James van Geelen on the Next Phase of the AI Buildout

Summary

Odd Lots Podcast Summary

Episode: James Van Geelen on the Next Phase of the AI Buildout

Date: October 6, 2025
Hosts: Joe Weisenthal & Tracy Alloway
Guest: James Van Geelen, author of the Citrini newsletter

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Overview:

This episode dives deep into the physical and financial realities of the ongoing artificial intelligence (AI) buildout in the U.S., with a particular focus on the rise of massive data centers and the immense investments funneling into the sector. The conversation explores the "picks and shovels" phase, unpacking which companies and industries are quietly powering the AI gold rush, how capex and financing deals are evolving, and whether we're experiencing a true technological revolution or an inflated bubble.

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Key Discussion Points & Insights

1. Scaling Up: Touring Hyperscale AI Data Centers

• Impressions from the Field

  • James recounts using drones and satellite images to observe the sheer magnitude of new data centers, such as Stargate in Abilene, Texas.
  • Quote: "A year ago this was dirt, and now there’s this thing and it’s the size of lower Manhattan." – James Van Geelen [06:32]
  • These builds are likened in scale and effort to post-WWII infrastructure projects, far surpassing former industrial benchmarks.

• The Role of Natural Gas and Power Needs

  • Operators are building their own natural gas power plants on-site to ensure reliability and energy capacity.
  • The turbines are simple cycle (rather than higher-efficiency combined cycle) because advanced models have 7-year wait times.
  • Quote: "Without power, these are just hunks of metal." – James Van Geelen [07:57]
  • Suppliers like GE Vernova and Caterpillar are key beneficiaries due to the scale and hardware demand.

• On-Site Labor & Construction Scale

  • Each hyperscale build is attracting waves of skilled trades: HVAC, fiber, electrical, and plumbing workers.
  • Quote: "There are 7,000 people working on building this. And this is just one site." – James Van Geelen [09:39]

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2. Investment Implications: The Picks and Shovels of AI

• Industrial Winners

  • "Old line" industrials like Caterpillar, Mitsubishi, Eaton, and Siemens Energy are suddenly red-hot stocks, often overlooked as AI plays.
  • Tracy jokes about a "Joe Hyperscale ETF," buying the companies that literally supply every nut and bolt.

• Unprecedented Demand & Company Confessions

  • Some vendors can only supply a portion of the parts needed—demand is outstripping even the world’s biggest industrial players.
  • Quote: "The pie is so big...the biggest companies in the world...can only do 60% of it." – James Van Geelen [13:03]

• New Metrics: Measuring by Megawatts

  • The size of data centers is discussed in megawatts/gigawatts, not square footage.
  • Liquidity cooling advances have reduced water needs, shifting the constraint to power, not water.

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3. The Bubble Question: Bubble or Paradigm Shift?

• Echoes of the Past:

  • The hosts compare today’s buildout to previous bubbles, especially the dot-com era: infrastructure leads, followed by speculative excess.

  • Quote:
    "If it’s not a bubble, it will be, and it probably is already. But where are we in the bubble? That’s the interesting thing for investors." – James Van Geelen [21:09]

• Contrasts to the Dot-Com Era:

  • Unlike "dark fiber" left dormant in 2000, every data center coming online is immediately used to capacity—no slack exists.
  • Demand keeps surging (e.g., the rise of compute-intensive video models like OpenAI’s Sora 2).

• Circular Financing and Bubble Dynamics

  • Intricate financing deals: off-balance-sheet infrastructure, ABS-backed by GPUs, debt/equity structures.
  • Nvidia is itself financing customers to buy its GPUs, creating a potentially risky circular system.
  • Quote: "That’s a bubble dynamic. That’s visible circular financing. But the demand is real." – James Van Geelen [24:17]

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4. Risks, Warning Signs, and Strategies

• Possible Early Warning Indicators:

  • Used GPU prices dropping

  • Financing waivers or renegotiations in private credit

  • Delays or issues with power delivery and supply

  • Slowdown in revenue growth for AI companies

  • Quote: "Monitoring used GPU prices...is a great way to see what’s going on." – James Van Geelen [29:35]

• Protecting Against the Bubble:

  • Suggests "long old-line physical hardware, short private credit/financiers" as a risk-balanced investment approach.
  • Quote: "The companies actually building it have unlimited upside, and...old line industrials...still have a core business to go back to." – James Van Geelen [31:13]

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5. AI Use Cases: Video, Robotics, and Storage

• “Slop Factories” or Strategic Business?

  • Much of AI’s current output (e.g., endless video generation) is seen as commercial revenue drivers and vital stepping stones toward AGI, not just frivolous content.

  • Video models are essential for robotics, which in turn generate the training data to further AI.

  • Quote: "Video models are going to become the most important part of this… becomes extremely important for robotics." – James Van Geelen [32:21]

• The Forgotten Boom: Data Storage

  • Demand for storage is soaring as video models produce vast volumes of data.

  • Stocks like Seagate and SanDisk are surging, driven by underestimated AI-linked demand.

  • Quote: "Basically one of the only areas of semiconductors that has gotten ignored has been storage… and if we’re going to start throwing out the slop on video [storage demand will jump]." – James Van Geelen [34:28]

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6. Robotics: Field Trips & Real-World Training

• China’s AI Robotics Push

  • James describes visiting Unitree in Hangzhou, China, where robot dogs and humanoids are mass-produced for practical deployment and data gathering.
  • Quote: "That’s the competition we have stacked up against us in the US vs. China." – James Van Geelen [37:33]
  • These units are advanced, cheap, and being deployed widely to generate the real-world movement and interaction data needed for future robotics.

