00:00This is the focus of a New York Times piece on Wall Street's growing skepticism of the data center, boom.
00:04The Times' Maureen Farrell, who wrote that piece, joins us now.
00:06Maureen, great to speak with you. Thank you very much for joining us.
00:09And maybe I could start with a broad question, just having you mark this moment of transition.
00:14So much of the conversation surrounding AI over the last few weeks has been on this broader existential threat,
00:20potentially the anxiety that I think a lot of policymakers and people are feeling.
00:24It does seem from your reporting that that's starting to be manifest now in other parts of this broader AI.
00:31Exactly. I mean, just a few weeks ago, it really looked like the IPO market for the rest of the
00:37year was going to be dominated by data center IPOs.
00:41I talked to bankers. They were expecting at least sort of a third of all the IPOs would be data
00:46center builders for these AI data centers or the companies that supply power to them.
00:52And very quickly, it's looking like these are going to be very hard to get done.
00:56So it does feel like a real moment for the first time in the public markets, at least.
01:01We're seeing these companies try to tap them.
01:05There's a sense that the appetite would be insatiable for anything data center related.
01:09And now we're seeing all these like existential questions that are, you know, are spilling out into the public markets.
01:16And we're seeing investors sort of voice some skepticism, too.
01:20What is driving the sudden reticence?
01:23Excuse me, I can I can speak words.
01:25Reticence. Is it is it one or two factors specifically or is it a combination of all of the things?
01:30I mean, what comes to mind is like the actual profitability of this technology, the debt ratios of some of
01:35these CapEx expenditures.
01:36What are the big concerns or is it just all of the above?
01:40I think it's all of the above and more and more things keep on getting added to the list of
01:44the all of the above.
01:46I mean, if you look at so many state and local elections are being data centers are dominating the conversation.
01:52And it seems to be one of the few issues that's sort of uniting the right and the left conservatives,
01:59liberals, that there there's a lot of wariness about having data centers and local communities.
02:04So that's one big thing. And I think even in the last few weeks, the noise has kind of gotten
02:08louder on that.
02:10So that's and we're seeing some issues like permits getting slowed.
02:14So I think there's real questions of how are how is this going to play out on the ground?
02:18Even if people want to even if companies are planning to commit, you know, billions, trillions, as you say, what's
02:24going to happen on the ground day to day to get this done?
02:27Plus, now we obviously have rising interest rates, so it's going to cost so much more.
02:33And, you know, we talked about the existential crises.
02:35It's just one thing after another seems to be giving people pause and real questions around this.
02:41Maureen, how are firms looking at these deals?
02:44I had Manny Roman on a panel last weekend, the CEO of PIMCO.
02:47And we talked a bit about PIMCO's involvement in projects in Michigan and Louisiana.
02:52And I kind of took away from that conversation PIMCO being involved in those deals, not as them kind of
02:58giving a rubber stamp to the promise of AI,
03:01but feeling like they'd come to some agreement that these deals were good deals.
03:04They felt like they were negotiated well and stood them in good stead.
03:08And I think PIMCO, in a recent note, said, you know, AI has gotten so big and is likely to
03:12grow so big,
03:12it's now having a huge macroeconomic impact on the global economy.
03:17What insight do you have into the way in which a lot of these firms, private equity firms, other investment
03:22firms,
03:22are thinking about the way they're constructing these deals?
03:27Sure.
03:27I mean, it's kind of changing day to day.
03:29And that, I mean, you're talking about PIMCO.
03:31Obviously, that's on the debt side.
03:34And so I guess there's a sense PIMCO did put out a report.
03:38They said it's, you know, more than $5 trillion, T.
03:41Again, it's going to be needed by 2030 to finance this AI boom.
03:46So for a firm like them and so many others, it's almost like you have to play in it.
03:51There's so much money.
03:52You have so much money.
03:53You're going to have to put your money into it.
03:56But the other question is that so much money is needed.
04:00There is a sense that you're going to have to tap public market investors to build it out.
04:05And we haven't really seen that yet.
04:06We've seen so much money raised in private markets to fund this out.
04:11We've seen so much debt lent to these projects.
04:15But we haven't yet seen the IPO market.
04:17So I think that's where sort of the pause is coming.
04:20And there's a question, you know, when you need trillions of dollars,
04:24can you do it without the IPO market?
04:27And people are worried about it.
04:29And I'm not saying they're not going to be able to get done.
04:31One, it's just going to be a much tougher road.
04:34And it's probably going to be a lot more expensive than they thought to build it as of right now.
04:39Other than the finance and technology concerns, which obviously are huge,
04:43how much do you think the politics is playing into this,
04:46the outrage over data centers, looming regulation, not just on the technology,
04:50but, you know, investing in a place you may try to build out a data center,
04:53you may get protests, and then those permits might get reevaluated.
04:56Is that playing, is the uncertainty there playing into this?
05:00Completely. I think it's just, you know, writ large, it's causing worries.
05:04And we're really seeing it on the ground.
05:06And we just talked about the New Mexico, you just talked about the New Mexico project.
05:10There's so many different ways.
05:11I think there are questions of what can city and states really do.
05:15And we're starting to see that.
05:16I mean, even something as simple as, you know, not simple, but like permitting.
05:21If the permits aren't in place, or they pause them, or they slow them down.
05:24When you think about these facilities that are tens of billions,
05:27even hundreds of billions of dollars, delays like that can be so hugely costly.
05:33And just the uncertainty, like, you can't really plot out your return
05:39if you don't know when things are going to happen.
05:41So I think the uncertainty that, there was a sense there was going to be uncertainty,
05:46of course, every construction project.
05:48But now there's so much more, and that's going to be very costly.
05:52It's inevitable.
05:53Maureen Farrell, great to speak with you.
