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Earnings Week Kickoff, DeepSeek Taps Inner Mongolia for 1 GW, Banks Up AI Stock Targets
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- [00:00]
Eric Ellingson
What's going on, y'?
- [00:00]
Charlie
All?
- [00:00]
Colin
Welcome back to BlockSpace Live for a big week. Charlie Earnings week is kicking off this week here at Block Space. We've got the bulk of the companies in our coverage announcing earnings this week and next week. So for today's show, we're going to kick off with a schedule of what y' all can expect in terms of live streaming, earnings calls, content on the live stream, unpacking those earnings calls, and executive interviews throughout the week. Following that, a quick stock market update because Christmas came early, Charlie, and it is green. It is not quite Christmas in July, Christmas in August. Everything's popping right now after a slump in July. Are we so back? It looks like it, but we're going to dig into the numbers just to show what the rebound is looking like, including some notes from investment banks B. Riley and Rosenblatt. Following that, we have our first guest on today, Eric Ellingson of Fortitude CFO on to discuss the company's pivot into zcash Mining and whether or not they have AI and HBC aspirations. And then we will cap off today's stream by bringing back on investor and analyst Ben Pouladian to talk about why capex guidance might be a little wonky considering no one can truly verify the OEM numbers for how much they're pumping out this year.
- [01:21]
Charlie
That's right, Block Space goes live every weekday at 1pm Eastern. We are in Compute's daily live show featuring quick hits on AI, data centers, emerging technology and and markets. This week is Earnings week so we are covering all things earnings in Neo clouds, data centers and powered land. We will get into that in just a second. If you like the live stream you can catch it on podcast form after it goes out on anywhere you get podcasts. Leave us a review. 5 out of 5 stars. My opinion. And if you can't get enough of Block Space content in audio or video form, we do written stuff. You can find that on our website, Blockspace Media. We publish a lot of articles and a newsletter daily covering everything we cover on the podcast and more. If you like memes, we always include a meme. This show is brought to you by CleanSpark. Nasdaq listed ticker CLSK. More on CleanSpark later on in the show. And guess what Colin, it is time for the inaugural earnings update. Yes, all hands on deck because we are doing the kickoff for every show this week covering earnings and this week is a doozy. I think a lot of people don't actually put like earnings on their calendar so they don't know that, you know, kind of happens like oh shoot, earnings are today. I should probably pay attention. We're covering those. We're going to give you a forward looking view into earnings. I've got this little calendar forward looking chart graphic for this week. So if you're listening, we're covering earnings week two weeks in a row. This is week one. We do Q2 or whatever quarter it is for the fiscal year, coverage for AI data centers and neoclouds. We have executive interviews this week. Again kind of a doozy. Today we have Eric Ellingson of Fortitude Mining. Tomorrow we have Ionic Digital C Suite CEO or CFO tomorrow Wednesday Patrick Fleury the CFO of Terrible and asher Ganude of Hut 8 on Friday. As far as when the earnings calls are on Tuesday morning we have Cypher and Hut eight Wednesday morning Terror, Wolf, Riot and Galaxy. Kind of all back to back early trio of earnings that morning. Thursday in the afternoon Clean Spark and Mara and on Friday Core Scientific. We'll be streaming the majority of these to our channels. Make sure to like and subscribe and pay attention to both our x and our YouTube because depending on the stream clash we may be streaming one place and not the other. So make sure to check out those we will hosting watch parties for these tickers.
- [04:27]
Colin
Yeah a lot of overlap Charlie. And just to drive that point home for the Times On Tuesday, August 4th Cipher kicks off at 8:00am ET followed by Hut 8 at 8:30 on the 5th. On Wednesday Wolf at 8:00am and then Galaxy and Riot conflicting at 8:30am all times ET. On Thursday we have Clean Sparks earnings at 4:30pm ET right after market close followed by Mara at 5:00pm ET and so far nothing on Friday. So keep an eye out. As Charlie said on our for our X and YouTube we will be streaming these live. We will also unpack the earnings every day on the stream. For Tuesday we will tackle cypher and hud8 come out same day. Wednesday we will tackle Wolf, Galaxy and Riot. Thursday we will be taking a breather because there's nothing coming out that morning and nothing at market close on Wednesday. But on Friday we will be hitting the ground running with Clean Spark and Mara's earnings as well. And as Charlie said we have those interviews lined up with Patrick Fleury and Asher Ganute so keep an eye out for those throughout the week.
- [05:41]
Charlie
Muted Charlie and this is just week one. We we haven't rolled out, we haven't pushed week two yet but there's a lot coming out Week two is also very big interviews and live streams and earnings calls. So that is to say it's a particularly exciting earnings week, Colin, because the market's ripping and where better is ripping. Where better else to go to see what is happening in the market than diametrics or diametrics.
- [06:14]
Colin
What's in our stockings this morning, Charlie? What pumps have we have the little market elves left us last night.
- [06:21]
Charlie
So pretty much everything, everything is green. It's not quite the rip that we saw on Friday after Leopold got liquidated, but I mean, if we just look at the powershells, Mara Wright, Clean Spark. Let me actually sort these by. Yeah, I mean Mara Riot, CleanSpark, Coors, Wolf, Cipher, Hut Bit Deer Hive, Applied Digital, Saluna, Big Digital Energy. Every single thing is up from anywhere from 2.3%. Hive Hut 1.6%. All the way up to Cypher at 9.4% up on the day. Really pretty wild here to see earnings week kick off to such a strong start. If we want to go down to the Neo clouds, this is where some of the numbers get even crazier. Leading the pack this morning, core weave up 15.7%. Nevius of 14.2%. Iron, 7.2%. So. And then the rest of the sector, you know, DGX, Shaz, white fiber, all of these up 1 to 8%. So strong start to the week. Maybe that means that all of the earnings are going to be pretty positive. Who knows? So toss it to you.
