Full Transcript for Will US Elections Gut AI Stocks? Plus, Cipher Digital's Earnings & SpaceX's Lawsuit

Soluna. 30 00:04:56.880 --> 00:05:15.700 [upbeat music] Soluna Holdings, NASDAQ listed ticker SLNH, develops data centers co-located with wind and solar plants, turning surplus renewable energy into computing power for AI and other intensive applications. 31 00:05:16.260 --> 00:05:26.200 We are proud to partner with Soluna Holdings here at Block Space, and if you would like to learn more, please visit solunacomputing.com. That's solunacomputing.com. 32 00:05:32.960 --> 00:05:38.940 Midterms are tomorrow, and several key races could impact data center builds across the country. 33 00:05:39.660 --> 00:05:53.140 Tomorrow 36 states elect a governor, and in 21 of them, at least one of the gubernatorial candidates wants to pause the data center build-out. The big one to watch is gonna be Texas. 34 00:05:53.920 --> 00:06:05.272 In this story from The Information, in five states, both candidates- Want to pause some kind of data center build out. 35 00:06:05.712 --> 00:06:16.172 And in up to 15 of those states, a candidate wanting to pause or create a moratorium could possibly win that race. Those 15 states hold more than 36 00:06:17.232 --> 00:06:31.812 one third of the American population, and they hold some of the biggest AI projects in the country, namely Stargate in Texas, Michigan, New Mexico, and also an eight gigawatt campus for OpenAI in Ohio. 37 00:06:32.012 --> 00:06:48.512 I'm gonna toss this to my co-host, Will. The midterms are Tuesday morning. How much of what happens do you think, uh, how much will hap- of what happens Tuesday do you think affects the market open on Wednesday? Yeah. 38 00:06:48.652 --> 00:06:58.372 Uh, phew. Kind of hard to know about Wednesday from Tuesday. We'll see if we even get some like, you know, late action ballot stuff. That happens a lot in American elections these days. 39 00:06:58.892 --> 00:07:06.592 Uh, throw back up that chart though from the information, 'cause I think that's a interesting thing for viewers to kind of see where the key battlegrounds are. 40 00:07:07.032 --> 00:07:14.932 I would love to do like a megawatt comparison, and I think SemiAnalysis did that as well in one of their pieces they published late last week. 41 00:07:15.252 --> 00:07:26.372 But basically, the idea is like how many megawatts in various states that are running for, have the guberna- gubernatorial elections right now actually matter. And Texas obviously is the big one. 42 00:07:26.412 --> 00:07:36.912 We just opened up the show talking about that. But you can see there's a lot more. You know, Ohio is gonna be a big battleground state. My last understanding is that Vivek Ramaswamy is not looking super hot there. 43 00:07:37.492 --> 00:07:40.592 Uh, but maybe there's more information I'm not super aware of. 44 00:07:41.072 --> 00:07:57.492 Michigan, obviously they have a contested, um, Senate race happening there, and I think we do need to think about what's gonna happen with Congress for the data center backlash going for the

next two years and not just, uh, the governor mansion for a lot of these states. 45 00:07:57.792 --> 00:08:01.392 The governor mansion's gonna matter because, you know, they're gonna set a lot of state policy level. 46 00:08:01.832 --> 00:08:15.352 But I think you could see a world where there's actually a huge Trump backlash, uh, in Congress, like we saw in previous eras of Trump admin one, and that could eat into the Trump trade, so to speak. 47 00:08:15.392 --> 00:08:34.072 We talked a lot about that on Friday, Charlie, where we might see a hostile Congress start going after some of the rules, uh, that were kind of set up during the first part of this administration, and perhaps hurting some of the companies that have sort of flourished over the last two years, data centers being a big one. 48 00:08:34.452 --> 00:08:39.952 The Trump brothers, for example, have been big proponents of Hut 8, big proponents of American Bitcoin. 49 00:08:40.272 --> 00:08:50.552 There's so many other companies out there, not just to single out Hut 8, but there's so many companies out there that the Trump administration has been sort of like around or, uh, has been big proponents of. 50 00:08:51.032 --> 00:08:58.792 AI data centers, obviously kind of the booster child of this f- th- this part of the second admin. So we'll see how that happens on Wednesday. 51 00:08:58.852 --> 00:09:05.292 I can't give you a crystal ball on which stocks go up and which go down, though. We will see. 52 00:09:05.412 --> 00:09:18.232 I'll point out that the months following the midterms, regardless of which way they go for the past 20 or 30 years, have been some of the best in American stock markets for most of my lifetime. You can go back test that. 53 00:09:18.532 --> 00:09:24.132 So let me pull up the map here. I was, I was, I was teasing it just a moment ago. Um, there's a map in the information. 54 00:09:24.192 --> 00:09:38.272 I think it's not as like ins- uh, en- enlightening, but, um, as I said, 26 of the 72 major party nominees back a pause. Most of these pause, most of these nominees in these, in these races are Democrats. 55 00:09:38.632 --> 00:09:53.952 But it's not a clean split because of as we covered previously, um, the Republican Party's also starting to flip a little bit anti-data center in some of your rural, uh, rural states, uh, more like Texas, New Mexico, and, uh, Oklahoma. 56 00:09:54.532 --> 00:10:07.912 In five of these states, both candidates back a data center pause of some kind, not necessarily moratorium, but at least some kind of pause. Those are Michigan, New Hampshire, Ohio, Oregon, and Texas. 57 00:10:08.592 --> 00:10:13.972 So a pause of some kind probably happens in those states regardless of who wins. 58 00:10:14.752 --> 00:10:26.552 Now, as Will said at the top, maybe Texas is a little bit of an exception and, and Governor Abbott is just kind of trying to, uh, post, you know, push back against, uh, people who really want, you know... 59 00:10:26.732