• Consumer Pricing

  • Unitree robot dog: starts at $3,000
  • Advanced models: $8,000
  • Humanoid robot: $16,000 (cheaper than a used car)

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Notable Quotes & Memorable Moments

• On Hyperbole and Belief:

  • "The party line is we’re building machine God—and if we’re building machine God, then that’s kind of a religious zealotry." – James Van Geelen [19:52]
  • "Three years ago, most of these hyperscalers were making net-zero by 2030 pledges. That is not happening… now, you’re using natural gas and then say, once we create machine God, machine God will fix it." – James Van Geelen [20:06]

• Bubble Humor:

  • "Are we in a bubble? Yes. Is the bubble over? There are good arguments for that. I don’t think…they’re leaning into this slop… it’s a company—they’re going to do whatever they can to make money. That’s capitalism." – James Van Geelen [33:44]

• Market Manias:

  • Joe live-checks tickers throughout, illustrating the speed and pervasiveness of the AI-driven stock surge:
    • "Caterpillar was a $334 stock… now 486 at an all-time high." [11:17]

• The Macroeconomic Question:

  • "I wonder about the crowding out possibility…what if you had another business in Abilene and you’re trying to hire an HVAC worker right now? There’s no hope—all the HVAC workers are at that big Stargate operation. This is a very interesting macro question…" – Joe Weisenthal [42:09]

• On Market Timing:

  • "It’s not my job to time the market. So I’m glad I don’t have to have a view on all of this stuff." – Joe Weisenthal [39:53]

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Timestamps for Important Segments

• Opening banter about data center field trips: [02:01–03:10]
• Discussion of Abilene & Hyperion data centers: [06:04–07:52]
• Details on power generation (gas turbines, suppliers): [07:54–08:53]
• Labor & construction scale: [09:35–10:13]
• Market dynamics: "picks and shovels" stocks: [10:23–13:35]
• Scarcity, location, & utility constraints (power, water): [13:35–16:22]
• Physical security & building standards: [19:23–20:44]
• Bubble theory, history & dynamics: [21:00–25:12]
• Financing details & circular deals: [23:45–26:18]
• Red flags for AI buildout slowdown: [29:24–30:38]
• Hedging AI exposure in markets: [31:02–31:30]
• The strategic importance of video models & storage: [32:21–35:09]
• Unitree robotics segment: [36:24–38:49]
• Macro ‘crowding out’ effects of AI spending: [41:50–42:40]

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Conclusion & Takeaways

• Physical AI buildout is massive, real, and still expanding.
• Energy and infrastructure providers are huge, underappreciated winners.
• Financial innovation in the sector is both enabling rapid growth and adding systemic risk—watch for cracks.
• Signs of froth are everywhere, but end demand for compute and video data is as real as ever.
• Even as companies pursue AGI with religious fervor, physical limits—to power, capital, labor—are shaping the new tech economic landscape.

This episode is a must-listen for anyone tracking the intersection of technology, industrial stocks, infrastructure, and financial innovations driving the next phase of the AI revolution.

Transcript

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[Tracy Alloway]

Hello, and welcome to another episode of the All Thoughts podcast. I'm Tracy Alloway.

[Joe Weisenthal]

And I'm Joe Weisenthal.

[Tracy Alloway]

Joe?

[Joe Weisenthal]

Yes.

[Tracy Alloway]

Have you ever wanted to tour a data center?

[Joe Weisenthal]

I'd love to.

[Tracy Alloway]

Part of me thinks it would be really boring, like if you actually went inside, because it would just be a bunch of the same cables over and over and over again. But part of me thinks just seeing the scale of it would be amazing.

[Joe Weisenthal]

You know what I would do if I toured a data center is I would look at those cables and every nut and bolt and vec and heating thing and get every brand name I could on any little piece of equipment in the entire thing and then see, are there any of these that are AI plays that the market doesn't really, you know, any random screwdriver that's being used in this operation. What is the name? Is it publicly traded?

[Tracy Alloway]

So literally, picks and shovels?

[Joe Weisenthal]

Yeah, just exactly. Oh, here is a company that makes the, you know, the doorstop. Are they an AI play? Because they're going to need a lot of doorstops for all these doors. That's What I would do.

[Tracy Alloway]

Okay, so I guess the, the Joe Hyperscale data center ETF coming to a market near you eventually. That would be a good idea.

[Joe Weisenthal]

That's a great idea.

[Tracy Alloway]

Well, today we're going to talk about some of these data centers.

[Joe Weisenthal]

Yeah.

[Tracy Alloway]

With someone who has actually gone on a field trip and looked at them. And then we're going to talk about broader AI because of course with markets still, you know, basically at records, there's a lot of concern that valuations are getting out of hand. We've had these financing deals which just do my head in in terms of like trying to track who's lending to who and who's buying from who and all of that. So we should talk about it totally.

[Joe Weisenthal]

Because I mean, two things, which is one, we know how important AI is to the stock market. Two, you know, as there's all these sort of complicated financing deals and the numbers change by the day. So just today we got news that in the OpenAI is allowing some of its employees to sell shares at a half a trillion dollar valuation. It just seems like it's constant fundraise constant numbers that go higher and higher and higher every day. Various estimates for how much capital expenditure is going to happen in this cycle seem to go up. I feel like what we really need to do is have one of these conversations every month and just get for real. Like we need to keep, like it changes so fast and the stakes seem so high.