- [07:44]
Colin
Yeah. So a huge rebound and this is a totally unverified report from Kalshi Finance, but I just have to get it up here because I feel like it's notable given the rebound. According to this tweet, hedge funds just bought tech stocks at the fastest pace since 2022. So if you're wondering what is behind this rally, you can thank Citadel for buying the book off of Leopold and the ensuing rush of liquidity into the system. I'm not sure how true this is because if you look back into July, there is this Goldman Sachs report that says, and this is from Bloomberg via Yahoo Finance. Goldman says hedge funds sell us tech stocks at record pace. Now, this is at the end of July when everything was getting absolutely hammered. It's possible that they're rotating back in now that evaluations have become a little less dear. But needless to say, it's just an absolutely absurd rebound. We covered this on the stream last week when we touched on some of the earnings. Microsoft up like 15% after it shattered Q2 expectations versus Meta, which was down about 8 to 9% following its earnings miss. And then you also had Amazon beat on its cloud segment.
- [09:00]
Charlie
As new all time highs for Amazon $3 trillion company as of this morning. I think what is it? There's five $3 trillion companies. So Amazon joins that pack.
- [09:10]
Colin
Yeah, that's if you look at the charts it's kind of incredible because it's just a cliff like it gaps all the way up for Amazon and for Microsoft. And we covered some of those Mag 7 earnings last week. They're not our primary beat obviously, so we don't put too much attention to those. But needless to say what we're starting to see, I mean just look at that chart, that's, that's, that's insane price action for a Amazon up 4.5%.
- [09:37]
Charlie
I mean this is a $3 trillion company market cap three and some odd trillion up big right at the open of the day.
- [09:47]
Colin
And the takeaway for me last week Charlie was looking at some of these earnings reports from the big dogs. It's that investors are starting to really ask what the feasible ROI will be for all this CapEx that they're spending. If you looked at Meta, they had an earnings miss even though they had a revenue beat. But their capex guidance was nudged upwards by about 5 to 10 billion for the full year 2026. Microsoft on the other hand had Azure cloud business line completely destroy expectations. Over 30% increase in revenue and its CapEx guidance fell. But that was some accounting shifting. They basically took it from the capital expense bucket into another operating cost bucket. But I do think that we have moved on to a new,
- [10:39]
Charlie
we've moved
- [10:39]
Colin
on to a new phase in the market where announcing the deals isn't enough to move the needle. We saw this recently with core Scientific and CleanSpark. They had two banner AI deals inked and the stocks did not really move as aggressively as we saw in the months prior and in last year when a lot of these deals were fresh.
- [11:01]
Charlie
I mean you say that but. And maybe the market was just a little cautious at the time because Korea was driving the market, whatever, maybe Iran was back on the front of everybody's minds. Perhaps people are thinking that things are over leveraged but at the same time, I mean look, this morning again you said B. Riley lifted clean spark to a 26 price target. What is it right now? It's, that's over, that's a over double. So it's at 14 right now. So it's basically 90% upside target. You have B. Riley also raising the terrible price target. To 40. So which is 124% upside.
- [11:41]
Colin
I'm glad you mentioned this, Charlie, because it's a good segue into some of these notes coming out before earnings, which we'll go ahead and tackle. Now. Caveat here. Whenever you see these investment bank reports, they're almost always on the sell side. So they're going to try to have higher price targets because they have a financial stake here.
- [11:59]
Charlie
Yeah, they're trying to sell you the stock. But maybe they're right.
