The Utilities Analyst Who Says the Data Center Demand Story Doesn't Add Up

Summary

Odd Lots (Bloomberg): "The Utilities Analyst Who Says the Data Center Demand Story Doesn't Add Up"

Date: February 2, 2026
Hosts: Tracy Alloway, Joe Weisenthal
Guest: Andy DeVries (Head of Investment Grade Credit & Head of Utilities and Power, CreditSights)

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Episode Overview

This episode explores the frenzy around utilities and the power demands of the ongoing AI/data center buildout. While the consensus is that AI will drive unprecedented growth in power and infrastructure—which has turned once-overlooked utility analysts into hot commodities—guest Andy DeVries offers a contrarian, numbers-driven perspective. He argues that current and planned supply is much higher than sober demand estimates, hinting at looming overcapacity, misaligned incentives, and major risks for investors, utilities, and ratepayers alike.

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Key Discussion Points & Insights

The New Spotlight on Utilities (01:36–04:17)

• Utilities were long seen as boring, bond-like investments, valued for steady dividends and growth roughly in line with inflation.
• The explosive growth of data centers, driven by AI, has catapulted utilities into a high-demand, high-growth narrative.
• Quote:
  “If you were a utilities analyst…sudden you are very in demand. Right, because all you hear about nowadays is the AI build out and energy constraints on that.” – Tracy Alloway (02:40)

Historical Context & The Analyst’s Perspective (04:17–06:12)

• Utilities weren’t always sleepy—they’ve weathered Enron, TXU, Calpine, wildfires, and other crises.
• Utility analysis pre-data centers was “a lot of rate cases, policy, tracking natural gas prices, renewables displacing coal.”
• Policy—both state and federal—is crucial.

Current Mood & Conference Mania (06:42–07:23)

• Recent utility conferences (e.g., EEI in November) packed to the brim; “CNBC broadcasting from the floor…probably a sign of a top.” – Andy DeVries (07:07)
• Utilities’ projected growth rates have moved from 4–6% to 5–8%—largely attributed to data center demand.

The Bull Case vs. The Contrarian View (07:23–08:52)

• Stocks like XLU have risen, but remain interest-rate sensitive.
• Industry narrative: Data centers will decouple utilities from interest rate sensitivity due to secular growth from AI/digital transformation.

Quote:
“As soon as the Fed starts jacking up rates, ChatGPT comes on the scene and all of a sudden there’s data centers…now you’re taking the leg up on growth.” – Andy DeVries (08:37)

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The Core Contrarian Argument: Data Center Math Doesn’t Add Up (08:52–13:16)

Demand Forecasts (09:26–10:17)

• Current data center consumption: ~45 GW
• By 2030: Consensus forecasts (from banks, consultants, BNEF, etc.) average around 90–95 GW (so, +50 GW).
• By 2035: Forecasts approach 160 GW, but estimates are fuzzy.

Supply Side Overlooked—But Critical (10:15–13:16)

• Utilities are working to connect ~140 GW of capacity to the grid in the near term, of which roughly 110 GW is firm, committed supply (apples-to-apples, adjusted for PUE—Power Usage Effectiveness).
• “On the demand side between now and 2030 you need 50 GW; utilities are working on 110 GW.” – Andy DeVries (11:47)
• There’s a risk of overbuilding supply relative to credible demand, especially as commitments multiply.

Tracking & Methodology

• DeVries’ team mixes data from Gmail alerts for demand (old-school “AI agent”) and a diligent analyst (Diego) for utility-sourced pipeline numbers (13:00).

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Deep Dive: Interpreting Power Markets & Forward Curves

Texas & the Forward Power Curve (16:20–20:23)

• Texas is seen as the epicenter, with wild demand forecasts (+30 GW peak by 2030 questioned).
• Utilities claim real demand is coming—signaled by $2.5 billion in cash collateral posted by data center customers (19:20).
• But forward power prices are flat—if grid demand were truly going to rocket, prices should be up several dollars, not $1 (20:12).