[Tracy Alloway]

Yeah. You definitely need frequent updates.

[Joe Weisenthal]

Yeah.

[Tracy Alloway]

The other thing of course hovering in the background is the importance of AI build out to the overall economy.

[James Van Gielen]

Right.

[Tracy Alloway]

And this is the question, like, is the, I think Deutsche bank actually put out a note on this. Is the entire US economy being propped up by AI right now? Maybe that's not a problem if, you know, if the AI stuff actually gets built and materializes into real money. But you can imagine if it is a bubble, then that would be bad.

[Joe Weisenthal]

The way I see it is there's essentially two ways this is going to end up. One is it turns out it was a bubble. We have a massive recession and we all lose our jobs. And the other possibility is that AI is not a bubble. We have AGI and we all lose our jobs. And so I'm curious which of the two paths is going to happen?

[Tracy Alloway]

Well, I got to say there are some alternate possibilities. Did you see the Dallas Fed chart?

[Joe Weisenthal]

I haven't seen that one.

[Tracy Alloway]

So it showed GDP per capita and one line was like for AGI and it just goes straight up.

[Joe Weisenthal]

It's just literally Vertical.

[Tracy Alloway]

Yeah. But then the other line is, what if the robots take over the world and kill everyone? And that line went straight down.

[Joe Weisenthal]

So, yeah, okay.

[Tracy Alloway]

Okay.

[Joe Weisenthal]

Lots of good outcomes here.

[Tracy Alloway]

Yes. All right, so we have the perfect guest, someone we've spoken to before who writes absolutely phenomenal research about AI and actually digs into literally the nuts and bolts of everything. We're going to be speaking with James Van Gelen. He is the author of the Citrini newsletter. James, thanks for coming back on.

[James Van Gielen]

Thanks for having me. I feel like the last time we were here we were also discussing whether AI is a bubble or not. And we get to do it again.

[Joe Weisenthal]

One day it'll be right.

[James Van Gielen]

Right.

[Tracy Alloway]

Analysts going on field trips is one of my favorite genres of research. Explain to us how you managed to do this.

[James Van Gielen]

So drones have become very commoditized. The likelihood of anything in the world being more than a 10 mile radius from someone with a Dr. Is extremely low. And we kind of use that to our advantage because we've been sitting in front of a screen watching green numbers go up and up and up. And it's not my fault that they named it Stargate. It kind of lends itself to not taking it as serious as one otherwise might. And someone, I read a tweet that said, well, where's the proof? There probably should be proof, right? So we looked at some satellite images and we went, okay, a year ago this was dirt and now there's this thing and it's the size of Lower Manhattan.

[Tracy Alloway]

Wow. It's in Texas, right?

[James Van Gielen]

It's in Abilene, Texas. And I mean, this is actually one of the smaller ones. I mean, if you look at Louisiana Meta's Hyperion, it would start, the footprint would start at the top of Central park and it would go down to soho.

[Joe Weisenthal]

Wow.

[Tracy Alloway]

So that's why they call it hyperscale.

[Joe Weisenthal]

So just to be clear, with Stargate, this is like the thing that like Trump and Oracle and probably Softbank is in the middle. Like, what is this complex? Who's behind it? This thing that you went and toured and got some drone footage of.

[James Van Gielen]

So it's essentially a mix of, you know, Oracle, OpenAI, there's some involvement from Nvidia, there's Saudi interests with MGX, there is some financing involved. And it is just one of the currently five data centers that are planned with a half a trillion dollars of investment. That's why we went and looked at it, because when you really think about it, this represents probably the largest infrastructure build out and effort since World War II.

[Tracy Alloway]

Where are they getting the energy from?

[James Van Gielen]

So that's the, that's the best part. That was the first thing we saw on the drone is you fly over it. And they just built their own natural gas plant. Huh. And going like Joe, great idea. Just going and looking at all the. But you got to look at the big stuff too, right? And, and without, I mean, without power, these are just kind of, you know, hunks of metal. So you have outside of Stargate Avileen, 10 natural gas turbines. And the interesting thing is these aren't like the really good natural gas turbines because if you wanted so natural gas turbines fall along simple cycle, combined cycle. These are simple cycle. They're each 35 megawatts, which is very much on the lower end. Half of them are from G. Vernova, half of them are from Caterpillar, a company that Caterpillar owns called Solar Turbines. And the reason why they're not, you would think, oh, you're spending half a trillion dollars on these things. You could probably get the best thing ever. But that'll take you seven years.

[Joe Weisenthal]

Oh, right, because there's a. There's a natural gas turbine.

[James Van Gielen]

Yeah.

[Joe Weisenthal]

Shortage. By the way, there's a headline. So there is a headline article on the Bloomberg today by Matthew Griffin. The hunt for winners in the artificial intelligence gold rush has landed on an unlikely target. Old line industrial equipment maker Caterpillar Inc. So you got to look at every one of these brands that's supplying it, and Caterpillar is up a lot, or it's up today. And the stock is done very well. So okay, Caterpillar. Who else? What are some of the. What else do you see besides these big turbines when you go out and tour this facility? So this stock is a rocket. So that's it.