- [12:03]
Colin
Yeah, maybe they're. Maybe they are right. And if you look at some of these in 2025, they would have been vindicated. Right. Because a lot of those stocks ended up soaring. But we'll start with Clean Spark here really quickly. This is coming to y' all from Block Space and per what Charlie just said, B. Riley raising its price target from 19 to 26. This is on Friday. It maintained a buy rating and the Target is an 81.3% upside from the closing price early Monday of $14.34 per share. What's driving this is not the Sandersville deal, though. B. Riley is arriving at this price target based on its assets in Texas. CleanSpark's two data centers in Texas, the Sealy campus, they have assigned an additional HPC value to the sele campus of 3.89 billion and 7.02 billion to the Brazoria county campus. Those figures use a 14x multiple to, to the. Excuse me, those deals use 14 times modeled NOI below the multiple assigned to the Sandersville deal that they model in this research note as well. And they are discounting capital expenditure estimates of about 2.59 billion for Sealy and 5.49 or 4.6 billion for Bezoria. They also have this note out on Wolf, which is a little scanter in terms of looking at potential, you know, potential future SBC revenue. But they did raise their price target from 32 to 40 and remaining with a buy rating. The 8% increase lifted the bank's target by 25%. And the new target applies about 124% upside from the reference rate when we wrote this article. And this comes on the heels of Terra Wolf's July 6 announcement for the 20 year lease with Anthropic at its Justified data Center in Hawesville, Kentucky. That's $19 billion deal over about 401 megawatts of critical it loads. There's also a note out on Galaxy, which we don't have up on the site right now, but the note itself comes from Rosenblatt and they are maintaining a buy rating but they are cutting the price target. Price target went from 39 to 35. Current price for Galaxy is about $21 per share and the price target cut is valuation mechanics driven. Rosenblatt is applying a 23x multiple to a lowered 2028 adjusted EBITDA estimate for Galaxy, which is conflicts with a peer average of about 18x and this is largely driven by the HBC hosting mix from Galaxy. As you all might recall, they have their core weave deal but they also have added a second site in McGregor, Texas. Originally spec'd for 24 megawatts so they can be under that batch zero threshold there in ERCOT, but they have aspirations to scale up to 300 megawatts at that site. What was interesting to me Charlie, with this Rosenblatt note with Galaxy though is they basically reset all of their valuation metrics for the company or their estimates and they didn't really trim them as much as they totally revamped them. So Q2 2026 revenue they dropped their estimate from 11.08 billion to 7.37 billion. Fiscal year full year 2026 revenue they estimated at 31.25 billion down from 49 billion. For the fiscal year 2027 end they have a target of 31.43 billion versus 65.84 billion for per the previous estimate as well. They also adjusted EBITDA down pretty significantly, including flipping EBITDA negative for the full year of 2026 down from 73.1 million to minus 300,000. I would imagine a lot of that is them taking into account the hammering that the crypto market is having currently because Galaxy still has a lot of hands not just within the HBC business but but within the realm of crypto financial services as well.
- [16:38]
Charlie
Yep, we are going to keep on going. We have deep seek in Mongolia. Fun little story this morning. Get to talk about the landscape of is Mongolia the Texas of Asia? More on that after a word from our sponsor CleanSpark.
- [16:58]
Colin
We are CleanSpark, America's Bitcoin miner, a publicly traded company with the largest operating hash rate powered entirely by self operated infrastructure across four states. This is our proof of work and we are setting the standard for what's next. Learn more about the intersection of energy and bitcoin@cleanspark.com.
- [17:32]
Charlie
You are. You're muted.
- [17:35]
Colin
Thank you Charlie. As you said, this one's a fun story. Coming at y' all from Block Space by way of Bloomberg and the Japanese Times. I believe the Japanese Times probably, or Japan Times probably reported it first and then Bloomberg did supplementary reporting. But that is deep seat targeting 1 gigawatt of AI data center expansion and Inner Mongolia, a region that old head bitcoin miners will remember from the heady days of China's mining dominance. We'll get into as we'll get into some of the numbers as to why that's happening. The region is very coal rich and one of the electricity generating powerhouses for mainland China. But this is coming to y' all from Will Foxley here at Block Space. Article says here quote Deep Seq is planning roughly 1 gigawatt of computing capacity in Ulinkweb, Inner Mongolia through a combination of company owned infrastructure and capacity lease from other operators. The Hangzhou based AI startup wants at least part of the capacity operating by the end of 2027, so they must have just gotten started recently or early 2028. According to reports from Bloomberg's and the Japan Times. Notably Charlie, the chip configuration has not been identified and we covered stories of or a Bloomberg report last week that insinuated that Moonshot, the company behind Kimik 3 was actually using roughly 20K Nvidia hopper generation chips from Alibaba for the Kimik 3 model. And this ran afoul into a bunch
- [19:15]
Charlie
of
- [19:18]
Colin
regulations and export controls that the US currently has over leading generation Nvidia chips to Chinese companies. As we covered on the stream, there are a few workarounds. Chinese companies can rent capacity outside of China for these leading generation chips, but they're not allowed to have the bleeding edge Nvidia chips for training or for inference for their AI in their own warehouses, in their own data centers. And so the question for this then becomes what is Deep Seat going to use? And of course the reporting was scant here because I don't think this is going to be something that you can just finagle out of sourcing very easily. But the question is whether or not they're going to use Huawei's Ascend line, which is China's leading domestic alternative, or stick with Nvidia. Deep Seek has used Huawei in the past, but early reporting indicated that it ran into difficulties training on Huawei Silicon and has continued to lean on Nvidia systems. The chip mix again for the 1 gigawatt build out has not been disclosed, so there's some tension here between regional and domestic. Charlie, I'll toss it to you before we get into some of the rationale for why Inner Mongolia has been chosen for this gigawatt build. Out.
- [20:36]
Charlie
Yeah, and I'll chime in on that too, but I think some context is important. So Deep Seq from which the term Deepseek moment the industry reckoning what, 18 months or so ago, Deep Seq is vertically integrating. Now this was a company, a Chinese near frontier model company who made its name on being like the efficient model, the token efficient model, super, super cheap. You could basically buy your intelligence and inference just for pennies on the dollar compared to other providers. And that's because they kind of supposedly trained their model on a shoestring budget, but now they're going full integration. So this is a very Capex heavy decision, we assume. And it does challenge this narrative that Deep Sea almost kind of created 18 months ago, which is you don't need massive compute. And that had caused like a tanking of the industry, Nvidia and others for like a week or two, which was quickly rebounded back. But basically Deepseek, the company who once challenged the idea or caused the industry to wonder if the idea that we need large compute and large capex is now leaning into this. So this is kind of reversal and acknowledgment and admission through corporate strategy and announcements that yeah, everybody short compute, including the company who everybody thought demonstrated that we didn't need as much compute. So I'll toss it back to you to talk about Inner Mongolia. I have a map pulled up if you want.