Quote:
“If you’re going to add 20% to your grid demand…you’d expect [the price] to go up…several dollars.” – Andy DeVries (20:12)

Natural Gas & LNG Exports (17:34–18:57)

• Gas futures curves are downward sloping despite surging US LNG exports and data center growth—contradicting the viral “supply crunch” narrative.

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What If the Demand Doesn’t Materialize? Who Bears the Risk? (23:04–25:48)

• If there’s an overbuild and demand lags, someone pays—the ratepayer or the utility/shareholders.
• Best practice: deals that shield residential users (e.g., NiSource/Amazon in Indiana), but many states lack strong protections.

Quote:
“The political risk of having mom and pop bail out Zuckerberg, Bezos, you can’t have that happen.” – Andy DeVries (25:31)

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Will Bureaucracy and Construction Lags Save Us? (25:48–28:09)

• Delays more likely on power generation (6–7 years), not data centers (2–4 years)
• Grid can handle more than headline numbers suggest, especially if data center load is flexible (e.g., shifting chemical/refining activity).

The Price of Capacity

• Gas plant construction costs have soared from $1,200/kW to $3,000/kW, but that’s tiny compared to data center build costs (~$40,000/kW).
• “For Big Tech…to spend another three to lock in their gas price or their fuel source, it’s nothing. It’s de minimis.” – Andy DeVries (27:10)

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Regional Transmission & the US-China Angle (30:09–32:11)

• Trouble spots: Midwest ISO (“retired the most coal, worst shape”), New England (highest power prices, tightest grid).
• US transmission build-out is slow, but not decisive versus China—power won’t be the bottleneck for the US AI race.
• “From your perspective, power is not going to be the decider here.” – Joe Weisenthal (31:44)

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The Data Center Debt Gold Rush: Private Credit Moves In (34:48–39:46)

• Private credit funds are pouring into data center finance—PIMCO made $2 billion in a single day lending on a Meta (Facebook) data center.
• Concern: as returns and competition rise, standards and covenants are likely to deteriorate.

Quote:
“We all know how this ends. Covenants start falling, rates start falling…If you’re Big Tech, who cares if you overspend?” – Andy DeVries (35:39)

• Meta/Big Tech often use off-balance-sheet vehicles for data center debt, possibly to maintain flexibility or to walk away from liabilities.

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Shady Circles: Incestuous Financing & Rating Agency Views (39:18–40:25)

• Tech/cloud companies investing in each other and securing reciprocal business (e.g., NVIDIA and OpenAI with "vendor financing").
• Ratings agencies do consider lease obligations as debt for ratings once operational.

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Nuclear: Still a Pipe Dream? (40:25–42:21)

• Mega-projects (e.g., Vogtle) now seen as unbankable; only hope is Small Modular Reactors (SMRs) with Big Tech buying and equity investment.
• Trend unlikely to reverse without massive political/economic incentives.

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Hosts' Closing Reflections (43:01–47:47)

• Parallels to previous tech booms: huge transformative impact can coexist with bubbles and overcapacity.
• Efficiency gains in AI hardware may blunt explosive demand—the “Jevons Paradox” isn’t destiny.
• The disconnect between market narratives (shortages, bottlenecks) and observed pricing curves (flat/declining forward power and gas).

Quote:
“As he pointed out, okay, ChatGPT came out—2 gigawatts…There aren’t a ton of ChatGPTs out there. That’s one of the most computationally intensive things.” – Joe Weisenthal (46:58)

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Notable Quotes & Memorable Moments

• On utilities’ newfound star status:
  “Sudden you are very in demand. Because all you hear about…is the AI build out and energy constraints.” – Tracy Alloway (02:40)

• Breakdown of overcapacity risk:
  “Utilities are working on already connecting almost as much as you need by 2035. There is a lot of supply of data centers coming and it’s very unclear if there’s going to be demand for this.” – Andy DeVries (11:45)

