The Compound and Friends
00:21:34 · Daniel Clifton, Josh Brown
[00:21:34] S1: Well, I agree, and I think the interest rate story is a big one. If you get a directionally improved situation in Iran, you're going to get lower rates. If you get lower oil prices, you're going to get fewer Fed rate increases and the data center portion of it. Let me give you one more. The deficit's probably going to get better here. This is a widely out of consensus view. Even if there's a budget deal, the deficit's probably to get better next year because we just did almost $1,000,000,000,000 of stimulus this year. Tariff refunds. There have been no tariffs in effect on the IEEPA tariffs because the Supreme Court threw them out. The OBB, the big distribution on the OBB, that was already that's already been banked now. You're not going to get that next year. Right? So you go through it mathematically, you're running off $607,100,000,000,000 dollars But this is why the data center issue is important. You need private sector growth to offset that fiscal tightening that's going to be happening. [00:22:29] S2: Do you think do you think the leadership in the Democratic Party... So they're not gonna say, alright. The data centers are fine. The rhetoric will continue. There's probably gonna be hearings. Yep. Like... But do you think deep down they understand, like, it would not be a great idea to halt all of these projects in their tracks? So Or or or is the the part of the party that's so insane, like, they don't get it or they don't even care about it? Like, what do... What's your read?
00:22:29 · Josh Brown, Daniel Clifton, Michael Batnick
[00:22:29] S2: Do you think do you think the leadership in the Democratic Party... So they're not gonna say, alright. The data centers are fine. The rhetoric will continue. There's probably gonna be hearings. Yep. Like... But do you think deep down they understand, like, it would not be a great idea to halt all of these projects in their tracks? So Or or or is the the part of the party that's so insane, like, they don't get it or they don't even care about it? Like, what do... What's your read? [00:22:56] S1: It's a little bit of both. Okay. I'm a little bit more nuanced on it. [00:22:59] S0: There [00:22:59] S1: are three different portions of the data center trade that people got to know about. The first is local. Most of these are getting canceled because of local opposition, not because of a state official or federal official. [00:23:10] S2: And that had been going on way before the Way before. [00:23:12] S1: That's why I go to these town hall meetings. I sit in it. The only place I see more opposition than data centers in some of these town hall meetings was, like, George Bush trying to privatize Social Security in 2000 Like, I thought I would never say that, right? And I'm like, Woah, this is crazy. Okay? Now, there were 40 referendums on the ballot on Tuesday on data centers. 38 of them went against the industry. If you look at Meta, not only did they go after a Meta data center, they recalled the three city commissioners on the ballot that approved that Meta data center. Like, this stuff is real. This is a revolt that's going on.
00:23:12 · Daniel Clifton, Michael Batnick
[00:23:12] S1: That's why I go to these town hall meetings. I sit in it. The only place I see more opposition than data centers in some of these town hall meetings was, like, George Bush trying to privatize Social Security in 2000 Like, I thought I would never say that, right? And I'm like, Woah, this is crazy. Okay? Now, there were 40 referendums on the ballot on Tuesday on data centers. 38 of them went against the industry. If you look at Meta, not only did they go after a Meta data center, they recalled the three city commissioners on the ballot that approved that Meta data center. Like, this stuff is real. This is a revolt that's going on. [00:23:47] S0: So people really hate it?
00:23:47 · Michael Batnick, Daniel Clifton, Josh Brown
[00:23:47] S0: So people really hate it? [00:23:48] S1: Hate it at the local level. The state officials have a lot more power on it. So here we are, all election going. The governor races are going to matter more than what goes on in Congress. I've never said anything like that. Right? And then, like, if you weren't focused on what was happening on the governor's races because the governor races were Ohio, Georgia, Texas. That's 40% of the entire chain of those data centers, right? And Iowa could be the biggest state in the country for data centers. It is built for it. But the voters hate it. So now you've got the states. The states come in and people say, Ah, they're just going to go back to politics. You know, this is politics. Once the election's over, we're going to go back to normal. That was the consensus view on Wall Street. And I said, Okay. Let's look at what happened in Virginia. Last year, Virginia changed its governor. The world capital of data centers. World capital. Yeah. Just twenty minutes from my house. Okay? A lot of it is national security, CIA, NASA, and Google and the hyperscaler said, Let's build around that and get under the umbrella. [00:24:45] S2: Really smart. The Virginia Loudoun County.
00:24:45 · Josh Brown, Daniel Clifton
[00:24:45] S2: Really smart. The Virginia Loudoun County. [00:24:48] S1: Loudoun County, but now we're in Prince William, too. So it's the next county over, and it's massive. So when you go the new governor comes in, she was endorsed by the Chamber of Commerce, a Democrat, when she was in Congress. She is not a Bernie Sanders liberal. Okay? And she's like, look, our people are hurting. Their electricity prices are higher. Whether that's true or not, I don't know. But that's the way she framed it. She says, we're going to do this tax increase. They do a $600,000,000 tax increase the third week of June. Blackstone, within two days, pulls the largest data center project in the state. Amazon two weeks ago canceled four data centers that they already had zoned in Northern Virginia. So I ask yourself, is there going to be more CapEx in Virginia today or before the election last year? And the answer is there's less today. That's manageable. It's Virginia, and we're kind of built out. But now you've to do that for Ohio and Georgia and Iowa, and the big [00:25:45] S2: one was Texas. Louisiana is going the other way. [00:25:47] S1: Louisiana is going the other way. I actually [00:25:48] S2: think That's interesting.
00:25:48 · Josh Brown, Daniel Clifton
[00:25:48] S2: think That's interesting. [00:25:49] S1: I actually think the new governor of Wisconsin is going to embrace the data centers. So there are some states that are going to do it, but Texas was the grail. And Texas was supposed to take all this extra data, all the spillover from the other states that banned it, and then all of a sudden Abbott lost. The way that we think about it, and this is why it wasn't an issue in the first half of the year, we call it the Boone Pickens rule. Boone Pickens on fracking used to say, Nobody cares if New York bans fracking. Nobody cares. As long as Pennsylvania, Texas Oklahoma. So Oklahoma. So that's the framework we took with data centers. Nobody cared. And that third week of June is when Virginia turned and when Texas turned. That's when Abbott said, we got to do something on this. That's the day all the data center related stocks peaked relative to the S and P 500. So interesting. [00:26:38] S2: Was going to ask you about that correlation. I think, like, July was the top for most of the AI hardware and chip stocks. Yep. And they never saw those highs again. Exactly. And you're drawing a direct correlation between rulings or this tax resulting in people pulling projects? [00:26:54] S1: Correct. Because these are the governors who are going to protect the jobs and go for jobs. And they said, Hey, wait a minute here. This is politically disadvantaged to be on the side of data centers. [00:27:05] S2: Daniel, put that... John, put that chart back up.