--> 00:10:35.412 He still, he wants to win, so he's, you know, playing both sides here. But in Maine, New Mexico, and New York, the pause candidate is favored to win. 60 00:10:35.772 --> 00:10:41.012 Now, in most of the states, so Maine and New Mexico, those are not huge for data centers. 61 00:10:41.492 --> 00:10:53.392 However, OpenAI does have a one gigawatt data center in New Mexico, and Meta also building something out there, although it's not disclosed how big it is. [lip smack] Um, seven more are really close races. 62 00:10:53.932 --> 00:11:08.192 That's Alaska, Florida, Georgia, Iowa, Kansas, Vermont, and Wisconsin. The one I wanna put my eye on here is Georgia, 'cause that's where CleanSpark and Core Scientific have 620 and 263 megawatt sites. 63 00:11:08.392 --> 00:11:22.112 Both, uh, companies we cover a lot here, that, uh, race is pr- is decently close. Um, a couple other notable ones is Iowa and Maryland. It's the Republican who is favored to win... Or not, sorry, favored to win. 64 00:11:22.812 --> 00:11:28.412 Is, uh, is the Republican candidate who is actually backing the data center pause. I also have here 65 00:11:29.352 --> 00:11:36.872 the Polymarket, which if you've been paying attention to Polymarket lately, maybe they haven't been hitting on elections. Again, the market might be wrong. 66 00:11:36.952 --> 00:11:49.112 They whiffed, uh, Polymarket whiffed the Brazil election recently. But here we have in Texas [laughs] That one's kinda hard to call [laughs] the Brazil one. Yeah, I know. Look at this, Texas. 67 00:11:50.652 --> 00:12:00.172 A little bit of a coup there, depending on who you ask. Uh- Yeah... or the Pol- the Poland one w- as well. But yeah, the Texas one's gonna be tight. Yeah. This is, this is kind of nuts. 68 00:12:00.252 --> 00:12:17.240 We see, um- Texas, which is getting more purple every year, uh, Greg Abbott historically the, like, pro-business, somewhat Republican, uh, candidate, um, he's already issued a statewide pause, um, delaying the ERCOT Batch Zero process. 69 00:12:17.580 --> 00:12:27.500 His administration froze new environmental permits and new grid hookups for data centers. Again, we covered this. His oppo- his opponent, Gina Hinojosa, wants an even broader pause. 70 00:12:27.560 --> 00:12:39.780 She calls Abbott's pause an election year stunt and says that as soon as g- Abbott gets elected, if he does, that pause will be flipped. So prediction markets still have Abbott in two to one. 71 00:12:40.800 --> 00:12:49.580 The question for Wednesday morning is, does the pause lift if g- Abbott gets elected, and does he reverse course? I'm gonna throw this question to Will. Texas is a big one. 72 00:12:50.280 --> 00:13:06.340 If Governor Abbott's opponent Gina wins and institutes a pause or moratorium with stronger teeth than Abbott has across the state, that could significantly derail the American AI story, like by a lot. Yes. Yes. 73 00:13:06.679 --> 00:13:08.500 I mean, like- That would be, uh-

Yeah... pretty bad. 74 00:13:09.620 --> 00:13:22.760 I, I, I would think you would see maybe a premium pop up on some of the companies that have diversified into other states or other countries, and that's something that we've seen Google and Microsoft and some of the bigger companies with a little more capital do. 75 00:13:23.340 --> 00:13:29.460 Um, and then some of the companies actually came into the, you know, the AI infrastructure trade already established to do that. 76 00:13:29.500 --> 00:13:40.620 Bitdeer comes to mind, where they have a presence overseas in Norway, they signed with Tidal, or they signed a s- facility in Tidal with, um, with Anthropic kind of in the, the background of that lease. 77 00:13:41.220 --> 00:13:48.340 And I think a lot of these other companies have kind of decided, like, Texas is the place to build. That's been the mandate. That's been kind of the call card for a few years now. 78 00:13:48.880 --> 00:13:58.040 But if we did see this race flip, crazier things have happened in elections, especially in the last few weeks, then yes, you would see a lot of problems. 79 00:13:58.200 --> 00:14:13.920 One analysis of this said if Greg Abbott wins, you have to wait at least until December for ERCOT to put out its next formal guidance on the batch process, and then there's a further wait for some of the utility processes that they're, they're looking at for, like, water and electrical rates. 80 00:14:14.680 --> 00:14:19.760 After that, you could probably see a lot of these deals start to, uh, start opening up in the spring. 81 00:14:20.440 --> 00:14:40.920 But if j- the Democratic candidate wins here, you could wait until late next year for any sort of guidance on how these projects can, can continue, because the current Democratic candidate for this is saying that the, uh, Texas House, Congress, and Senate needs to decide new rules. 82 00:14:41.460 --> 00:14:51.920 That session doesn't happen until January. It ends in May. Who knows if it's gonna be a first ballot issue when the, you know, all the people come up to Austin and decide what they're gonna do. 83 00:14:52.780 --> 00:15:03.080 You could see a delay for quite a while, and for those projects, waiting a year, essentially a year to get some guidance on what to do, that's not great. That's not great for deal flow. That's not great for markets. 84 00:15:03.660 --> 00:15:09.000 And you'll see that other markets will kind of open up. We're already seeing that there are a lot of alternatives to Texas. 