expertise built over decades.
Neoclouds, on the other hand, must build a balance sheet from scratch with creative financing, only to serve the hyperscalers’ leftover TAM, and all for a new commodity (compute tokens) whose value is not yet established.
No wonder neoclouds live on a razor’s edge: supernormal revenue growth fueled by equal or greater capex, hoping commodity prices soon make investors very happy. I call it “a dream business (to short).”
But wait—there’s more.
In a nascent, rapidly evolving commodity market, large pricing inefficiencies arise from swings between oversupply - think $CRWV in 2024–2025 bringing large compute online for what was only a handful of large buyers at the time - and undersupply when many buyers enter at (what feels like) all at once (Jevons’ paradox accelerating). Buyers and sellers are constantly left wonder g who holds the negotiating power in these conversations.
Things eventually stabilize, with better matching of land, power, talent, construction, procurement, GPUs, compute, financing, buyers/sellers of stabilized assets, used GPUs, and more.
Then $/GPUhr accelerates (as long as TAM grows). The most recent compute pricing charts suggest we might be there now.
If so, neoclouds are here to stay. The strong ones will grow fast; the weak get acquired and their old contracts renegotiated to much higher current rates.
A much healthier ecosystem overall.
But remember this:
Be it the hyperscalers of the neoclouds, the DC developer always makes bank!
$NUAI $IREN
I spend a lot of time in the private markets, and the recent madness around financing challenges for DCs and neoclouds is pure FUD.
Yes, there is a shortage of traditional lender capital, but many pristine balance sheets in Silicon Valley, elsewhere, and across sectors have strong incentives to participate and fill that void.
AI is a moment when everything as we knew it changes.
Every single business…
in every single sector…
across every P&L line item…
will be profoundly impacted…
by this new god-like capability.
Every balance sheet in the world will contribute to AI development over time, and AI datacenters benefit because of their lock on power.
So why the debt scare? The datacenter/neocloud market is being crowded out by public sector debt issuance. If you agree with my earlier proclamation about AI affecting everything, private sector enterprises will contribute their balance sheets to AI development in two ways:
1) As the next source of debt/equity financing for DC developers and compute providers (probably not voluntarily), thereby lowering DC cost of capital;
and/or
2) By consuming tokens far faster than supply, raising $/GPUhr for compute and lease rates for DCs.
Path 1, lowing the cost of capital, seems logical, but massive public sector debt woes will keep financing costs elevated for a long time, making path 2 equally a necessity:
Higher debt/equity rates are offset by higher DC lease rates.
Higher lease rates are offset by higher $/GPUhr or a larger share of those $/GPUhr economics.
In an expanding TAM, prices rise quickly as demand outstrips supply. If AI’s TAM is expanding, $/GPUhr should be high, right? Sort of. It’s a tale of two cities: the haves and the have-nots.
Most of today’s AI economics (outside GPU makers) go to the incumbents: hyperscalers. They have large, highly creditworthy balance sheets from decades of capital-light models, diverse and growing revenue, and strong margins, serving the world’s largest and successful enterprises. Hyperscalers are the most trusted providers of enterprise-grade/scale compute—an expertise built over decades.
Neoclouds, on the other hand, must build a balance sheet from scratch with creative financing, only to serve the hyperscalers’ leftover TAM, and all for a new commodity (compute tokens) whose value is not yet established.
No wonder neoclouds live on a razor’s edge: supernormal revenue growth fueled by equal or greater capex, hoping commodity prices soon make investors very happy. I call it “a dream business (to short).”
But wait—there’s more.
In a nascent, rapidly evolving commodity market, large pricing inefficiencies arise from swings between oversupply - think $CRWV in 2024–2025 bringing large compute online for what was only a handful of large buyers at the time - and undersupply when many buyers enter at (what feels like) all at once (Jevons’ paradox accelerating). Buyers and sellers are constantly left wonder g who holds the negotiating power in these conversations.
Things eventually stabilize, with better matching of land, power, talent, construction, procurement, GPUs, compute, financing, buyers/sellers of stabilized assets, used GPUs, and more.
Then $/GPUhr accelerates (as long as TAM grows). The most recent compute pricing charts suggest we might be there now.
If so, neoclouds are here to stay. The strong ones will grow fast; the weak get acquired and their old contracts renegotiated to much higher current rates.
A much healthier ecosystem overall.
But remember this:
Be it the hyperscalers of the neoclouds, the DC developer always makes bank!
$NUAI $IREN
I've always wanted a Tesla Roadster and now that I've seen the latest, I am so overwhelmed by its capabilities that I have no idea what to do with it. What am I really paying for? I get the amazing looks, speed and unbelievable cornering, but safety? Street legal? Flight?? Kickflips??? Excessive g-forces????😕
I still want one!!