[Tracy Alloway]

Do you see any people, like security guards?

[James Van Gielen]

So many people, huh? And I mean, it's there. I don't know. You seem like Silicon Valley. And there's that scene where there's like one guy in the data center and he's like, yeah, you know, night and day don't really matter much down here. And it's just one guy running. But in the build out, I mean, there are every single H Vac technician or guy that knows how to lay fiber or guy that knows electrical or plumbing within 100 mile radius of Abilene. Those are. They're all there, right? There's 7,000 people working on building this. And this is just one site. And yeah.

[Tracy Alloway]

So people have been talking about the picks and shovels phase of AI investment for A while now, but it seems like stuff is still getting built and it has further to run.

[James Van Gielen]

My kind of favorite, we can, you know, and I'm sure we will discuss whether this is a bubble or not. But at the end of the day the money is getting spent and my favorite kind of setup in the market is you have something that has a multiple that reflects kind of a wrong reality or doesn't really fully integrate a secular theme. And then you have a cycle that's really bad. So whether it's kind of the robotics supply chain goes throughout the automotive cycle and if you guys are aware, that's been a nightmare. And then you have some of these, A lot of these companies took really significant drawdowns when Trump got elected because the. This isn't really tech capex, it's much more similar to like LNG terminal CapEx. Yeah, that kind of entails the same companies that were benefiting from the ira.

[Joe Weisenthal]

Oh, interesting.

[James Van Gielen]

So everyone sold them and now it turns out it's kind of like the horseshoe theory. Right? You could.

[Joe Weisenthal]

No, that's super interesting. Like it's just these sort of like old line industrials and they did very well under the Obama administration because of all the factories and all that stuff that we talked about. And then it's like, okay, we're pulling the plug on this, but now there's just this tidal wave of money. By the way, Caterpillar was a $334 stock on April 2, right before Liberation day, which is sort of where we should benchmark things now. 486 at an all time high. What are some of the other companies you see out there for real?

[James Van Gielen]

Like preferably the ones that haven't gone up yet.

[Joe Weisenthal]

Yeah, but seriously, like else is, who else is getting a piece of this action?

[James Van Gielen]

So something that I want to make sure I mention just to frame this whole thing. If you look at the building site plans, they have the names of all the data halls and they are literally each called Ludicrous Building. So it's Ludicrous Building one, Ludicrous Building two.

[Joe Weisenthal]

Amazing.

[Tracy Alloway]

Wait, is it ludicrous with a K? No, that would be great. I mean ludicrous spelled correctly is also fantastic.

[James Van Gielen]

But the comp. I mean really, I would encourage anyone to go and look at this video because the, the, it's, it's just a. There is such a disconnect between looking at green numbers going up like, like caterpillar going okay, cool.

[Joe Weisenthal]

Yeah.

[James Van Gielen]

And then you see it and it is mind blowing. I mean they have rows of dry and Adiabatic coolers that are, you know, hundreds and hundreds for the liquid cooling loops. And then you have the kind of all the H Vac, the power generation, the transmission. We compiled a list of basically 200 companies, 50 of which were high confidence in kind of seeing as part of this build out. And the interesting thing is you have these multinational OEMs. The scale of this project is so large that you can call one of them and say, okay, we want to go with, you know, Mitsubishi heavy or we want to use Eaton for this thing. And they will say, yeah, okay, well we can do 60% of it. I mean, the biggest companies in the world are, yeah, they're just fighting. They don't have to fight with each other because the pie is so big.

[Joe Weisenthal]

How scarce? You know, there's all this around the country. There's been all this tension like is there going to be enough energy for data centers? What about the water? What about the politics, people? We see these town halls where the locals don't want a data center. How scarce are locations like Abilene? I mean, there's a lot of empty space in Texas. Could you see are there more Stargates or more Abilene's out there waiting where the companies can just say, you know what, we're just going to build our own infrastructure, we're going to build our own natural gas plant and we're just going to do it in the desert in Texas where we don't have to worry about NIMBYs or local politics or anything. Is that the future for a lot of this stuff?

[James Van Gielen]

Yeah. There's already another facility that's planned in Shackelford, Texas, which is not too far from Abilene. Abilene is already planning on a expanding by another 600 megawatts. I mean, that's how we're measuring data centers now is just in megawatts and gigawatts in Louisiana. That's where Met is building Hyperion. You have some unidentified or unannounced Midwest facility that'll probably be in Ohio. Basically anywhere that you can get the gas, anywhere you can get the power, anywhere that there's the land. There was one planned in Indianapolis. And it's interesting you bring up water because we wrote about water a little while ago as well, and we were basing our projections off of what the water consumption of like existing data centers were. The advancements in liquid cooling have changed that a lot. So there was a huge kind of uproar about, well, this data center is going to use so much water and if you look at it, this was in Indianapolis and if you look at it, it's about the same amount of water as a thousand households because it's all closed loop liquid cooling now. The water just gets recycled and filtered back. So it's really just something where the constraint is still power and getting these kind of turbines and it's, and, and it's going to increasingly become a thing where it's behind the meter power generation. They're just going to build their own power plants. They're not going to rely on the grid. You guys remember what happened in Texas in 21 with Erica? Yeah. You cannot underwrite that as a data center. You just can't be offline. So that's kind of where we're headed, is this power and energy kind of bottleneck. Is the bottleneck. One of the more interesting things we ran across is you look at Xai's data center and we went through a lot of the filings of all these different data centers. They're permitted for 1535 megawatt turbines and there's thermal imaging of the site that shows they're using 35 GE.