85 00:15:09.400 --> 00:15:29.740 I think people still choose Texas overall 'cause it's the richest merchant market for energy in the world, but I think that if you saw this tighten up, you'd see other states and other countries be a little better, and maybe you'd see a discount on some of the current, uh, companies that are still in that batch process and are, are not actually queued up to go further down the pike. 86 00:15:30.660 --> 00:15:40.320 Yeah, this wasn't really something we anticipated even, say, six months ago. No. Um, and I'm j- I just, I kind of ran, um, a lot of our stuff through DI Metrics, um, pulling up... I mean, 87 00:15:41.380 --> 00:15:52.300 uh, Texas has more than 25 gigawatts of, like, planned capacity, uh, uh, planned expansion across many of the companies we cover. Cipher, Crusoe, Iron, Mara, Core Scientific, Hut 8, Galaxy, Riot. 88 00:15:52.860 --> 00:16:05.320 Some of these are already through, um, the process, but if you just look at just the amount of capacity, a lot of which is pending permits, this is huge. So if Texas does have some kind of, like... 89 00:16:06.160 --> 00:16:14.020 If, if the process to get, to get these sites online is hamstrung significantly, that's, 25 gigawatts [laughs] is massive. 90 00:16:14.060 --> 00:16:23.940 That's, like, basically an entire, uh, that's the lower bound of what is expected to come online next year across the entire, uh, AI data centers, uh, space in North America. 91 00:16:24.560 --> 00:16:33.420 There's one other kind of detail, one s- state I will, uh, zero in on again, 'cause it's personal to me, in Oklahoma here. Historically a very red state. 92 00:16:33.940 --> 00:16:46.260 However, um, the gubernatorial race, while it is favored by the less hostile to data center candidate, it's getting close. Um, incumbent... Uh, not, sorry, neither are an incumbent. 93 00:16:46.580 --> 00:16:57.560 Mike Mazze is the Republican, um, who is favored to win. He wants a pause or new regulations on data centers, very similar to Greg Abbott, actually, down in Texas, where he... 94 00:16:57.820 --> 00:17:06.460 Then the big one is, like, he says you, uh, you gotta be behind the meter and closed loop water system. I think that is probably a pretty acceptable stance to have. 95 00:17:06.800 --> 00:17:18.320 But his opponent, Cindy Munson, who is the Democratic candidate, s- uh, is running as a, on, like, her bl- her main platform, as a, "I'm gonna sign a moratorium on day one." 96 00:17:18.880 --> 00:17:34.580 And right now, polls are, like, 60/30 or so for that race, and, um, that's crazy, because if you look, Google's, uh, got their largest data center up in Northeast Oklahoma. It's the third largest one in the country. 97 00:17:34.940 --> 00:17:47.800 They have two, possibly three more of that size planned in the state. Not to mention, I believe Iron's got one, Core Scientific is, uh, buying out and converting a site from Polaris. You have massive industry. 98 00:17:47.960 --> 00:17:52.960 It's kind of playing sidecar to Texas. And so, um, it's, it's wild. 99 00:17:53.000 --> 00:18:02.980 You know, Texas and Oklahoma, uh, all, all looking, like, surprisingly close, uh, and it has pretty big implications for the overall American data center build-out. 100 00:18:03.540 --> 00:18:16.080 Will, final thoughts on, like, going into midterms here as it relates to the companies we cover? As always on this show, all eyes on Oklahoma. We'll see All eyes on

Oklahoma... Yeah. Now, I, 101 00:18:17.780 --> 00:18:27.340 I do wonder which stocks just kinda like take a, a nosedive after the election, given that some races happen. Uh, the one that I'd call out is Oracle with New Mexico. 102 00:18:28.580 --> 00:18:39.280 That one might have been de-risked already, and Oracle's kinda taken a, a beating recently. They had a $10 billion, uh, offering this morning for their ATM. I didn't get a chance to look at the stock price. 103 00:18:39.320 --> 00:18:41.380 I'm assuming it fell from that notice. 104 00:18:41.920 --> 00:18:56.560 But, uh, they have their project Jupiter there, which, s- sizable project, had a lot of problems, been in the news a lot recently, and that state is a fairly aggressive anti-data center, uh, government. 105 00:18:56.820 --> 00:19:07.220 So what's gonna happen with that project? And if that project can't continue, what's gonna happen to Oracle, given the size of these things? These things are so big, they could be company killers. 106 00:19:08.160 --> 00:19:19.600 I think Oracle's probably too big to fail at that size, but it's, it's a fairly large project. Anti-data center governor coming in. It's probably not what Oracle wants right now. I think that's the one to watch. Yeah. 107 00:19:20.280 --> 00:19:30.260 Uh, great one to watch. Again, we're gonna be covering this also on Wednesday when the results land. We're gonna keep on going. Cipher just did their earnings this morning. 108 00:19:30.640 --> 00:19:37.320 We'll have some insights as well as a new price target from KBW after a word from our sponsor, Luxor. 109 00:19:37.320 --> 00:19:50.100 [whooshing sound] This episode is brought to you by Luxor's Commander, Bitcoin miner management software built for enterprise operations. 110 00:19:50.620 --> 00:20:03.920 Commander gives you real-time fleet monitoring, bulk remote commands across your fleet, and Intelligent Miner, which is an automated profitability engine that runs every five minutes, adjusting power settings to live hash rate and energy markets. 111 00:20:04.540 --> 00:20:18.920 ERCOT backtests show over 10% more profitability versus binary mining. Commander Pro is 100 bucks per megawatt, or a 25 basis pool fee adder, which is roughly half the price of competitors. 112 00:20:19.719 --> 00:20:25.120 Comes with a 60 day free trial. Get started at luxor.tech/commander. 113 00:20:29.160 --> 00:20:38.220 While AS stocks are crashing and everyone is running for the exit, investment bank KBW just held their outperform rating on data center stock, Cipher Digital. 