• On Texas grid risk:
  “Texas is a walled-off market…demand estimates are they’re going to add 30 GW by 2030…no way, the forward power curves don’t reflect that at all.” – Andy DeVries (13:41)

• On ratepayer protections:
  “The political risk of having mom and pop bail out Zuckerberg, Bezos…can’t have that happen.” – Andy DeVries (25:31)

• Efficiencies blunting demand mania:
  “What we’ve seen so far is that these things are getting more and more efficient…faster than anyone expected.” – Tracy Alloway (45:11)

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Key Timestamps for Major Segments

• 00:00–01:36 — Ad spots / intro skip
• 01:36–04:17 — The utilities analyst's “moment”
• 04:17–07:23 — Historical crisis/opportunity in utilities; policy focus
• 07:23–08:52 — Stock/bond market response, growth narratives
• 08:52–13:16 — Contrarian math: demand vs. supply for data centers
• 16:20–20:51 — Forward power/gas curves; implication for true demand
• 23:04–25:48 — Who pays: customers or shareholders; protection mechanisms
• 25:48–30:09 — Delays in supply, construction costs, actual system slack
• 30:09–32:11 — Grid/transmission, US-China, is power a constraint?
• 34:48–39:46 — Private credit booms in data centers; off-balance-sheet structures
• 39:18–40:25 — Incestuous industry financing; vendor lock-ins
• 40:25–42:21 — Nuclear verdict: only SMRs with Big Tech as anchor?
• 43:01–47:47 — Reflection: bubbles and true demand, efficiency drivers

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Conclusion

This Odd Lots episode delivers a much-needed reality check on the AI-data center-utilities narrative. Andy DeVries’ methodical approach shows utilities are racing ahead with supply that may vastly overshoot even aggressive demand forecasts. Meanwhile, market pricing (power, natural gas) remains skeptical of an imminent crunch—contrasting with pervasive hype from industry and media alike.

The conversation closes with a nuanced take: revolutionary technologies can transform society while still wildly overpromising, leading to cycles of overbuild and correction, both for equity—and, increasingly, for debt investors.

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For more from Odd Lots, subscribe to their newsletter and join the discussion on Discord (info at bloomberg.com/oddlots).

Transcript

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[Joe Weisenthal]

Bloomberg Audio Studios Podcasts Radio News.

[Tracy Alloway]

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

[Joe Weisenthal]

And I'm Joe Weisenthal.

[Tracy Alloway]

Joe, imagine you are a utilities analyst.

[Joe Weisenthal]

Yeah, Fun.

[Tracy Alloway]

And for years you are laboring in the utility analysis mines. And you know, we like talking about utilities, we like talking about energy. We find pretty much anything interesting.

[Joe Weisenthal]

That's right.

[Tracy Alloway]

Equal opportunity interest people. We are. But you got to say utilities for a while. Some people would say it was a little boring, quiet.

[Joe Weisenthal]

No, that's right. I mean for most of our careers, I think if you were a utilities analyst, a really big part of your job. And maybe I'm wrong, but I just in the popular discourse was like talking about yield relative to Treasuries. Right. They were seeing a sort of bond like instruments, et cetera, maybe a little.

[Tracy Alloway]

Bit of growth, but roughly reliable Safe haven. Ish. Dividend plays I guess.

[Joe Weisenthal]

Totally. And since I know where we're going with this conversation, one of the themes of the last few years has been what I would say is the old industries that were either stable or cyclical becoming secular in the way they grow.

[Tracy Alloway]

I think that's right. So what is happening now is if you were, I don't want to say a lowly utilities analyst but you know, maybe a sort of forgotten utilities analyst outside of your sector, sudden you are very in demand. Right. Because all you hear about nowadays is the AI build out and energy constraints on that. And so obviously a lot of people want to look at it from a utilities perspective.