- [22:14]
Colin
Yeah, can you go ahead and toss that up here?
- [22:17]
Charlie
Yeah, because this is really, I think this is helpful for people. Inner Mongolia is not the country of Mongolia. It's the province of China, like a large state. The province of Inner Mongolia, which is the large province in northern China which borders Mongolia, I call it. I think maybe thinking of it like the Texas of China may be kind of accurate in that it's sparsely populated, it's resource dense and it has tons of power distribution and power generation related resources to you.
- [22:56]
Colin
Yeah, it's about 350 kilometers northwest of Beijing. So it'll be just close enough. A little bit further out maybe than you'd want, but it'll be close enough to service computing needs for that city center. And it has a naturally cooler climate that makes it beneficial for running these data centers. And it is flush with coal, so much so that there's a crowded field of companies in there. Alibaba U Cloud, vnet Group, Zongolian Data have all set up projects there. And now Deep Seq moving in. Bloomberg reports Inner Mongolia as a whole had 28 large medium computing and data center Projects under construction or renovation in H1 2026, totaling an estimated 117.6 billion RMB in investment. And a June 25 regional disclosure had already pegged this area that Deepseek is moving into at 66 major computing projects with 71,000 petaflops of aggregate capacity. Over 90% AI related with Deep Seq, Bydance and JD.com workloads already running there. So the reason why all these companies are flocking into Mongolia is because it is a electricity generating powerhouse for China. Total installed power capacity is estimated at 240 million kilowatts. That's 240 gigawatts, which is the largest of any Chinese province. Coal makes up the lion's share of of aggregate megawatt hours produced. It's 117 gigawatts of the whole of the nameplate load. But in 2025, coal fired powered plants produced 590 billion kilowatt hours versus solar and wind which generated about half that at 277 billion. And this despite the that fact, fact that solar and wind actually make up a decent chunk about 120 gigawatts of the nameplate power in the region. But they're intermittent. So you don't get all of that power.
- [24:55]
Charlie
Obviously it's Mongolia, it's the steps, the windy steps of Mongolia. Of course there's wind.
- [25:01]
Colin
Yeah, I mean, so they've got a bunch of wind there, they got a bunch of solar there. But the coal baseload is the thing that will really make this region shine for AI data center development. In fact, Inner Mongolia is the key node in China's west to east power transmission project. In 2025, roughly 40% of its generation was exported to other provinces. So there is a bumper crop of electrons in this area. And now that will go towards these AI data centers that are setting up shop there. The coal reserves in the region total roughly 536.5 billion tons, which is nearly a third of China's national total. So the fuel security in the region is very, very strong. And they're not going to run out of any raw materials for producing this or, sorry, they're not going to run out of fuel anytime soon for these data centers. And as I touched on at the beginning, Charlie, Inner Mongolia was one of the bedrocks of bitcoin mining when bitcoin miners still used to be dominant in China. In fact, that's where most of the miners still are. The ones that are left in the nation are concentrated in this region because it is so Flush with power. So we'll see how long they stay with all of the AI data centers starting to come in and crowd the trade for energy.
- [26:17]
Charlie
Yeah, I'll repackage a bit of what you said. Basically, if we want to compare West Texas, like ERCOT interconnection cues, with Inner Mongolia, also, the way to pronounce that city is Ulang Kab. I had to look at.
- [26:33]
Eric Ellingson
Thank you.
- [26:36]
Charlie
The distance from this baseload that deep sea is looking at to say, a major hub like Beijing. The distance is roughly the same distance as Abilene, Texas to Dallas, Texas, just for like a little like, you know, visual and geographical comparison. The difference though, between Inner Mongolia and Texas is that while Texas has huge demand, it means large and long interconnection queues. May not be the same case with Inner Mongolia in that they already have a lot of the installed capacity just because for whatever reason, China likes to, as a command economy, build a lot of things. And in this case, it may actually work out pretty well for them. I know that some people, some folks may say, oh, this is green computing, because it, you know, there's a lot of installed wind capacity in Inner Mongolia. I don't know if I think that's entirely true. As you said, Colin, this is going to be a coal powered energy mix.
- [27:45]
Eric Ellingson
Yeah.
- [27:45]
Colin
The people who fawn over China as some poster child of the green revolution are just diluting themselves because they'll point to charts that show how much solar and when they're building, which is true.
- [27:56]
Charlie
But if you look, they've got solar, you know, covering mountains and everything, but it's not connected to anything.
- [28:03]
Colin
Yeah, it's not connected to anything. And also, if you look at how much coal they're building, it dwarfs the green generation that they're rolling out. Also, China's not doing this out of the goodness of their heart, or I should say Beijing, the CCP are not doing this. They're doing it because they produce all the world's solar panels and they subsidize that production. They have a lot left over, so they're just gonna deploy it for their own use cases. So.
- [28:26]
Charlie
All right, we, we have Erik Ellingson of Fortitude in the wings. We'll bring him on up here shortly after a word from our sponsor, Luxor.