114 00:20:39.200 --> 00:20:50.500 In a fresh note published today after Cipher's Q3 earnings call, analyst Steven Glogola held his outperform rating and kept its $11 price target. This is the key part. 115 00:20:50.880 --> 00:21:01.360 KD- KBW expects a muted reaction to the earnings call given the state of the Texas governor's race. Earnings should have beat on earnings per share, despite lower than expected revenue. 116 00:21:02.000 --> 00:21:13.480 As of today, Cipher trades roughly 50% below what KBW expects Cipher to hit on using its model. As we're talking here, Charlie, the stock has held up relatively well on the earnings. 117 00:21:13.780 --> 00:21:22.800 It's down certainly a little bit here. Uh, but since the summer, you can see it's down 30... uh, it's down from $30 a share to around $7 a share. 118 00:21:23.340 --> 00:21:40.520 So the question is, despite Cipher tumbling since the summer, do you think a 2X is possible given what they shared on their earnings call, what they have in their pipeline, and perhaps the biggest indicator is if the Republicans secure a win for the governor's mansion in Texas tomorrow? 119 00:21:41.540 --> 00:21:54.460 Yeah, a 2X, obviously. Cipher's got a great power pipeline. They've got, uh, a lot of, uh, proven track record. I think a lot of this, we, we have to sit on our hands until the gubernatorial election in Texas tomorrow. 120 00:21:55.340 --> 00:22:01.340 Then we'll see. I think we'll get a lot of clarity there. And I think if Abbott wins, again, it could be close. 121 00:22:01.500 --> 00:22:16.220 If Abbott wins, we could see what the, what the, what the flip on data center moratorium or pause looks like. I'll also point out, um, that, uh, I think you said KBW's got a price target here. And, uh, 122 00:22:17.880 --> 00:22:31.060 yes, I think it could 2X, but I'm confused because didn't KBW also actually... N- they said it was 2X, but like they reduced their former price target by like 60% from 28 bucks to 11 bucks. Yes. 123 00:22:31.120 --> 00:22:36.780 So yeah, that's still bullish, but like [laughs] why are they less bullish? I, I've, I'm curious about this. 124 00:22:37.560 --> 00:22:48.760 Yeah, no, this is something that I need to reach out to KBW and get some insights on, 'cause I'm curious myself. They went from $28 with an outperform ticker or outperform choice in August. 125 00:22:49.300 --> 00:22:59.080 The market re-rated in between, obviously, with a lot of these stocks, you know, kinda getting pounded and going to elections. And so they went from $28 to $11. 126 00:22:59.480 --> 00:23:11.640 They kept the outperform, uh, instead of going to neutral or sell. So we do have that. And $11 is still 50% above Cipher's current holdings. But, you know, we're not in the bullish 28, $30. 127 00:23:12.600 --> 00:23:24.700 As late as this summer, we had a $30 price target on Cipher. Now, at the time, that seemed great, right? Because Cipher was indeed trading around $30. Uh, actually seemed like $30 might be a little bearish on the stock. 128 00:23:25.220 --> 00:23:35.740 But we had so many negative things happen for this company and then to the data center industry in general. Now, I will also say that I do hold Cipher. I'm a huge fan of the team, huge fan of- Me too. Me too... 129 00:23:35.880 --> 00:23:44.040 I love Cipher. I own some Cipher. Disclosure, yeah. So there's a, there's a disclosure there, but

some negative things have happened. One, they're mostly Texas-based, right? 130 00:23:44.100 --> 00:23:56.860 And as that race has become tighter, they have had, uh, more pressure on their stock price there, right? We already talked about the governor's race. If it, it flips from red to blue, could be in a world of hurt. 131 00:23:57.360 --> 00:24:09.360 Also, ERCOT. We had ERCOT change its batch process. Not everything in, went Cipher's direction. Some of them are still on, like, this study load versus base load that they thought they were going to get. 132 00:24:10.000 --> 00:24:22.828 Um, and then I think the last thing that was key here was Cipher decided to raise a $850 million convertible note at a bad time in the market- When the market was sort of weak already, great that they were able to go get that cash, and they had a great reason for it. 133 00:24:22.908 --> 00:24:37.428 They needed to basically upgrade some of their facilities for an existing deal, and in turn for that upgrade, they were able to extend to get another $5 billion in future revenue. So $850 million now, $5 billion later, 134 00:24:38.468 --> 00:24:47.088 great decision, but market timing is really important, and the market did not like that convertible note offering. So I think those are some of the reasons that we saw the stock price tumble. 135 00:24:47.448 --> 00:24:56.948 I think KBW just sort of looked at the market, and they kept the outperform because they still are bullish on Cipher, but they're realizing that a lot of these stocks are kind of rerated. 136 00:24:57.328 --> 00:25:04.828 We'll cover this later in the, in the week, but B. Riley also brought down a lot of their price targets for companies, uh, that they cover in their remit. Yeah. 137 00:25:05.228 --> 00:25:15.948 It- a lot of these things were, were, were shifts in the political climate, which, uh, really went against Cipher, and it happened very quickly. It is kind of like the national data center pushback story. 138 00:25:16.768 --> 00:25:27.308 Um, I would say that's outside of their control. The convertible note, uh, probably necessary, but a little bit at the mercy of the market and the timing. Not it's, like, unfortunate or whatever. 139 00:25:27.648 --> 00:25:39.928 There's also the cost overruns, uh, at Barber Lake, but again- Yeah... that's a, that's a pretty common thing. We covered this on the podcast where we said basically not, not crazy, uh, a little bit to, to be expected. 