[Joe Weisenthal]

Vernova, another one that was at 330.

[Tracy Alloway]

You're just typing tickers.

[Joe Weisenthal]

Yeah. That was a $330 stock on April 2nd. That's a $609 stock.

[Tracy Alloway]

Okay.

[James Van Gielen]

Check out Siemens Energy.

[Tracy Alloway]

Thank you, Joe. Oh, he's doing it.

[Joe Weisenthal]

You could keep going.

[Tracy Alloway]

All right, I have kind of. This isn't an essential question, but.

[Joe Weisenthal]

Okay, wait, I got it.

[Tracy Alloway]

I knew this was gonna happen.

[Joe Weisenthal]

I know. Siemens Energy was a $56 stock on April 2. That's 108. That's a straight lineup. Okay.

[Tracy Alloway]

Okay. Clearly someone's making money.

[James Van Gielen]

Yeah.

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[Tracy Alloway]

Like how big are the walls of these things and what does security actually look like? Because you know, we talk about people being upset about higher energy prices. I understand that maybe some of the some of them are building out their own energy capacity. But you know, in a populist mindset, people might still be upset at a upset that AI is going to take jobs and things like that. They could become targets, right?

[James Van Gielen]

Yeah, absolutely. I mean, apparently security isn't tight enough to shoot down a drone yet.

[Tracy Alloway]

Oh, of course. Yeah.

[James Van Gielen]

But when you talk about the walls, like the interesting thing is everything in this data center has. You can't just build it like a house. Everything needs to have the right, you know, anti corrosion insulation. You can't just be losing heat. You're already spending so much money on cooling. So everything in the building envelope is also kind of the most expensive thing it could be.

[Tracy Alloway]

And I assume it's like a sealed envelope, I guess.

[James Van Gielen]

Yeah, exactly. And the the opportunity of just how, how big is this going to be if you actually believe the the people that are building this? And this is kind of an interesting dynamic of the hyperscalers are in somewhat of a prisoner's dilemma. We can't speak to whether they actually believe or not. But the party line is we're building machine God and if we're building machine God, then that's kind of a religious zealotry. So three years ago most of these hyperscalers were making net zero by 2030. That is not happening yeah, there's no way that's happening. Maybe they buy carbon off it, but that's not happening. Because if you need to do it now, you're using natural gas. And then you say, well, once we create machine God, machine God will fix it.

[Joe Weisenthal]

Right.

[James Van Gielen]

And you can justify a lot of stuff.

[Tracy Alloway]

Wait, okay, so let's talk about is AI in a bubble? Because when we're conversing about buildings that are literally called ludicrous and we're talking about machine God will solve all our problems.

[James Van Gielen]

Sounds a little bubbly.

[Tracy Alloway]

Yeah. That's the kind of stuff you look back on and say, oh, yeah, that was the top.

[James Van Gielen]

I know that we have to talk about this, and that requires some numbers, so I have some notes. But the interesting. I mean, you can make a case for either side. And it kind of hinges on not so much what AI looks like in the future, but more where we are in the cycle. If the question is, is AI a bubble? Yeah, probably it's a new technology. It's exciting every single time we've. The railroads, the, you know, dot com. Probably. If it's not a bubble, it will be, and it probably is already. But where are we in the bubble? That's the interesting thing for investors. So if you look at kind of where are we in the financing side? When we had the dot com bubble, the big thing. Are you guys familiar with dark fiber?

[Tracy Alloway]

No.

[James Van Gielen]

So essentially they were building out this kind of infrastructure for the Internet. And the conviction of the day was the Internet's going to be the biggest thing in the world. Correct. And 97% of the fiber that was laid was called dark fiber because it wasn't lit up. It was just laying there because eventually we're going to need it. That's not the case right now. Every single time that one of these data centers comes online, you're at 100% utilization. There's no dark fiber. And we're continuing to need more. I mean, I don't know if you guys saw Sora 2. More than 70% of the content that we consume is video. So a video model makes a lot of sense. It's also way more compute intensive. And the final form of AI is not chatbots. It's going to be video. It's going to be robotics, which use video models. So that's kind of like the bullish side, but I totally see I have some numbers here. So we've had some of these circular deals and so far, I mean, there's hundreds of billions of dollars for this. Most of the financing is structured much more like toll roads or LNG terminals. The Meta Cyprian was $29 billion. 26 billion of that was Pimco on debt and then blue owl with 3 billion of equity. An off balance sheet arrangement which also was pretty popular during the dot com bubble. Then you have stuff like GPU collateralized SPVs. Core Weave has a seven and a half billion dollar Blackstone SPV. There's like an $11 billion GPU backed loan market now which compared to the, the infrastructure thing I can get that. It's like those GPUs are going to be worth like they will depreciate.

[Tracy Alloway]

So yeah, that's abs right? That's like asset backed securities.

[James Van Gielen]

Okay, yeah but when you look at the. Where we just saying where are we in the cycle? Well there's been, there's been a lot of these off balance sheet arrangements but in terms of that prisoner's dilemma that we spoke about where nobody's going to back off because then maybe they risk not creating machine. God. The debt to equity ratio on most of the hyperscalers is not crazy. Sure Oracle has the highest and but they still have a lot of room to lever up in pursuit of this goal. The interesting kind of dynamic of Nvidia finances its customers and then its customers buy Nvidia GPUs and then you know that yeah, that's a bubble dynamic. That's visible circular financing. But the demand is real.