- [28:41]
Colin
This episode of Blockspace Live is brought to you by Luxor's commander Bitcoin miner management software for enterprise operations. Luxor's commander gives you real time fleet monitoring, bulk remote commands across your fleet. And intelligent miner, that's an automated Profitability engine that runs every five minutes and tests your fleet's power settings against live energy and hash rate markets. In fact, ERCOT back tests show 10% improved profitability with intelligent mining versus binary mining. Commander Pro is $100 per megawatt or a 25 basis point pool fee adder. But you can also try it free for 60 days. If you'd like to learn more, go to Luxor Tech Forward slash Commander to get started. Alrighty, Charlie, let's get Eric Ellingson, cfo, Fortitude, on the stage. Eric, welcome to the show, sir. How you doing?
- [29:30]
Eric Ellingson
Well, Doing well. Thanks, Colin. Charlie, good to spend time with both of you guys. Appreciate you having me on today.
- [29:37]
Colin
Yeah, appreciate you taking the time, man. It's been a long time coming. We've been covering Fortitude on the. On the website for quite some time after it was spun off from Foundry, started getting its own footing. So this was a great opportunity for an update on some of the stuff y' all are planning, especially with this merger that y' all are doing with Heart Sciences for a public listing. And I think that's a good place to start. What's driving this decision and what is the market appetite right now for a crypto mining equity when most of the sector is pivoting towards AI? I think that's probably forced first and foremost on an investor's minds and also if you can give a rough timeline for when you all think this will be completed.
- [30:21]
Eric Ellingson
Absolutely. No. Again, good to be here and yeah, excited to talk about the transaction. So, not unlike some of our mining brethren before us, we are looking at a reverse takeover transaction with hard sciences ticker symbol hscs as a vehicle for us to enter the public markets. I think why was kind of a very specific question from you, Colin, on why is now the right time relative to appetite for the market considering mining companies from our perspective? And Barry talks about this often across podcasts and Twitter. He likes to zig when others are zagging. Right. And so as folks are leaving a market, we see a gap in the space for us to enter from a mining perspective. And I think we think about mining a little bit differently than some of the larger folks that have been in the space for an extended period of time. We're focused primarily on zcash. And so the mining economics of zcash look very similar to that of really early days, bitcoin mining. And so when you think about, and I want to talk mining holistically across the space as opposed to talking about kind of our financials, specifically but if you take a look, zcash info is a great resource by one of our sister companies, Foundry. But if you take a look at zcash info, you could see some of the very specific economics tied to mining Zcash. And at 80 plus percent margins on any given day for the Z15 Pro, it's a really attractive time for us to be mining the zcash token. And as you think about the profile of a mining company over the longer term, there's a need for power assets and there's a significant need to purchase Asics and appreciate you bringing that up too, Charlie. And there's a need to purchase Asics and mining equipment as well. Right. And so if you go to the Miner tab in particular, you can see the profitability of some of the units kind of directly with the Z15 Pro being at the top of the page. So as you know, as we speak, at 10 cent power cost, which he has listed as the electricity rate above, we're still right at close to 80% mining margins. And of course we're at something less than 10% today in our power cost. We've guided in our investor relations deck is bringing our cost to mine as ecash token down from $70 to $40. So a little bit of a long winded answer on the front end, but I think economics are the reason why. And then why enter the public markets? Fundamentally, it's a capital and growth story for us.
- [32:47]
Colin
I'm glad you talked about the economics because that was actually going to be my next question. When you look at a company's decision to go for something like zcash versus Bitcoin mining, that's the first thing that comes up. And have you all done numbers on bitcoin recently in terms of what the margins are similarly for new hardware? Just to give listeners kind of a perspective there.
- [33:08]
Eric Ellingson
Yeah. Margins in the bitcoin space are depending on power cost, anywhere between 10 and 30% contribution or gross mining margins. And as mentioned, Zcash is in that depending on your power cost, between 80 and 90% contribution or gross mining margins, depending again on, on the underlying power cost of the business.
- [33:28]
Colin
And that 80% was based on 10 cent power. And I believe on one of Fortitude's press releases, y' all are coming in somewhere around 4 cents a kilowatt hour. Am I correct about that?
- [33:40]
Eric Ellingson
You are. So we're in, we're in that 4 to 5 cent range and that's, that's based on kind of the hub that we're building in real time. In Nebraska. So we were super excited to announce a reset greenfield site that we energized in Grand Island, Nebraska and we had purchased earlier this year another site in Aurora, Nebraska. And we're working to kind of build a hub outside of again, kind of that theme of zigging, while others are zagging in terms of being outside of Texas, in some less crowded markets that are still kind of very open to an interruptible rate, which fundamentally is the thesis behind all crypto mining.
- [34:19]
Colin
Can you kind of speak to that hunt for power a little bit, Eric, in the sense that you said you're kind of looking outside of some of the more crowded markets? What is the edge that crypto miners are looking for right now to secure power in such a constrained environment with all of these data centers gobbling up every electron they can find?
- [34:41]
Eric Ellingson
Yeah, the edge and the differentiating factor for crypto versus the reliable redundant load required in the AI HPC space is our flexibility and be able to shut off and curtail when the market requires. That continues to be a theme in both Bitcoin and all of crypto mining, including zcash as well. Others are looking again for that stable, reliable load and even redundancy tied to it. So again, a lot of the larger miners that are pivoting in real time are looking to purchase cogen sets and things like that that are going to add redundancy to their grid connected power today, whereby we're comfortable working directly with the utility to put in place a curtailment strategy. I think the other theme is we're working to find and fill kind of smaller pockets of power. You asked specifically outside of the ERCOT grid in particular, I think there are agrarian economies across the Midwest that have power infrastructure that supports really twice per year use and that's harvest season and plant season again for a lot of the agrarian economy. That infrastructure is there and primed to be coupled with all of crypto mining.