140 00:25:39.968 --> 00:25:46.168 This is, uh, pretty common in, uh, you know, retrofitting or changing the process. So none of... 141 00:25:46.208 --> 00:25:53.888 Neither of those- I s- none of the things that were in within Cipher's control that I see are really that bad or change much of the fundamentals. 142 00:25:54.388 --> 00:26:04.648 I think you just gotta look at the things happening external to the company, which are- Yeah... stuff outside your control. So how do you reprice Cipher based upon this new information? 143 00:26:04.988 --> 00:26:10.268 Maybe that's, maybe that's what the, uh, KBW note's about. Yeah, I mean, I think they're still bullish. 144 00:26:10.788 --> 00:26:20.568 Obviously, they have a 50% price increase, price target based on the current trading price of Cipher, which is around $7, and they have the outperform sticker there. 145 00:26:21.048 --> 00:26:29.167 I think some things from the earnings call to cover for those who missed it, they beat on earnings per share a little bit, and then they lost on revenue. 146 00:26:29.408 --> 00:26:38.948 Uh, the revenue decline comes from Bitcoin mining sort of going away. They did secure their first yield, so to speak, on HPC, so that's a huge win for the company. 147 00:26:39.348 --> 00:26:47.228 Uh, not too long ago, even Bitcoin miners getting HPC revenue was sort of seen as, like, this distant dream that only a few companies could execute on. 148 00:26:47.668 --> 00:26:59.048 So I think hat tip to Cipher for seeing the revenue flow into their coffers for the first time. I think that's notable. A few other updates. They signed a 70-megawatt site in Texas as well that they plan to build out. 149 00:26:59.588 --> 00:27:08.868 As of right now, that sits under the 75-megawatt minimum to be included in some of the ERCOT processes for, uh, getting, like, a direct s- load study. 150 00:27:09.408 --> 00:27:16.068 That might change in the future, but if they're able to, like, move with that quickly and, and, and get that built out from a greenfield into an actual data center, 151 00:27:17.008 --> 00:27:27.488 that might be able to slip under the radar for a little bit. But who knows? The last point to make is about Colcus, their one-gigawatt site, which I think is a pretty important, uh, topic to hit on. 152 00:27:28.608 --> 00:27:34.328 There's not a lot of one-gigawatt sites still in Texas, and these are the sites that are used for training the large inference models, right? 153 00:27:34.408 --> 00:27:47.088 So ChatGPT's latest models were trained on the Crusoe sites in Abilene, uh, and they're using, you know, those huge data campuses to train the new models, and then the inference can kinda happen at some of the smaller campuses. 154 00:27:47.848 --> 00:27:52.528 Uh, so for, for Cipher to have Colcus, this one-gigawatt site sitting there, 155 00:27:53.428 --> 00:28:02.408 Tyler Page, the CEO, described it as their crown jewel, that, you know, they think they're going to be able to sign with a high creditworthy t- tenant at some future date. 156 00:28:02.448 --> 00:28:12.948 They're having a lot of active conversations with it. A lot of people are taking, like, a scope of how they could architect out that build. I would see a few of these things as lifting them in the future. 157 00:28:13.668 --> 00:28:22.588 One, just kinda getting the narrative straight on the cashflow and how the HPC is kinda lining up. Two, the ability to continue to build out sites and pipeline. 158 00:28:22.968

--> 00:28:31.288 And three, most importantly, Colcus ideally getting some tenant or some announcement in the next 180 to 200 days. 159 00:28:31.708 --> 00:28:38.128 That would be huge for the stock, and I would expect that it would go up because of that as, like, an uplift on the valuation. 160 00:28:38.288 --> 00:28:48.628 It would just prove that the management can execute on its pipeline in a way that you and I have already seen them do in, in the past. Any thoughts there? I agree. I agree with this. 161 00:28:48.728 --> 00:28:57.948 Um, I think we just need to see if they can execute on the, on the things that remain under their control. Um, and this is the story of, of everybody. 162 00:28:58.028 --> 00:29:10.188 During, uh, volatile, uh, you know, massive periods of growth in industry, things change very, very quickly. So within the realm of, of stuff that you can control, can you execute? 163 00:29:10.288 --> 00:29:24.088 So, uh, I still own Cipher, so that's, that's where I, that's where I sit. Um, maybe I won't make as much as if I'd bought, uh, you know, like, S- you know, Samsung stock a year ago, but still. Yes. 164 00:29:24.148 --> 00:29:35.308 I know more about PowerShell than I do, uh, memory. We are gonna keep on going. We're gonna go back to the main data center everybody talks about, the one that Elon's got in Tennessee. 165 00:29:35.528 --> 00:29:51.608 But before that, a word from our sponsor, Ligos. [static sound] Hedge funds are getting liquidated. Is your Bitcoin safe? It's not just Bitcoin prices drying up. 166 00:29:51.808 --> 00:30:06.668 Big whales, hedge funds, and lending desks are going under after a brutal year of hacks and problems. Counterparty risk is rampant. Hackers are at the all-time high. 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[sniffs] SpaceX is being sued by the NAACP for its flagship data center in Tennessee. 171 00:30:57.595 --> 00:31:03.656 Here's what's going on and how this could affect the crown jewel of Elon's SpaceX data center empire. 172 00:31:04.616 --> 00:31:15.696 So on Friday, a federal judge said that the case from the NAACP against SpaceX's Colossus data center air permit violation will move forwards. 173 00:31:16.396 --> 00:31:29.556 For context, SpaceX's X AI arm runs its Colossus II data center in Memphis, Tennessee. This is one of the largest data centers in the country, and 174 00:31:30.496 --> 00:31:40.956 it is powered by dozens of natural gas turbines. I'm showing you here on the map exactly where it is, right on the border of Mississippi and Tennessee. 