[Joe Weisenthal]

Well this is I guess the question if the demand is real, why are the Nvidias of the world financing their customers? Right. Intuitively you think okay, Nvidia's the demand for chips is maxed out. Right. Then intuitively you think well then there's plenty of money elsewhere. So do you have a guess for why Nvidia is impelled to, you know, invest in OpenAI, invest in Core Weave? It's been a long time investor in Core Weave and so forth.

[James Van Gielen]

Yeah, I could take the very skeptical view or the kind of not skeptical view. The not skeptical view is the best thing for Nvidia is that we accomplish AGI. So anything that it can do to get us closer to that massive, massive infrastructure that's required for that is great.

[Tracy Alloway]

For them as quickly as possible.

[James Van Gielen]

As quickly as possible. Because every year that you don't achieve AGI becomes less likely. So that is maybe the core factor. And then there's. It's good for them. And playing into that because this isn't necessarily like the dot com bubble because the dot com bubble had fiber and then it had pets.com and Amazon and all that stuff. This is all pretty much capex tech is capital intensive again, which means that the bust won't necessarily be like the dot com bubble where it gives the real players time to shine. If the capex spending grinds to a halt because the market goes down, that's the worst thing in the world. So in a way it's in their interest obviously to make sure that that doesn't happen.

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[Joe Weisenthal]

Want to ask it now because I might forget there was a headline I think earlier this week. Again, headlines almost every day. Can you explain why Meta which is building out which obviously hyperscaler. They have tons of Data center capacity. Why do they need to do a deal with Core Wave? So I saw that Meta is going to pay a few 14 billion some number for capacity on Core Wave. What can the. What do the Neo clouds bring to the table such that the legacy is like you know what we want some of your capacity.

[James Van Gielen]

It's basically I would say anything you can do to shift that capex away from yourself is great. Right. Right now a lot of this stuff is funded from cash flow and yeah, we're starting to see debt financing take its place. But if you, the. You're running a company that's existed for a while and is one of the biggest companies in the world and yes you could justify taking inordinate amounts of risk to do this but just like anyone else, if you have a goal and you can kind of shift away some of that risk to. Because if, you know, if Core Weave goes bankrupt, Meta's not, it's not the worst thing in the world for Meta.

[Tracy Alloway]

What would you be looking out for? For signs of the bubble bursting or I guess the capex faucet starting to turn off?

[James Van Gielen]

So in terms of like the warning signs first monitoring used GPU prices I think is a great way to see what's going on. Seeing like contract renegotiations, waiver headlines from private credit and also a big one would be any delays in delivering power. Make it so that you finance this thing and then it's not going to be able to work. Right. I do think that another. You really do have to kind of index to the revenue that's being generated by the AI companies as well. And you saw OpenAI recently announced that they're basically allowing you to buy things with one click from the inside the app. And I think that that was also a big driving factor in the router where they kind of route your model to the. It's setting it up for advertising because the other day I asked Google a pretty simple question and it just gave me the answer with no advertisements delivered to me. So we need to. I think that there is the killer apps kind of are here or coming, but that has to happen fast.

[Tracy Alloway]

Yeah, the, the fact that the Internet kind of runs on ads is an underappreciated reality of our world and we did an episode on it way, way back in the day. Is there any way if I wanted to get exposure to like the good stuff of AI, the actual money being spent, but then I don't like all the circular financing arrangements. Is there a way to hedge that particular risk?

[James Van Gielen]

Yeah, you could you could buy all the real companies that are building this kind of data center and then you could short Blue Owl and the private credit companies that are doing the kind of financing aspect of it, because if it goes bad, they have limited upside and kind of unlimited downside. And if it continues happening, the companies that are actually building it have unlimited upside. And there's still, like you said, these old lines kind of industrial that like they still have a core business to go back to.

[Joe Weisenthal]

What's your take on? So OpenAI announced its new SORA thing that Tracy has a code for Meta. Announced its meta AI, which a lot of people like, this is slop. And I don't, we don't need to get into a debate about whether this is all garbage. I kind of think it is, but that's not actually the question I'm interested in. The question I'm interested in is one way to view these things is, you know what these are going to be, these video, these AI videos are going to be really important sort of business revenue drivers in our pursuit to AGI. And the other view is, look, if they were close to AGI, they would not be devoting time to the slop factories. And this is the sort of question, and I'm curious, from your perspective, what do you think is the real logic behind all of this effort to create these sort of, you know, dumb like, oh, a video of an astronaut riding a horse through space with a, you know, cowboy hat on or whatever.

[James Van Gielen]

Video models are going to become the most important part of this. You, you need, for example, LLMs don't really interact with the world, but we're starting to see in robotics, AI models interact with the world. So you have these video language action models and you can structure it so that. There was an interesting paper on Arxiv recently that, and you know, this is. Video models like VO3 are emergent zero shot learners. And understand what that just means is you can give it basically like a second of context and then it can extrapolate about what's going on beyond that, that becomes extremely important for robotics. And you can structure these vision language action models where you have like a slow reasoning model that is kind of like your conscious mind and determines what it needs to do. And then you have like a fast model that actually does the movements and stuff. AI kind of extends into the realm of you need to generate as much data as possible. And having video data and knowing what's good and what's bad is also very important. But yeah, to your question, OpenAI probably does want to show that they're making more money. And I don't doubt that there are people there that truly believe that they're building the machine. God. And I also don't doubt that they realize if they to have a shot at doing that, they need the market to play along and they need to keep growing their revenues. So I think there's a lot of really good counter arguments about like, not necessarily. Are we in a bubble? Yes. Is the bubble over? Like, there are good arguments for that. I don't think one of the. I don't think that. Oh, well, they're leaning into like kind of this slops that, you know, it's a company, they're going to do whatever they can to make money. That's capitalism.