- [36:09]
Colin
So I'm curious specifically about this grand island site. And you know, so the curtailment piece seems to have been pretty big about coming into this area and saying, hey, we're not going to drive up power costs, we're going to make sure that we're shutting off when appropriate and kind of dispelling fears of these data centers driving up costs. I'm curious, I'm curious with regards to some of the moratorium pushback that we've seen in certain jurisdictions and localities, how much of that is impeding or helping with Fortitude's ability to procure power specifically from the standpoint of it seems like most of the ire is directed towards the AI data centers and there might be a case for crypto miners with that curtailment piece to kind of duck that entirely. So making it easier say hey, we're not the same as these guys, does it make it just a little bit harder considering there is more scrutiny on any power use? What have you all found?
- [37:11]
Eric Ellingson
Yeah, I think this is such a cop out answer, but it's on a case by case basis. God. And what I mean by kind of case by case basis is if people are willing to listen and understand the nature of the load that we're utilizing, like Ryan Schmitz did specifically at Brand Island. Right. He got on on the local news to talk about how this is a great thing for the local economy and an ability for them to bring in additional revenue and utilize power infrastructure that again is only utilized on a couple occasions per year. So the interruptible load and contract that we signed with the folks in grand island, we're really excited about working with Ryan and team at GIUD and Grand island to build that infrastructure and now energize that particular infrastructure. So I think if folks are willing to listen to the benefit that we can bring to the grid and the additional revenue that can be generated for that local economy, not only it's us hiring people, but there's a construction component to what we were doing in addition to paying for power costs that's supporting grand island and the grand island community. So for folks that are willing to listen, we're willing to partner with everybody from independent power producers and IPPs across the, you know, all the way down to kind of the local co ops that want to provide us smaller loads,
- [38:33]
Charlie
I'll throw out kind of a wrapping up question which is obviously it's case by case and you've again zigged when others have zagged. But does Fortitude have any plans to pursue AIHPC co location at all? Can you speak to this at all, Charlie?
- [38:53]
Eric Ellingson
We're not right now. So I think it's a never say never mentality. Right. I think when we talk about our business and one of the cool themes and one of the reasons I joined a little less than a year and a half ago now was this mindset of being a returns maximalist. And so I think the team at DCG and us at Fortitude are always open to ideas and want to take that kind of return on investor capital mindset first. And if that over the long term means that we're going to explore opportunities. I think the group would be open to it.
- [39:30]
Colin
Awesome. Eric, thank you so much for joining, man. Really appreciate the time. And we'll have you all back on as things start to develop for Fortitude.
- [39:39]
Eric Ellingson
Appreciate it. Yeah, exciting times ahead of us too. So excited to come back on and keep you guys abreast. Everything we're working on. Thanks, Tom. Thanks. Thanks, Charlie. Appreciate the time.
- [39:47]
Colin
Thank you.
- [39:50]
Charlie
Love that guy. Love a curveball mining strategy. Very compelling. We are going to keep on rolling. We have Ben in the audience. We're going to bring him up here in a moment to talk about chips and what it means for AMD's new chip in his letter that he put out this morning. Before that, a word from our sponsor, Lygos.
- [40:19]
Colin
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- [41:25]
Charlie
All right, we got Ben Palladian in the wings. We're going to bring him up here again. Gonna run it back. Ben, welcome back to the show.
- [41:33]
Ben Pouladian
Running it back. Welcome. Good. Glad to be back with you guys. I missed you guys over the weekend and I'm, I'm happy to be here again.
- [41:40]
Charlie
Yeah, and you were busy over the weekend. I mean you went, you were typing fiercely typing up this letter to AMD CEO Lisa Su, which I want to focus on. Like I was reading through this again. Had to use all the LLMs at my disposal to catch up on chip architecture. But I think I'm down. And this is very interesting because you say there's about half A trillion in capex in AI data center spend allocated based upon self reported unverified vendor benchmarks. And you have some open questions. So give me the TLDR of your takeaways from the AMD conference and presentation and the overall thesis of like what you want to find out.
- [42:32]
Ben Pouladian
Yeah, basically I'm a, I'm a pretty well known Nvidia shareholder. So I was at the AMD AI event a few weeks ago in San Francisco and then they put on the screen that their CPUs, you know, 20% better than Vera Nvidia VERA CPU on single core performance and I was like okay, like let's bring the competition back because you know, back in the 90s and 2000s it was always intel versus AMD on the CPU stuff. Now on the AI data center front I think it's Nvidia versus AMD on the CPU. So I went through their whole deck to see like what they were talking about and then I couldn't find the chip that they were talking about. There's no model number, no wattage, no price and it's not even on their price list. And then this, Tom's hardware also said the same thing that this, this chip doesn't exist. So I was like you know what, like this is something important. I, I reached out to a few friends in the industry and I said like am I like, like making sense here or am I seeing things? Like no you're right Ben, like this isn't anywhere. So I said you know what? The reporting earnings on Tuesday let me use my social media and publish a letter to see if she can respond and see what it is. I'm, I'm just open to discussion. I just, when people put up these slides of all these footnotes, I just want people to back it up of like real data. Because when I ran my LED lighting company we, we submitted everything to like a third party testing agent place and they would measure lumens per watt and then this and then in this particular case or like fudging the, the wattage number in different areas to kind of make their performance look better or worse and, or changing the metrics and it's, it's a little weird. And in this era like yeah, spending half a trillion dollars, you want to know what the apples. The apples comparison are? Because every, every watt matters in a data center because you're so power constrained
- [44:35]
Charlie
and, and that gets into you put out four questions for DOC CEO Dr. Lisa Su hopefully maybe to answer or shed light on this tomorrow. AMD earnings call tomorrow so we'll. Maybe we'll get some answers. But lay this out for me. Dive a little bit deeper into this. I don't call it the mystery chip, but we don't have the hard data is basically the point. What do you think the chip is? But what do we not know about it?