@Tesla @elonmusk
Do you think any of these statements is correct:
1) AI usage and related capex spend is going to decrease dramatically because stock prices are down for a week/month/year
OR
2) the AI trade isn’t profitable enough to absorb a few % increase in the cost of debt
OR
2) near-term stock prices are a good predictor of the future?
Remember, Mr. Market is a manic depressive that vacillates between fear and greed. Use him to your advantage.
If you don’t know what to do right now, you haven’t trained long enough for this exact moment.
A younger, less experienced 'me' would have sold today given all the volatility and large drawdowns in the datacenter space, over the past few days.
The wiser 'me' knows that these shakeouts are normal and that your thesis over your chose time horizon needs to hold true, especially in the face of uncertainty.
Here's the rule: only play games you can win. Traders shouldn't look to long-term investors for advice and long-term investors shouldn't look to traders for advice.
Choose your game wisely and remind yourself of the game you're playing, every so often.
The rest is noise.
So, let me get this straight:
The post (dated Oct. 8, 2026) uses “just,” but the event was roughly 2.5–3 months earlier. It is not a new/recent incident;
One single local resident left his home due to lung irritation, when there was an active local wildfire that could have resulted in poor air quality in the region, and the article states “local residents (plural) flee” their homes; and
One diesel generator was found to have visible emissions, while the AI generated image depicts multiple generators bellowing massive amounts of smoke.
This is the best the anti-datacenter movement can come up with?
If so, they might have a serious credibility problem.
$NUAI filed its 8k today, right on schedule, and exactly in line with expectations.
Let’s recap. Earlier this year, NUAI had:
i) the TCDC site, ~450 acres of prime datacenter real estate in the heart of datacenter alley
ii) no grid power
iii) agreement for a 450MW BTM arrangement with Thunderhead;
iv) no internal execution capabilities (which is why their prospective Hyperscaler tenant wanted an execution partner called Stream);
v) a 50/50 JV arrangement with Stream who was representing the Hyperscaler;
vi) as of April, a Macquarie debt facility for $290m that had a slew of milestones to achieve before you could draw capital; and
vii) a pristine balance sheet after the Sharon AI buyout.
Fast forward a few months and this is how the picture changed at TCDC:
i) an incremental ~50 acres of strategically acquired land at TCDC that effectively checkmates Vistra’s other partnership opportunities in the area;
ii) a 20 yr PPA for 207MW with Vistra, a leading IPP who will likely increase that capacity to TCDC substantially, over time;
iii) an incremental 100MW of BTM power bringing the total to 550MW;
iv) a world class execution team in Evan, Jose and an army of other datacenter vets;
v) a parting of ways with Stream who not only dropped the ball with the Hyperscaler but also fell out of exclusivity with NUAI, effectively leaving NUAI to fully self-perform on construction and materially improve economics on all fronts thanks to the firm grid power and the world class mgmt team;
vi) a green light from Macquarie that 3 of the 4 required milestones have all been hit for progressive draws on the facility; and,
vii) a balance sheet that remains pristine.
Today’s 8k does a few very important things. It firms up the required collateral for the PPA (item ‘i’ above) and, judging by Macquarie’s green-light on the first 3 milestones (item ‘vi’ above), strongly indicates that NUAI is in advanced discussions with a prospective tenant and possibly also has an LOI in place. The LOI likely wasn’t announced because it was non-bonding but it I were Macquarie, I would require nothing less for NUAI to continues drawing sizeable amounts of the facility.
NUAI is objectively materiality better on every single measure and yet Mr. Market, in his infinite wisdom (or lack thereof), has left the price close to where we were before all these highly favourable developments unfolded.
Consider yourself lucky to be buying more here. I know I do.
Next up, tenant announcement and the start of construction.
The finish line is in sight.
Even after all this, if all you do is worry about the volatility, the macro or the FUD, you may consider leaving investing to the professionals.
Happy hunting to all.
Awaiting good news from $NUAI this week. Charlie and team have been busy executing.
The table is set. The 20yr PPA is secure.
Next up, while I don’t expect an announcement of an LOI given it will be non-binding, I expect disclosure of things like draws on the Macquarie facility and/or similar maneuvers to meet construction timelines.
207MW of live power has never been more valuable, and it is most valuable when you can energize and deliver a datacenter on Day 1 the power is available.
These announcements will bode well for a binding lease agreement.
This is not an if, but a when.
Awaiting good news from $NUAI this week. Charlie and team have been busy executing.
The table is set. The 20yr PPA is secure.
Next up, while I don’t expect an announcement of an LOI given it will be non-binding, I expect disclosure of things like draws on the Macquarie facility and/or similar maneuvers to meet construction timelines.
207MW of live power has never been more valuable, and it is most valuable when you can energize and deliver a datacenter on Day 1 the power is available.
These announcements will bode well for a binding lease agreement.
This is not an if, but a when.