175 00:31:42.216 --> 00:31:54.376 This is miles across the state line, uh, from the Tennessee location in Southaven M- Mississippi. These natural gas turbines have been running without an air permit since mid-2025. 176 00:31:55.916 --> 00:32:07.016 The NAACP is asking for penalties of up to $124,000 per day, and has asked the court for an injunction to shut down the turbines while this case plays out. 177 00:32:07.516 --> 00:32:19.616 Beyond that, the lawyers are appealing the permit for SpaceX's power plant, which potentially jeopardizes the long-term expansion plans for the project. Why does this matter? 178 00:32:20.176 --> 00:32:32.096 Colossus is SpaceX's flagship AI site and has been the growth story for Elon's rocket ship company. Hamstring the future expansion of the site could dramatically affect SpaceX stock price. 179 00:32:32.636 --> 00:32:44.216 I'll dive a little further into the details, but first I wanna toss it to my co-host, Will. Will, SpaceX's IPO filing says they plan on spending billions more on these turbines. 180 00:32:44.996 --> 00:32:56.796 How much of the SpaceX AI story depends on continuing, continuing to roll out more of these natural gas generators? Tough to see a lawsuit like this, but it makes sense. 181 00:32:56.916 --> 00:33:02.516 There's been a lot of lawsuits in Elon's history of running companies. Uh, this is probably 182 00:33:03.556 --> 00:33:16.876 in the top 10 of interesting ones, especially if it gets, like, a little more juicy and threatening to the core cashflow of the company right now, which is the AI compute being brought out of that Colossus data center. 183 00:33:17.536 --> 00:33:27.636 Uh, but I wouldn't put it up there quite yet with some of the, the, the real winners and zingers that Elon's had against, like, the SEC, uh, or taking, you know, Tesla private, things like that. 184 00:33:28.036 --> 00:33:39.416 In terms of, like, what this means for the AI story for SpaceX, we do know that AI compute is one of the main, if not the largest, drivers of revenue for the company over the last few quarters. 185 00:33:39.836 --> 00:33:44.236 They are spending a lot on it, and they're planning on going bigger and bigger with this. 186 00:33:44.696 --> 00:33:55.556 Don't have access to their pipeline info at the moment, but they do have a lot of job listings for building their own turbines, turbine blades to be specific, right? And what does that tell you? 187 00:33:55.596 --> 00:34:02.276 Well, they're trying to do the whole Elon verticalization thing where they build the components in-house, and then they go deploy it into the field. 188 00:34:02.596 --> 00:34:15.616 Now, in this case, with these turbines, you know, they did the rent-a-haul method where you go

rent a turbine somewhere, you hook it up on a trailer to your data center, and then you have nat gas, I would assume here. 189 00:34:15.956 --> 00:34:21.256 Some of these sites even use diesel, and you're just running your site off of that nat gas. It's... 190 00:34:21.776 --> 00:34:35.896 It works, and nat gas is actually a great way to run a data center, uh, but if you don't have something that is as clean as some of the new gen tech out there or is not very quiet, then you're going to have unhappy neighbors, and that's what we're seeing here. 191 00:34:35.936 --> 00:34:42.156 Like, a, a lot of this has been brought up just because Colossus is one of the more noisy data centers out there. 192 00:34:42.455 --> 00:34:50.016 Uh, and there's a, there's a lot of homes that are nearby, and I think there's just frustration around that. Plus the air pollution angle, which 193 00:34:51.536 --> 00:35:00.696 I'm not quite sure about that 'cause I, I don't know how clean nat gas is burning versus some of these other things. I mean, certainly be less-- be more clean if they weren't burning anything, obviously. 194 00:35:00.796 --> 00:35:08.316 But they are zoned, in my understanding of the situation, appropriately. Your take on it? Well, well, they're zoned appropriately. 195 00:35:08.356 --> 00:35:17.076 It really comes down to the permits, and that actually, specifically the air permitting, is the vector through which the NAACP is bringing their lawsuit. 196 00:35:17.456 --> 00:35:27.716 So before I explain a little bit more on exactly the nuances of this, this particular lawsuit, 'cause I think the nuances do, uh, carry, like, the potential con- You know. 197 00:35:28.336 --> 00:35:39.296 Through the nuances will we find out whether SpaceX is okay or not. So here's a map, um, for Measured AI, and it's hard to see on the screen, but right here is the Tennessee-Mississippi border. 198 00:35:40.016 --> 00:35:49.376 And on, and just north of it is where Colossus II will go, and just to the south we have the Southaven power plant. That's where all the generators are. So basically, 199 00:35:50.376 --> 00:35:59.376 uh, Colossus II will sit in Tennessee to the north, and then across the border a mile or two to the south is the power plant where all of the generators are going. 200 00:35:59.976 --> 00:36:15.576 The generators are specifically the thing that is of concern. How in the world did Elon get permission to put these turbines down without an air permit? Basically, he didn't. [laughs] So, um- [laughs]... 201 00:36:15.596 --> 00:36:24.136 Mississippi's regulator said that- Yeah... Mississippi's regulator basically said you don't need a permit, um, because these are, these were, quote, "temporary." 202 00:36:24.276 --> 00:36:35.172 And classifying this temporary, as you said, Will, they're on, like, a skid or, like, a trailer. And the other key thing is that they're not gonna be there for more than 12 months. Well, more than- Well-... 