- [45:09]
Ben Pouladian
Maybe this chip doesn't exist. So if it doesn't exist, like, tell us like what's closest to it or map it out for us so we can kind of understand. Don't have people go through all these like tiny footnotes like in a maze to kind of try to figure out what this product is and. But make the claim that you're 20% better than Nvidia. Right. Because Nvidia has also built a heritage of CPUs which people don't know about. Grace Hopper was the first CPU that they worked on, but they didn't really market it because the whole AI revolution, if you, if you look at all the things that Jensen has been talking about all these years, it's like the CPU is dead, Moore's Law is dead, long live the gpu. But in reality, you need both to coexist. You need the CPU to kind of tell the GPU GPUs what to do and have that orchestration to work together. And the question is, which one is better and which one has higher performance. And if you go back in time, like I said, the late 90s, early 2000s, it was always AMD versus Intel on which CPU is better on performance and megahertz and all those things. And I think now we're back to that rivalry again between these two companies, which is exciting because I think a rivalries create better performance and it serves the customers better in that aspect.
- [46:35]
Charlie
And this gets into kind of like a standard reporting discrepancy. You talk about like this inconsistent denominators when reporting chip performance. And this extends also, I believe, to Nvidia in that there's some in like, it's not. It's very difficult to compare apples to apples when comparing the performance of these chips, I guess. What does this mean at the data center level? Because most of our audience is like power acquisition, power deals. But that's downstream of this, like, very, very, very different business of like chip stats.
- [47:14]
Ben Pouladian
Yeah, because they pushed, they pushed 600 watts on throughput and then 400 watts on agents per watt, but there's like no wattage for the single core. So obviously if you're supposedly saying you're using less watts and outputting more than you're better than the other guy. But what if you're actually using more watts but not and hiding it? Right. And that I think that for like a data center designer or owner, that leak, that wattage. Leakage. Right. Can negatively affect or affect our profitability because their energy costs go up and they don't have enough power. I think that's what people really need to understand is we're super power constrained and every watt matters and that needs to be accounted for on the specs of your products.
- [48:03]
Colin
I mean, does this have the potential to derail the expansion plan some of these companies have? I'm thinking about even just modeling out Capex. If the wattage isn't totally aligned with what you're expecting to spec for your data center, that could cause some kinks in the road. Do you think that's a legitimate issue for some of these operators or it is.
- [48:24]
Ben Pouladian
Because when you're talking about rack scale deployments, you have one rack times a thousand or whatever is in the data center. So all these things multiply and scale. So the question is, what is it? I need to know that number and that performance because I'm designing this data center that's going to basically be built in a year and a half based on your specs today. And the load and the wattage and the power supply and everything, everything has to kind of match up. If not, you're putting the, the operator in a bad position because they end up deploying it and then it's going to end up costing more than what they actually thought it was going to be. And then like you're negative on your margins.
- [49:05]
Charlie
So AMD reports tomorrow. Yeah. Do you expect them to answer or clarify anything regarding this chip? I mean, you've got four questions. You know, publish the sub scores of the chips, unify denominators, maybe tell us what chip or whatever. Do you expect them to maybe address any of these open questions that you have and then if they do, to what degree does that add, like give investors clarity going forward?
- [49:36]
Ben Pouladian
I'll be listening. And recently I've had an influx of AMD employees start following me on X right now. They're all in these different departments coming out of the, the woodwork. So it's, it's definitely making the rounds I think around San Jose and Silicon Valley. It's a good question. And people when they work hard on these products in these different groups and it's, it's a lot of data and numbers. Like at the end of the day you want an apples to apples comparison on what you're you're up against and if you're kind of moving the target or the denominator to make yourself look better and 20% is a big number for these types of things. It kind of discourages you. So how do we level the playing field for everybody to kind of play nice like I have nothing against Lisa Sewer amd. I love it. I also had a question for Nvidia to talk about their memory and architecture, what they're doing. Everyone needs to kind of contribute for this to work in this ecosystem. Because the way I look at it is, you know, we're all on the same team. It's us against China at this point. So we all need to win. And let's make sure the people buying these products are also winning and getting the right product that they were looking for. I think that's the most important.
- [50:50]
Charlie
You bring up the, you referenced like the Intel AMD CPU race of before my time.
- [51:00]
Ben Pouladian
Yeah, I'm kind of old I guess.
- [51:02]
Charlie
Yeah. And you call this quote the best CPU race in a decade. You know, what are your thoughts on x86 holding the data center crown? Do we see Vera at the beginning of the ARM takeover for you know, hosting these nodes? I don't know. Give, give you some color on what we can look forward to for this competition.