[Joe Weisenthal]

Totally. I always think like, what a great luck that some people have in their careers. You know, you could be an analyst and learn modeling skills and all kinds of stuff. And then you get allocated and someone gets allocated, I don't know, farm equipment and another person gets allocated to. They wind up in utilities in 2022 and it's like, man, they're on TV all the time. My old boss at Business Insider, Henry Blodgett, it's like he was there as an Internet analyst in like the late 90s. What amazing timing and luck. And so it's like journalism in the beat ears. That's right. It's the exact same thing.

[Tracy Alloway]

I started out covering airlines of all things, but those were interesting. Anyway, I'm glad to say we do in fact have the perfect guest. So we're going to be speaking to a utilities analyst, someone who happens to have a very contrarian take on the data center build out and how much energy is actually required. We've been hearing a lot from people who are very, very bullish on the data center build out. So this will be a useful cover point.

[Joe Weisenthal]

I love it.

[Tracy Alloway]

Okay, so without further ado, Andy Devries, head of investment grade credit and head of utilities and power over at credit sites. Thank you so much for coming on Oddbots.

[Andy DeVries]

Thank you. The pleasure's mine.

[Tracy Alloway]

So is it great to be a utilities analyst right now? Even better.

[Andy DeVries]

Well, your, your Bloomberg News reporter Josh Shaw wrote an article about the how much it's changed for being a utilities analyst. Now the data centers are here, but to push back, we did have the largest bankruptcy of all time in Enron.

[Joe Weisenthal]

Oh yeah.

[Andy DeVries]

The largest LBO of all time in txu, which then went bankrupt. And the largest private equity return ever in Calpine, 25 billion, which exceeds Apollo's Lyndell trade and Blackstone's Hilton trade. So we have had a lot of fun along the way.

[Tracy Alloway]

Have you been a utilities analyst throughout that entire timeline? How long have you been doing it?

[Andy DeVries]

I started with the first pack gas bankruptcy and then went to the second. And here we are with data center. So 25 years.

[Joe Weisenthal]

Wow. So you really have seen it all. It is fair to say so. You're absolutely right. There have been some disasters and home runs and utilities, you know, they do get Central in the news, obviously, with the fires that we saw, for example, California several years ago, and the court trial is about allocation of risk. And in those situations you mentioned Enron, et cetera. But it is also fair to say that much of the discourse in day to day has been like, these are sort of bond like instruments.

[Andy DeVries]

Absolutely.

[Joe Weisenthal]

Before we get into that, just like, sort of like talk to us about what a normal day is like. And when you're thinking about utility before.

[Andy DeVries]

You know, pre data centers.

[Joe Weisenthal]

Yeah, pre data centers five years ago, whatever.

[Andy DeVries]

Pre data centers, you're looking at a lot of rate cases, you're studying a lot of local news, you're looking at legislation, you're reading, you know, dry regulatory documents. And then you're tracking natural gas prices because that's setting the price of power. And then on the federal level, you obviously have the renewables displacing coal and that's, you know, obviously having a big impact now. So it's a lot. I actually think it's a lot of fun.

[Tracy Alloway]

My impression was always the policy aspect of it seemed kind of the most important thing to keep track of. Is that right?

[Andy DeVries]

Absolutely. And that's down to the state level, but also the federal as well.

[Tracy Alloway]

Yeah. We've done a few energy episodes. Still trying to wrap my head around the sort of patchwork of rules that seem to govern our energy infrastructure.

[Joe Weisenthal]

But anyway, there's something a little Aspie about the way like you talk to people in this space and you're like, well, how does this get priced? And they're like, well, are you talking about market or essential? It's like, okay, I don't know, you know, it's like, are you talking about a rate board or are you talking about market prices?

[Tracy Alloway]

It's so hard, especially in a 40 minute podcast, to try to generalize that.

[Joe Weisenthal]

But I love the people. Don't get me wrong, those are my favorite people.

[Tracy Alloway]

Anyway, Andy, what is the mood like at the moment among utilities people, analysts, investors? Wasn't there a conference recently?

