Big Technology Podcast
00:02:23 · Ranjan Roy, Alex Kantrowitz
[00:02:23] S1: Okay. You've already you've already left The US. One election result, and you're just fleeing. [00:02:28] S0: I'm out. No. I'll be back. I'll be back. But... Okay. You might think that seeing Prince Harry at the airport, who, the way, is very friendly. He was, like, giving me this, like, sheepish, mom, sorry. I gotta get ahead of you because otherwise, I'd be, you know, mobbed for selfies. So I was like, that was cool. You might think that was the highlight of the trip. You might think seeing the iPhone duo was the highlight of the trip. No. It was seeing MG Siegler with nothing... None other than the b frontier around his risk. No way. [00:02:55] S1: He had it.
00:02:55 · Ranjan Roy, Alex Kantrowitz
[00:02:55] S1: He had it. [00:02:56] S0: He has it. We talked about it, and that discussion's coming up next week. So I I don't wanna give way too much, but let's just say it's been an action packed week. And and and that isn't the only stuff going on in this world because you may or may not have noticed that not only did the Democrats sweep to power in The United States this week on Tuesday, the midterm election happened and... Elections happened, and the Democrats took both the house and the senate convincingly. But 38 jurisdictions either ban or restricted data centers, which we spoke a little bit with Teddy Schleifer on Wednesday. Not only that, the somewhat pro data center governor of Texas lost his race to the very anti data center governor elect coming from the Democrat party in in Texas. So, basically, we'd... We had seen all the negative polling around AI. Many people anywhere from, like, 23 to somewhere in the sixties, a percent of people, depending on which poll you believe, said AI was crucial for their vote. So we've actually seen this go from basically a technology many people hadn't heard of a couple years ago to a defining technology that people have rallied against in the election. And obviously, we're seeing the fallout in the market. What was your initial reaction when you saw what was going on, you know, specifically with this AI as an issue? And where do you think it leads? We're gonna talk through what's going on in the stock market, but let's go high level first.
00:04:27 · Ranjan Roy, Alex Kantrowitz
[00:04:27] S1: I mean, I think out of all the surprises from last Tuesday, people being vehemently against AI and data centers was probably the least for me. I mean, we've seen the numbers. I figured what... I know it was the polling worse than ICE. I hope it was not polling worse than ICE is. I think maybe they might have been on that same poll six months ago, but [00:04:49] S0: Not looking good for any of the three. [00:04:51] S1: No, no, no, no. Jesus. We all know, I mean, we've heard this, we've seen it, it's been very clear that the public is especially the data center debate, and the AI industry has done itself no favors in terms of how it's positioned itself. I think the really interesting part, and we're certainly seeing that in the markets is, what does that actually mean very concretely for the Anthropic IPO for the hyperscalers? Like, this is gonna add a lot more unpredictability around what their actual economics look like over the next two to three quarters. And I think we're... That is exactly what triggered the market, and I think we're gonna be seeing a lot more of that volatility.
00:05:38 · Alex Kantrowitz
[00:05:38] S0: Well, you know, what's interesting, it's been very difficult to sort of put your finger on what's happening. So when when the election results were coming in Tuesday and Wednesday, Wednesday, actually, in the wake of it, the tech stocks went up and the market went up. Some people said it was because there was a belief that finally, the voters were going to restrain the tech giants from spending so much. And that was a good thing. Then they digested it another day. And on Thursday, they're like, Oh, God, wait, they kind of need these data centers to continue this AI story. And so the market went down 4%. And then Friday, there's a bounce back. We're at we're not at the end of the trading day. But it does look like a bounce back. And I think what's interesting is, and I'm curious to get your take on this. One of the defining features of the AI trade is that it is somewhat inscrutable. It's amazing how many smart people really don't seem to have an idea of what's going on. You rarely see the market do this up and down and up again. Usually, maybe there's maybe a fall, and then a bounce back the next day. But the fact that it was up down up, and no one seems to have a handle on where this is going is is an interesting feature of this trade. And and that has trickled down effects across everything that we watch. What do you think?
00:06:58 · Ranjan Roy
[00:06:58] S1: I'll disagree there. I actually think it's pretty clear what's happening. I know Nasdaq's like up, what is it? 1.6% as we record after being down over 6% and the biggest fall since COVID, like March 2020. So I mean, we're always gonna get this little bit of a bounce back, but I mean, it's set, it's clear, like the data center build out and the absolute scale that was required to make any of these numbers make sense almost certainly will not happen. So to me, mean, I think I saw like what you'd said was kind of funny around the idea of like, it'll actually restrict spending and that's good for stocks because it it's adding a layer of discipline to hyperscalers that they've not shown on their own. You could even argue maybe Anthropic now out of its $518,000,000,000 in commits on compute might be able to get out of them because if data centers actually aren't able to be built, then maybe that'll be more attractive. I mean, that's like four d chess type of logic in terms of any of this. But I think the main thing to me like, not only have voters spoken and Ben Thompson, like he said that before the constraints were around first to compute and then like actual physical capacity, but now political capacity is the major constraint and I think we're gonna see that going forward. So I think there is no way the assumed build out of data centers and compute capacity can continue as at least it was forecasted to. So then it just becomes how does that change each individual story?
00:08:43 · Alex Kantrowitz
[00:08:43] S0: Alright. I'm gonna challenge you on that because, you know, I'm trying to figure out how real the restrictions are gonna be. And I keep thinking back to the initial techlash where the congress went after tech and the FTC went after tech and the DOJ went after tech. And you even saw meaningful wins from the regulatory agencies in cases they took against these companies. And where are we? Has anything changed as a result of this? I would say very little. And when I... So that... So so I am always tempted to double check my, in my initial reaction on the headline to what's actually gonna happen five years down the road. And you know what, like, you're already starting to see some of the stuff come in here that's leading you to believe that maybe this is also another blip and that the the the votes and the legislators and the governors won't get in the way of of AI build out the way that you we might have anticipated. Here's two things that I want to want to bring up number one. There have been there have been lots of 38 jurisdictions or more that have voted for restrictions or bans on data centers. Right? We agree with that. But that's... That does not limit these tech companies from either a, expanding where they already are because the groundwork is already in place, or b, finding new areas that would be maybe potentially eager to welcome the growth. Right? You're gonna see competition among the states, even among towns and cities within the states to get these data centers in. Because, you know, no matter how ugly they are and no matter what they represent in terms of AI job loss, the trade unions want them there because they do mean at least short term jobs. Right? Then you think about the governors. And even the governor elect of Texas, who ran so strongly against data centers, is now saying she is effectively not anti data center, she just wants them to play by their rules. So what we're seeing is not the end of the data center build out. But it's maybe the beginning of a negotiation.