- [51:28]
Ben Pouladian
Yeah, I mean the, the whole x86 thing sort of died. I think you can also look at what Apple did with the. They designed intel out of their MacBook. So like every, pretty much every new MacBook has Apple Silicon on it with their own cores and it's, it's all ARM based. Nvidia did the same thing and now with agentic AI you have ARM which came out of its own AI CPU and then AMD supposedly has three different cpu's and then intel, this whole run up that you see in the stock price is they're able to charge more for CPUs because there's so much demand in that. But the question is, is just throwing more CPUs at the. The problem might not be it. The question is how do you design the CPU to be more the most performant in an agentic long horizon task workload for AI. And to really do that I think you need to have the roadmap to make it purpose built. That's why not to be conflicted but I think Vera Rubin was designed for that. And the road map that Nvidia has for their CPU products I think is well versed for long horizon agentic task loads. And I think that's where it's headed with that. And then they, I think they shrink that to some extent and they put it into the, the, the RTX personal computer that's coming out or for, for enterprises and offices. And I think once you create that like scalable solution you kind of see all that working. And then this is just my like hypothesis. Sometimes you just have to kind of think outside the box and dream a little bit. I think these CPUs and these various CPUs right now they're orchestrating virtual agents or like basically like LLMs to do things. Eventually these CPUs will be orchestrating physical AI which is like robots. So the, the agentic, like the robots are basically running loops for you stay on in the manufacturing floor. Like pick up this widget, drill it in, test it, close it. Like that's a loop, right? And you needed a CPU to orchestrate that. Like a master computer. With all these robots running in concert at the robot. How do you. Who's doing an operating system? Who's running it? I mean, I mean I think that's like another Nvidia type of play.
- [53:52]
Charlie
And that kind of becomes a lot of this is focused on memory and where this memory sits on the GPU and the chip. And this may not be like the best closing question but you talk a little bit about memory power and how this is kind of obscured like the LPDDR 5x versus like an unpublished M R D I M M figure I'm still trying to wrap my head around this but the as as like context becomes king here or maybe I don't know if you just if you agree with that as context often kind of becomes king for these long horizon tasks like memory power becomes very important. Give me some color as to like what we could hope to see in the memory like stats game especially with regards to power draw and you know, hopefully can we expect it to be more standardized and transparent to perhaps incentivize a little more competition? I don't know. What are your thoughts here?
- [54:59]
Ben Pouladian
I think you know amd Nvidia made opposite memory beds. AMD gets its bandwidth from MRDM and modules with buffers that have to be powered and cooled. Nvidia uses low latency or uses low power phone lineage memory. So neither company counts a single watts of their headline power and that's where they differ the most. So it's kind of like two different schools of memory thought. I'm not, I don't know which one is right or which one is better. So it's, that's where it's kind of hard to. To balance out and figure out which one makes the most sense. You know, one obviously has, you know, buffers in it and it's cooled, and the other one uses like the same types of memory that you use in, like cell phones. So who's right? We'll see with that.
- [55:58]
Charlie
Maybe zooming out for a final take. We're heading into earnings week here. We're going to cover a lot of the PowerShells, NeoCloud's data center earnings. You probably look a little bit more at the chip level, the actual upstream production. But I'm curious, when you see these types of open questions on AMD, will AMD's and any information they do or don't give tomorrow, will that inform any opinions you have about the rest of the actual, like data center operators and construction companies?
- [56:34]
Ben Pouladian
I think demand is still outstripping supply. The question from a data center operators to make sure they have the right stack and equipment to eventually, hopefully operate profitably. Because I think your biggest cost is energy, right? So I don't see energy costs going down. So if they're scaling up and it's a finite amount of energy, what is your wattage, load and how is it all working? Because you don't want to get overloaded or have devices take more energy than they say they do on their specs or whatever it is to have those issues. And I think that's something they need to mitigate. And in this situation, because there's so much demand, like everybody is getting business, I don't see like a big slow, like, it's not like a, it's not like a short report or anything like that. It's just like a question to just bring to the industry to just level the playing field. So even if there's other startups that claim these sort of things, like kind of use the same metrics, so there's an apples apples comparison on these.
- [57:43]
Charlie
Ben, thank you so much for your insights. I hope you get the answers you want tomorrow.
- [57:48]
Ben Pouladian
Come on, Lisa, tell me what's going on.
- [57:50]
Charlie
Yeah, Lisa. Tag Lisa in the comments, everybody. Ben, thanks so much for your time. Maybe we'll, we'll probably run it back soon.
- [57:57]
Ben Pouladian
So let's go. Thanks, guys. Have a good day.
- [58:00]
Eric Ellingson
Thanks, Ben.
- [58:01]
Ben Pouladian
All right, bye. Bye.
- [58:04]
Charlie
Kind of a renaissance podcast here covering all things from PowerShells to Mongolia to AMD86 and ARM trends. So that will wrap it up for the show today. I do want to call everybody really quick to look at. We have the schedule posted on our Twitter here for the earnings week's events we are covering. Specifically, tomorrow morning, tune into our channels for Cypher Digital and Hut 8. Then we will have Ionic Digital C Suite person on the pod to chat about what they are up to. But make sure to follow all Blockspace content this week. If you cannot get enough of our video, live stream and podcast, head to our website for all written content. Blockspace media. That's not blockspace.com it's blockspace media. This show is brought to you by CleanSpark. NASDAQ listed ticker clsk I'm Charlie. I'm Colin and we'll see you tomorrow.