[Tracy Alloway]

You know, one of the things I think about another reality of our current time, this is kind of related, but if we're talking about video data, YouTube Staying power has been like phenomenal, Right. It's been around for decades now and we haven't really seen any successful competitors. Anyway.

[James Van Gielen]

Well, since we wanted to talk about stocks that are going up, what's another one people kind of forgot that video takes up a lot more storage than text does. And if we're going to start just like throwing out the slop on video, the part, basically one of the only areas of semiconductors that has gotten ignored has been storage. Not like memory, like RAM and stuff, but like hard drives and solid state disks, like Western Digital and you know, okay, so Seagate.

[Joe Weisenthal]

Yeah, that's what we're talking about. So this was a, this was a $84 stock in late March and now it's a 254. That's where you're going, right? Okay.

[James Van Gielen]

Yeah. Wow.

[Joe Weisenthal]

Yeah. There's a crazy, There's a crazy.

[Tracy Alloway]

It has gotten attention. But you think it could go up more?

[James Van Gielen]

I think so. And I think that to illustrate that dynamic that's going to keep happening, basically you just keep looking at stuff where there's people say, oh, well, you know, there's a, there's a glut of X and that's why this isn't going to win from AI. And then eventually the glut of X doesn't matter. It's a. That's what happened to Nvidia in the beginning of all this. There was a glut of crypto GPUs and now nobody. Like, when's the last time you heard someone be bearish on Nvidia because there's too many crypto miners.

[Joe Weisenthal]

SanDisk was $48 in April 2nd. That's $126 stock. Pretty crazy. These are just. These are like just the tools that just store. Just basic. Yeah, yeah, crazy.

[James Van Gielen]

It's. It is. And it's. It. I guess you could be worried by that or you could say this isn't. This isn't like Nvidia doubling in a month necessarily. Right. It's just people discovering. I think it's a good barometer, which is important in a bubble that people are still paying very close attention. And you start to get worried when everybody just goes into the Cisco of it all. But these are real companies that have real products. Of course there's some silly stuff that's happening, but it's not only silly stuff. It's not 2021 with the. You know. Yeah, I don't need to.

[Tracy Alloway]

So speaking of on the ground research, or maybe I should say in the sky research, when it comes to robotics, you had a robot dog, right? Yeah, one of those, like, really advanced ones.

[James Van Gielen]

We got a Unitree robot dog. It is super impressive.

[Tracy Alloway]

It's also incredibly creepy when it stands up on its hind legs.

[James Van Gielen]

Yeah. Have you seen the video?

[Joe Weisenthal]

Yeah, I saw your video of it. Yeah.

[James Van Gielen]

It's. And Unitree. We went and visited Unitree too, and it's. I've seen Boston Dynamics, you know, Spot robot, which is actually more impressive also could probably murder you. Like. And. And the interesting thing about Unitree is. Yeah, this. The robot kind of feels like a weapon. It's very heavy and stuff, but it's even their humanoid, like, it can't lift more than eight pounds. And also, Unitree is not focused on like making the brain. They just want to make the hardware. And you go there and they were like, where's your lidar from? Oh, well, we needed this specific thing, so we just made it ourselves. Okay. What about your actuators? Well, we made those ourselves too. Anything that they don't make themselves, they get within a 90 kilometer radius of their headquarters.

[Joe Weisenthal]

Where's their headquarters?

[James Van Gielen]

It's in Hangzhou.

[Joe Weisenthal]

Nice.

[James Van Gielen]

So it's something where you're really. That's the competition that we have stacked up against us in the US versus China. And I think the interesting route that they've taken is it's super advanced. You can code on it. You can already see videos of people buying them and making them do specific things. But they made them not super. Like, it's not going to kill you. And that's a great way to get a bunch of training data, because we don't have enough training data. Of what it's like to move around the world. We have the sum history of all human knowledge that's been recorded for text models, but we need more data for robotics. And I think that that's like an interesting kind of thing where they're just kind of sending these out into the world so that they can get enough data to actually make it safe enough to have a robot in your house.

[Joe Weisenthal]

Can anyone buy a unitree dog for sale online?

[James Van Gielen]

Yeah, there's a lead time, but I can get around it if you wait.

[Tracy Alloway]

How much are they?

[James Van Gielen]

So they start at 3,000, and then we got the super advanced one that you can attach a robotic arm to so it can manipulate its environment. And that was $8,000. And then their humanoid is 16, which is like less than the cost of a used Honda Civic.

[Joe Weisenthal]

That's not bad.

[Tracy Alloway]

Well, 3,000. Also the price for like a really good purebred dog.

[Joe Weisenthal]

Well, that's what I was going to say.

[Tracy Alloway]

Like, I don't know what that says.

[Joe Weisenthal]

People pay a lot of money for actual dogs, so, yeah, it seems.