[Andy DeVries]

Everyone's gung ho on this. So the biggest conference of the year is EEI in November, and it was packed. I was standing room rolling for some of these presentations.

[Tracy Alloway]

Wow.

[Andy DeVries]

Your competitors at CNBC were broadcasting from the floor.

[Tracy Alloway]

Is that the first time that probably.

[Andy DeVries]

A sign of a top. So yeah, people are very happy. And then just to quantify it, utilities have generally grown around 4, 5, 6% a year and then that's moved to 5 to 7% a year. And now certain names which we'll talk about later. Are up to 8% a year and that's driven by data center growth.

[Joe Weisenthal]

Talk to us a little bit more about that. So what is the. I mean I'm like looking at a chart of the XLU etf. I don't think it's like done insane, but talk to us a little bit about like maybe quantify the exuberance for us. So it's like, okay, we, we are no longer just in the business of measuring bond proxies and looking at policies, etc. There is a secular growth driver. Talk to us about like the bull case and then also how we would see the bull case. Sort of like how it's manifesting into tradable instruments.

[Andy DeVries]

Sure. And you pulled up the graph of the xlu. Obviously it's still a very interest rate sensitive sector.

[Joe Weisenthal]

Yeah, that's people paying dividends.

[Andy DeVries]

You can find higher yields and other fixed income instruments.

[Joe Weisenthal]

Yeah.

[Andy DeVries]

So, you know, maybe didn't do so well last year, but the industry argues that as this EPS growth rate goes up to the high single digits, mid high single digits, that it shouldn't be as interest rate sensitive. So that's the big debate going on with investors.

[Joe Weisenthal]

And the stock, I mean the XLU has done well. It's gone up.

[Tracy Alloway]

If you zoom out, it looks pretty good.

[Joe Weisenthal]

It's done well.

[Tracy Alloway]

That's my impression of a bitcoin investor, by the way.

[Joe Weisenthal]

Zoom out.

[Andy DeVries]

Just zoom out.

[Joe Weisenthal]

Well, right.

[Andy DeVries]

Think about it.

[Joe Weisenthal]

You've gotten the, and you've gotten that coupon, right? So like you get. So like you might in normal times just be happy with a coupon. You're getting coupon plus.

[Andy DeVries]

I mean it worked out the Fed went zero interest rates for so long. So utilities are the place to be. That's just math. And then as soon as the Fed starts jacking up rates, ChatGPT comes on the scene and all of a sudden there's data centers. So now all of a sudden you're taking the leg up on growth when you don't need to be. So interest rate sen.

[Tracy Alloway]

Interesting. So one of the reasons we wanted to talk to you is because you have that contrarian take on the data center build out. And we wrote it up in the Odd Lots newsletter, which everyone should subscribe to. It got a lot of attention. Your analysis interestingly, is just based on some pretty simple math. So why don't you just to start out with, why don't you walk us through the calculations that you're actually making to try to analyze how much capacity the utilities are taking on to actually Power data centers, sure.

[Andy DeVries]

So as you said, it's pretty simple math here. So utility. So data centers now are consuming around 45 gigawatts of power and you can switch between capacity and throughput. I'm going to stick with capacity. Okay, so 45 gigawatts of power. And then there's lots and lots of third party estimates for where they're going to be in 2030. And they center around this, you know, 90, 95 gigawatts. So you need to add 50 for 20, 35. There's a lot fewer estimates. You come around one hundred and sixty. Now these estimates, they, you know, they're all over the place. They come from sell side banks, they come from consultants, they come from everyone. BNEF has one there, I think one of the best out there. So thank you. We use them a lot. So. So that's on the demand side and where you're going to come out on these. And then you look at the supply and everyone talks about the demand, right?

[Joe Weisenthal]

Oh yeah.

[Andy DeVries]

But then you look at the supply and all these tech bros are too cool to actually look at the supply and do utility analysis. Right? Who wants to be a utility analyst? You were making fun of us before, but if you look at this, we're pitying you.

