The Compound and Friends
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.
00:27:05 · Josh Brown, Michael Batnick, Daniel Clifton
[00:27:05] S2: Daniel, put that... John, put that chart back up. [00:27:08] S0: Are... Michael, what are we looking at here? Well, this is what we're just talking about, just where data centers... People decided, nope. No, thanks. [00:27:14] S1: No. Thank you. [00:27:15] S2: Okay. What is it about... It looks like North Dakota won? Is that what you're saying? [00:27:21] S1: Yeah, but the one that there were two I think there are two that are going to win. Maybe one of them that are going to win they weren't really meaningful data center initiatives. The big ones, the ones that people were focused on where there's actual real data center projects and they were trying to limit those, particularly in Ohio, those were getting shot down, and that was a real sign of where the populace is. [00:27:41] S2: And that means it's over? No appeal? No legislative process? [00:27:46] S1: Think the meta statement was, we're going to evaluate our options. So I think the companies are figuring out, hey. Can we go back into the town? Is there things that we work out? [00:27:56] S2: We pay? I wanna ask you about what what is different about Louisiana. Yeah. That's the Beignet project [00:28:03] S1: Yes. [00:28:04] S2: Which is also Meta. Is Oracle there too? [00:28:06] S1: I don't know if Oracle's there, but definitely Meta. [00:28:08] S2: Alright. So... But what is different about the climate in that state that is enabling that to go forward without any problems?
00:28:08 · Josh Brown, Daniel Clifton, Michael Batnick
[00:28:08] S2: Alright. So... But what is different about the climate in that state that is enabling that to go forward without any problems? [00:28:14] S1: Part of it, number one, is that they can go behind the grid. They can actually segregate the electricity away from the consumer. [00:28:20] S2: Okay, so the consumer's not paying, Right. Quote, higher [00:28:23] S0: you just... Why can they do that? And others can't... [00:28:24] S1: We have the PJM interconnection in the Northeast, so everything is mixed into electricity load, and so it creates confusion. I think other states are going try and go this direction, but they're not there yet. The second is that Louisiana is embracing the jobs. And third, there's been a better PR movement, like teachers getting $50,000 salaries. I authored a study in April that showed that if you have a data center, they pay your property taxes. And what that does is it leads not only to lower property tax, which dwarfs any electricity increase, but it creates demand for housing. Because let's just say I live in Loudoun and you live in Arlington. Loudoun has data centers. Arlington doesn't. Okay? 40% of my property tax is now being paid for by the data centers. [00:29:09] S2: Yours is zero. Does anyone know this? So Like, people. Do any regular people know this? [00:29:14] S1: No. Because there wasn't an education campaign [00:29:17] S2: Oh, about god. What's wrong with these guys? Right. But here's what's happening. Podcasting twenty four hours a day. Nobody could bring this up.
00:29:17 · Josh Brown, Michael Batnick, Daniel Clifton
[00:29:17] S2: Oh, about god. What's wrong with these guys? Right. But here's what's happening. Podcasting twenty four hours a day. Nobody could bring this up. [00:29:24] S0: Repeat the point. Wasn't paying attention. Yeah. No, I'm just kidding. [00:29:26] S2: I'm just kidding. [00:29:26] S1: Okay. Guess what it does though? Even if you don't know this? [00:29:31] S2: Hold on. Wait, this is crazy. So all of these data centers that were proposed and now don't look like they're going through. Yeah. The construction project, if they had gone through and they eventually... They would be paying portions of people's property tax. Yeah. And nobody is informed about this. Correct. So Chamath is doing eight hours of podcasting a day. Yeah. He didn't think to mention this? [00:29:56] S1: No. I don't listen [00:29:57] S2: to David, it but I'm saying like all of these... They're all going on podcasts. Yeah. Jensen. Like, they don't stop talking. They didn't think to make [00:30:06] S1: How this does this data center benefit you? The property tax rate in Loudoun County has come down ten years in a row. I'm a public finance economist. That's how I started my career thirty years ago. That's not happening anywhere in the country. And so what it does is it creates demand for housing in the data center counties. Yeah. Okay? And it raises property values because the local property tax, the lower tax is capitalizing into home value. The home value differential is like $20,000 per homeowner. It's massive.