203 00:36:35.252 --> 00:36:42.372 12 months later, as of the summer, uh, the regulators in Mississippi say, uh, "We're gonna give you an extension." 204 00:36:42.912 --> 00:36:58.572 I'm being pretty hand-wavy here, but basically the NAACP has members of the NAACP nearby this Southaven power plant. As you can see, it's 500 or so feet from a neighborhood. 205 00:37:00.792 --> 00:37:11.972 And when you have these near or downwind from these, and they don't... these, these generators, and they don't have permits, that is cause for a lawsuit. 206 00:37:12.072 --> 00:37:26.032 So while the conventional regulators chose not to enforce the permits, in fact even extending them, uh, you can have a private entity, like the NAACP, bring the lawsuit. So 207 00:37:27.152 --> 00:37:42.172 what happened was a judge de- uh, Elon, SpaceX, and the subsidiary XAI requested the judge throw this lawsuit out, and the judge, the federal judge, declined to throw it out, saying that the NAACP does have a case here. 208 00:37:43.212 --> 00:37:54.412 XAI argued that letting citizens sue under the Clean Air Act is unconstitutional, and the Justice Department backed XAI's bid to dismiss. However, the judge rejected the constitutional argument. 209 00:37:55.272 --> 00:38:07.072 So to be clear, the NAACP is not, um... Or sorry, the judge did not rule that XAI broke a law. The judge just ruled that the case gets to move forward. So that is where we are right now. 210 00:38:07.232 --> 00:38:24.132 That is, like, where we're sitting is, okay, the case is moving forwards. Um, will this result in SpaceX paying out up to $124,000 per day? Will this result in an injunction on new turbines? This is the open question. 211 00:38:24.672 --> 00:38:35.592 So that would be the big thing, right? It's... The payment per day, look at the math. Like, you could probably do- He lo- No, no stranger to fines. He'll pay that fine. That's fine. Yeah, he'll probably pay the fine. 212 00:38:35.652 --> 00:38:41.912 I mean, it's, it's not great to be paying, what, a million dollars a week essentially for, for doing this. Yeah. 213 00:38:41.952 --> 00:38:58.152 The bigger issue is not being able to service this customer contracts that are into the billions, and that, I don't think that happens because the economic pressure that, that would put on the site would lead to perhaps 214 00:38:59.772 --> 00:39:02.752 all those contracts with Google and Anthropic going away. 215 00:39:03.052 --> 00:39:11.672 'Cause remember the topic then when we s- when those SpaceX contracts were signed was that there was very easy outs for both Google and Anthropic in those contracts. 216 00:39:11.712 --> 00:39:18.752 I believe it was, like, a 90-day, like, "Hey, we can get out of here if we want." Uh, and that would put a lot of pressure on SpaceX as a huge driver for it. 217 00:39:19.012 --> 00:39:23.712 And it's funny just you find these Achilles' heels in some of these contracts, right? And that's what they're going after. Like, 218

00:39:25.412 --> 00:39:37.392 I think these, these lobbyists who are going after it, they can see where something might be a good push point for the economics, and they can just go after that. Now, what does this mean for SpaceX? 219 00:39:37.632 --> 00:39:46.672 I assume this means, like, find some better gensets fast, even if you're paying a premium for it- Good luck-... and get this-... building a genset right now. Yeah. 220 00:39:47.372 --> 00:40:01.392 It's gonna be hard, but, you know, perhaps there's a way to jump a queue. Perhaps you're buying another site. You know, go buy a data center company that's in the red right now, strip all their stuff, and ship it over. 221 00:40:01.632 --> 00:40:10.372 There's companies that are sitting on hardware for sure. There's companies that haven't been able to get stuff off the ground. So if you're really in a, in a something like that, you could do that. 222 00:40:10.632 --> 00:40:22.672 You certainly need the judge or whoever to keep extending this window, uh, 1.5 years when they were only given 12 months to do it. It's like, all right, six months over, that might get a little tough. 223 00:40:23.052 --> 00:40:34.032 Uh, but again, still super early. This is just the case is proceeding. We don't even know. Like, they can wrap legalese around this forever and ever and ever. By the time that actually means something, 224 00:40:34.972 --> 00:40:42.212 they have Bloom fuel energy cells on site, or they have, you know, nat gas turbines that are within the specifications that they need to have. 225 00:40:42.772 --> 00:40:50.252 Or they can just, like, grease the wheels with one of the states and get this going. I don't know. There's a lot of different options when you're looking at these, these games. Yeah. 226 00:40:50.332 --> 00:41:01.292 It's, it's weird for me to ever say this, but, um, I'm pers- I'm particularly sympathetic to the members of the NAACP next door because it's h- it's difficult to go after the s- the noise. 227 00:41:01.552 --> 00:41:11.172 And if you see videos of people who live near these things, it is too loud. This is a pretty egregious violation of, like, noise and implicit property rights. But that's- Yes... 228 00:41:11.572 --> 00:41:18.472 that's a difficult legal angle to take that in, in my cursory review of this. The air permitting thing is a lot clearer. 229 00:41:19.052 --> 00:41:27.212 So maybe, like, the air permitting angle is the, the, the, the vector you choose, and you've got the strongest legal case. You got the NAACP is willing to back it. 230 00:41:27.772 --> 00:41:41.312 I don't see how this stops the train of, like, rapid continued expansion. There's too much money. There's, there's too much of the American [laughs] economy riding on this data- Yes... center getting built. 231 00:41:42.412 --> 00:41:54.192 Maybe you just- I-... gotta pay up. I wanna show the, the site actually and see if we can get a clip on here just so everyone can kinda hear it. 