[Joe Weisenthal]

But we realized our pity was misplaced. But we were not making fun anyway.

[Andy DeVries]

So you look at the supply and these utilities are tracking all these data centers connecting to the grid because they've got to do a lot of work, spend a lot of money in transmission, distribution, new substations, transformers. It's a lot of work, but it boosts their earnings growth. So they're happy to talk about this. And so you look at where they're at and where they're, they see things coming and they've got around 140 gigawatts of near term supply. Now. Kudos to the utilities. They break out what's firm, committed, signed, contracted versus pipeline behind it. Because there's a lot of double, triple, quadruple counting. So if you're going to build a data center in the Southeast, you're going to tell Duke, you're going to tell Southern, you're going to tell Dominion, you're going to build one. So that's the pipeline potential. But looking just at the firm, committed, whatever they want to call it, you're on 140 gigawatts now. You got a PUE. Adjust that. So when you connect a data center. Yeah, when you connect a data center to the grid, you've got lights You've got cooling. Those third party estimates I gave you are just for raw compute.

[Tracy Alloway]

Why did you split those out though? Because I mean all data centers are going to need to be cooled down, right? What's the point of splitting it out?

[Andy DeVries]

I'm not splitting out, I'm just adjusting it downward because the third party estimates are just compute. So if you're connecting to the grid, you're going to ask for the lights, the cooling and everything. So I want to go apples to apples versus the third party.

[Joe Weisenthal]

What does PUE stand for?

[Andy DeVries]

Power Usage Effectiveness, Power Usage Efficiency. So they're at 140. So that PUE is down to 110 on apples to apples. So just to go back, you only need 50 on the demand side between now and 2030. And the utilities are working at connecting 110. So the utilities are working on already connecting almost as much as you need by 2035. So again, just to make sure, on the same page, third party estimates 45 gigawatts for data centers now going to 95, that's 50. Utilities are working on 110. They don't give timing for that. Some of it's going to be past 2030. What I'm trying to say is there is a lot of supply of data centers coming and it's very unclear if there's going to be demand for this. So that's the issue there. And then it might be worth pausing that and just saying how we're tracking these things. Yeah, so what we do for the demand side is we use the original AI agent. You know what that is? A Gmail alert. They're the best. So anything that's not in our trade pubs, not on Bloomberg News, we get picked up by a Gmail alert. And so then we get all that in a spreadsheet. So that's on the demand side. And then on the supply side we use Diego. And that's not a large language model. That's my junior sitting several blocks west of us right now. So he tracks all this and utility calls. Just yesterday Nextera moved another 2 GW from the potential into the committed. And these utilities are chomping at the bit to sign more and more of these deals. And I think it's just going to be oversupply. We're going to overbuild these things.

[Tracy Alloway]

Just to be clear, the commit the firm commitments, those are signed agreements to actually build this capacity.

[Andy DeVries]

Yes.

[Tracy Alloway]

Okay.

[Andy DeVries]

And so I was talking with the CFO of Encore and they made these comments on their call as well, they're owned by Sempra. And I said, you know, no one really believes these demand estimates. Texas is a walled off market, as you guys know. 87 gigawatt peak market.

[Joe Weisenthal]

That is the one thing I know about energy. Texas is its own walled off market.

[Andy DeVries]

There you go. So 87 gigawatt peak market and the demand estimates are they're going to add 30 gigawatts by 2030. And I said to the CFO of Ankara, said there's just no way. He said it might not be 30, but it's going to be closer to 30 than it is zero. And I said, I just the four power curves don't reflect that at all. And he said then they're mispriced. So just for the entire market, just for the benefit of your users, you cannot trade forward power in Texas on interactive brokers. I know that. Oh, that's half your audience.

[Joe Weisenthal]

That's too bad. Everyone's like looking up there.

[Andy DeVries]

That's what I did.

[Joe Weisenthal]

This is great. And this gives us a bunch of technical questions to get into.