[Tracy Alloway]

Why are you looking at me?

[Joe Weisenthal]

Why do you think I'm looking at you?

[Tracy Alloway]

Okay, James, that was so much fun. Thank you so much for coming in and sharing with us your. Your field trip observations.

[James Van Gielen]

Thanks.

[Tracy Alloway]

Joe. I think maybe it's the cynical journalist in me, but I get really nervous when we start saying it's different this time.

[Joe Weisenthal]

Yeah, I mean, it's always different. It's always the same. It's sort of. There are certainly, you know. Yeah. I mean, look, it's crazy and it's a lot of money and it's still. You know, we've been asking people on the podcast what kind of use value are you getting out of this technology? And it's still very ambiguous.

[James Van Gielen]

I don't know.

[Joe Weisenthal]

I don't have. It's not my job to time the market, so I'm glad I don't have to have a view on all of this stuff, But I do think that's.

[Tracy Alloway]

A cop out, Joe.

[Joe Weisenthal]

No, I do think. I do think for. Okay, what's your. Okay, give us your. Give us your price target. That's a. Okay, give. Give us your price target.

[Tracy Alloway]

I'm copying out.

[Joe Weisenthal]

Okay. I do think this is moving so fast and every day the numbers are so big and the stakes are so high for all of this that it does feel like we just need regular updates on the state of how much money is being spent in this area and what the eventual payoff will be.

[Tracy Alloway]

I want someone to draw a massive like infographic of all the financing deals. Because I think you could make a really interesting one.

[Joe Weisenthal]

Yeah, you definitely could.

[Tracy Alloway]

That would probably be illuminating. On that note, I did think James's suggestion of, you know, know, shorting the private credit players and then going long, the actual physical hardware ones, that was interesting.

[Joe Weisenthal]

Yeah, no, it's really interesting. Also, I had not realized, I mean, it is very interesting the way booms or bubbles, whatever you want to call it. I don't like using the word bubble because that implies whatever, booms or bubbles, the way they spread out. I just think that's extremely interesting. Right, so Nvidia takes off in late 2022 when people are blown away by ChatGPT and they say there's incredible and it's being powered by all these Nvidia chips. And then people go on the hunt, right. For other things. It's like, what else? And even still today in October 2025, that spreading out process continues. And so, okay, in the last few months, maybe it's like a caterpillar, or maybe suddenly people are realizing that just sort of old fashioned computer storage is going to be very hot. But we're still in this phase where as people open their eyes to these things, the spreading out continues to this day.

[Tracy Alloway]

Right. Well, also there's an expectation that eventually, you know, normal companies are going to benefit from it as well and become more efficient and all of that.

[Joe Weisenthal]

I just remembered the one question I was going to ask James, but I could just throw it out as sort of a speculative question. So he mentioned all of the workers. Could you ask all of the workers that are out there that are building these things? And it does make me wonder about the sort of crowding out possibility. Like imagine if you imagine if you had some other business in Abilene and you're trying to hire an H VAC worker right now. Because H Vac, you know, you're like, oh, restaurant.

[Tracy Alloway]

And you're competing with like open air. Yeah.

[Joe Weisenthal]

You're like, you have a restaurant in Abelian and you're like, you know what, I need to update my air conditioner or whatever. Or whatever.

[Tracy Alloway]

There's no hope.

[Joe Weisenthal]

And what are you going to do? Because all the H Vac workers are at that big Stargate operation. And I do think this is a very interesting macro question on all kinds of things, which is the degree to which all of this spending with uncertain payoffs will have a crowding out and potentially inflationary effect on the rest of the economy.

[Tracy Alloway]

Well, presumably machine God will eventually design H vac robots. So problem will be solved.

[Joe Weisenthal]

Problem we solved.

[Tracy Alloway]

All right, shall we leave it there?

[Joe Weisenthal]

Let's leave it there.

[Tracy Alloway]

This has been another episode of the Odd Lots Podcast. I'm Tracy Alloway. You can follow me at Tracee Alloway.

[Joe Weisenthal]

And I'm Joe Wiesenthal. You can follow me at the Stalwart. Follow our guest James Van Gielen. He's at Trini 7. Follow our producers Carmen Rodriguez at CarmenArman, Dash O' Bennett at Dashbot, and Cale Brooks at Kalebrooks. For more Odd Lots content, go to bloomberg.com oddlots we have a daily newsletter and all of our episodes and you can chat about all of these topics 24. 7 in our Discord, Discord, GG Oddlots.

[Tracy Alloway]

And if you enjoy Odd Lots, if you like it when we talk about the physical realities of AI, then please leave us a positive review on your favorite podcast platform. And remember, if you are a Bloomberg subscriber, you can listen to all of our episodes absolutely ad free. All you need to do is find the Bloomberg Channel on Apple Podcast and follow the instructions there. Thanks for listening.

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There are two kinds of people in the world. People who think about climate change and people who are doing something about it. On the Zero podcast we talk to both kinds of people. People you've heard of like Bill Gates.

[Joe Weisenthal]

I'm looking at what the world has.

[James Van Gielen]

To do to get to zero, not.

[Joe Weisenthal]

Using climate as a moral crusade and.

[Akshat Ratty]

The creative minds you haven't heard of yet. It is serious stuff, but never doom and gloom. I am Akshat Ratty. Listen to Zero every Thursday from Bloomberg Podcasts on Apple, Spotify or anywhere else you get your podcasts.