'Cause some people are listening on their, their AirPods, right? 232 00:41:54.232 --> 00:42:05.812 And they're like, "Oh, this data center can't be that loud." Oh, it's loud. And I know this, I know this site has more... like, this case has more to do with, um, has more to do with the air quality permits. 233 00:42:05.892 --> 00:42:14.392 But, like, the thing that's interesting to me is, like, uh, how loud the site is. So I'm gonna pull this up. This is from CNBC. I can pull it up here in the middle, 234 00:42:15.652 --> 00:42:29.972 and just so we can, like, listen to it on stage, but it's a pretty loud site. So this is, again, from CNBC, their coverage of the Colossus site in Memphis, Tennessee. [turbines humming] It get louder. 235 00:42:30.392 --> 00:42:37.512 Some nights you can s- smell the fume from the turbines, and it's really, really noisy at night. You just have to endure this. 236 00:42:37.552 --> 00:42:51.582 [gentle music]When South Memphis, Tennessee resident Loretta Thornton first heard about xAI's data centers coming to town, construction was already underway. 237 00:42:52.982 --> 00:43:03.242 Now she lives next door to one of the world's largest AI data centers. Just can't get no peace in the morning, and that's all I'm doing is enduring it. And I, and I know I cannot sell my property. 238 00:43:03.282 --> 00:43:15.602 Who would want to buy it living beside this thing? Elon Musk's xAI, now known as SpaceX AI following a merger with SpaceX, has made the Memphis area the center of its AI ambitions. 239 00:43:16.082 --> 00:43:22.602 It built Colossus-1 just south of Memphis, Tennessee, which was training AI just 123 days after the groundbreaking. 240 00:43:23.222 --> 00:43:31.542 And now construction is underway on two other data centers in South Memphis, originally named Macrohard and Macroharder, now known as Colossus-2. 241 00:43:32.242 --> 00:43:36.682 xAI is also building out energy infrastructure to feed its power-hungry supercomputers. 242 00:43:37.182 --> 00:43:48.782 It purchased a decommissioned power plant in Southaven, Mississippi, and is now operating dozens of methane gas-burning turbines for its main energy source. I'm standing outside x- 243 00:43:56.802 --> 00:44:05.762 So I just yanked that because I think we kind of get the full scoop here, but it's loud. It's really loud. It's loud. Yeah. I mean, you know, what's the zooming out here? 244 00:44:05.862 --> 00:44:17.362 What's the whole point of like property rights in America if you can have an effective like violation of owning your own property, which implies that you're not going to have some crazy 245 00:44:18.462 --> 00:44:32.602 industrial thing move in next door and basically you got no one in your court fighting for you. So this is weird. The NAACP is fighting for the residents. I'm particularly sympathetic to it. 246 00:44:34.082 --> 00:44:38.862 So I don't know if this is a check, if this is some compensation in some case, but 247 00:44:40.442 --> 00:44:52.701 these are the types of stories which we're going to have to deal with as the American AI build out happens because there's no way we compete with China who just abuses their citizens' rights and autonomy with impunity. 248 00:44:53.122 --> 00:45:05.402 I shouldn't laugh about that, but true. It's true. Yeah, it's true. So- What if Elon just gave a check to everyone in that town? You know, but the thing is it'll happen more. Put it in their Trump account. Yeah. 249 00:45:05.442 --> 00:45:19.282 What if they airdrop SpaceX shares into the Trump accounts for like more for this community? Something like that. Like you guys – or like honestly, the easiest way might be just to buy the houses around there. 250 00:45:19.322 --> 00:45:28.482 Like this woman in the video is right. It's like, "I can't sell my house now." It's like, "Sell it to SpaceX. Like, you know, threaten to sue. See what you can get for it. They could just, you know, 251 00:45:29.762 --> 00:45:43.222 turn it into a guest house for workers." I don't know. Yeah. Now, Will, I've got to like become a member of the NAACP in order to get my pound of flesh if SpaceX builds a data center next door. 252 00:45:43.282 --> 00:45:55.442 I'm not even sure I can do that for obvious reasons. Data centers in space. Yeah. Data centers in space. You know, Elon did call his shot. I've been talking about this. He says, "Oh, it's always sunny in space. 253 00:45:55.482 --> 00:46:05.442 We always have solar power." You know what's also not in space? Noise. Counter to your science fiction movies, which have loud lasers in space, there's no noisy neighbors. 254 00:46:06.402 --> 00:46:19.682 So we'll be covering this over the next few weeks. Forever. Yeah, probably forever. We're going to be covering this until nobody talks about it anymore, which is probably going to be a few years. 255 00:46:20.522 --> 00:46:26.542 So let us know what you think about the SpaceX story. Let us know what you think about Cypher. Let us know what you think about the midterms. 256 00:46:27.322 --> 00:46:39.002 If you're still listening, you made it to the end and you get a special invite to our X chat. It's free. Link is in the video description and on our X. 257 00:46:39.042 --> 00:46:50.382 Hop in there, chat stocks, data centers, et cetera, midterms with us. You'll find me, Colin, and Will and the other Blockspace team. Thank you for listening to Blockspace Live. We do this at 1 p.m. 258 00:46:50.422 --> 00:46:59.602 Eastern on weekdays, Monday, Tuesday, Wednesday, Thursday, Friday, with the exception of this week because my normal co-host is out. We'll be back on Wednesday. We are Compute's daily live show. 259 00:46:59.862 --> 00:47:06.822 If you want more Blockspace content, head to our website, blockspace.media. We'll see you on Wednesday. 260 00:47:06.822 --> 00:47:21.182 [outro music]