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[Andy DeVries]

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[Joe Weisenthal]

Let's just keep talking about Texas. Explain to us kind of what the forward power curves are and how you can back out the implicit assumptions that traders are making based on those forward power curves about how much demand there's going to be.

[Andy DeVries]

Sure. So I mean obviously if you're going to go from 87 you're going to add 15 or 30, whatever it is, you'd expect that curve to go higher. Data.

[Joe Weisenthal]

What's the curve measuring? Okay, you say there's a forward power.

[Andy DeVries]

So the forward power curve is around the clock peak or off peak. There's three separate curves and the difference in peak and off peak is actually, you know, narrowed because data centers run 24 7. So it depends on your North Texas or South Texas and those are in the high 50s.

[Joe Weisenthal]

But what would we be seeing in the curves for like is there trading happening at the 2030?

[Andy DeVries]

10 or 30 might not be so liquid but 27 and 28 certainly are.

[Tracy Alloway]

There's other energy markets. So if you look at NAT Gas for instance, although gas traders are really weird about the futures curve in gas, which I don't really understand but if you look at that, you point out that over the longer term it's downward sloping which suggests that there isn't going to be as much demand or maybe there's going to be more supply out in the future.

[Andy DeVries]

I love it. We're morphing into natural gas because that is the main driver of power prices, especially in Texas. And the forward curve for gas is much more liquid than it is for power. And the forward curve for gas is inverted. It goes from 370 to 360 by the end of the decade. So as my energy analyst Charles Johnson points out, the bigger driver there isn't data center demand. We're at 6 bcf a day there. A lot of people are about 10 12. We can get into that. But LNG exports were exporting 18 bcf a day. Now we're going to add another 12. Like you'd think that curve would be at least upward sloping by 25 cents, 30 cents. By the way, you can trade that in your interactive brokers account. So that goes into. Is there going to be a glut of LNG starts getting outside of my expertise. But that's what we heard from A lot of clients last week when we went on the road all over New York City.

[Joe Weisenthal]

This is very interesting. I actually want to ask another question about the pure power curve. But since we are on LNG and then we can get back to the power curve, just setting aside data centers, et cetera, intuitively you would think that what is a growth business in the United States? LNG exports. And in fact one of the sort of policy debates around the whole question of building out LNG terminals is it's going to make gas more expensive for American consumers because now we're going to be competing with European buyers. Whereas when we didn't have LNG export terminals, we were just swimming in it because it had nowhere to go.

[Andy DeVries]

Nowhere to go.

[Joe Weisenthal]

So it's very interesting to hear that even with everyone acknowledging A booming domestic demand and B the expansion of international demand. That downward sloping gas curve.

[Andy DeVries]

Yes, maybe, I don't know, maybe the reflecting world peace in Europe and Russia, LNG is unacceptable to the rest of the world. That could be a driver.

[Joe Weisenthal]

Then they would have to rebuild that pipeline.

[Andy DeVries]

Yeah, but, but back to our original conversation on demand. The reason I was talking to the Encore CFO and asking him about this is he said he's holding two and a half billion dollars of cash collateral postings from some of that demand. And he's like, you're not some, you know, Joe Schmo startup. I'm going to build a data center and connect to your grid if you're posting two and a half billion dollars. And he says, and this is what he said on their earnings call as well, you know, that's real demand that is coming. It, it's, it's material.

[Joe Weisenthal]

I'm sorry, just now to go back to the power curve, which I get is much less liquid out there. But there are trades that happen. These are price, like why, how do you infer volume from price? Because these are price curves.

[Andy DeVries]

We don't get the volume, but it's a, it's a yearly curve and then right before the year starts it splits into 12 month curves and then it goes into weekly before.

[Joe Weisenthal]

But what I'm saying is how do you infer what expected volume in 2028 is going from a price curve?

[Andy DeVries]

Sure, it's, it's flat, it goes up a dollar from here to 2030. Whereas if you're going to add 20% to your grid demand and you'd expect it to go up, okay, several dollars.

[Joe Weisenthal]

All right.

[Andy DeVries]

And the natural gas side, I'd want to see $0.40, $0.50.

[Joe Weisenthal]

I see what you're saying.

[Andy DeVries]

Okay, and then just to go back to the fork, your upper 50s in Texas, low 60s for peak. And the data center companies are paying 95. So Vistra just did a deal off.

[Joe Weisenthal]

95 what?

[Andy DeVries]

Dollars a megawatt hour.

[Joe Weisenthal]

Okay.

[Andy DeVries]

For round the clock. So Vistra contracted out its Comanche Peak plant in Texas, $95amegawatt hour. So big tech is paying a very pretty penny. You can argue some of that's for the CO2 free aspect of it and some of it's just a lock in the supply.

[Tracy Alloway]

So just to go back to the math and your overall argument, I mean, you're basically saying that utilities are already committed to building out, I guess, twice as much capacity as is forecast to be needed by 2030.

[Andy DeVries]

Yes.

[Tracy Alloway]

The wild card to me seems to be the demand forecast. Right. And we're already seeing those change pretty wildly. I know you mentioned Bloomberg Nef, but you know, they've, they've raised their forecast because of the data center build out, so they've raised their forecast of how much energy is actually needed. How much confidence do you have in those demand numbers and how could they change over time?

[Andy DeVries]

Moderate confidence. But like, look where we're at now. Like OpenAI built all the ChatGPT using 2 gigawatts. All the big tech hyperscalers, they haven't given their 2025 volumes yet. But if you take their 2024 volumes and then double it, and this is output, so I'm going to transfer it back to capacity and you assume a 60% capacity factor. All the hyperscalers combined around 15 gigawatts and that's got to be over half the data center demand. So to talk about 95 gigawatts, I mean, it's a staggering number. And then you get more advances in, you know, Nvidia chip efficiency. Yeah, obviously Jevons paradox kicks in. You've had numerous guests talk about that. It's just a lot of power. A lot of power.

[Tracy Alloway]

Can you just remind us one gigawatt is enough to power what? I like these comparisons.

[Andy DeVries]

A million homes, but it depends if you're in Florida or the northeast. But generally speaking, that's where you're at.

[Joe Weisenthal]

Not only do I find electricity markets and market structure and electricity very difficult to wrap my head around. Even after all of these conversations, I have built no heuristics or intuitions for what these. A gigawatt kilowatt megawatt. Like you say these things and I know gigawatt is bigger than a kilowatt like what this actually means and then the fact that even there we're talking about the difference between a gigawatt and a gigawatt hour. And I've yet to develop the sort of intuitions that I have.

[Andy DeVries]

Haven't you seen Back to the future?

[Joe Weisenthal]

Yeah.

[Andy DeVries]

1.1 gigawatts.

[Joe Weisenthal]

Oh, there you go.

[Tracy Alloway]

We gotta print out a little table.

[Joe Weisenthal]

Yeah, I need a little cheat sheet.

[Tracy Alloway]

Like the way we used to do for credit ratings. Financial crisis, we need that up there. And actually credit ratings are going to be interesting from a utilities perspective as well.

[Joe Weisenthal]

Can I just ask, you know, obviously one of the sensitivities in general with all things data center and utilities is this view, and I think it's kind of overstated. Is the average ratepayer going to end up paying for a lot of data centers or we'll raise our electricity bill? And I understand, like these are complex questions and the math isn't so clear. And also from what I understand, the emergence of a data center can actually lower a consumer's electricity bill because there's just that simple math, which is if there's more buyers splitting the cost of the build out, then actually your price tag can go down. But in the scenario you're laying out in which there's a bunch of upfront capital investments and everyone's very excited to build it out and that creates wires and you have to buy transformers and gear and all this stuff if the demand does not materialize as expected. That does sound like conditions in which we could see consumer rates go up.

[Andy DeVries]

Absolutely. So that's what we're spending all our time on. And it's state by state. And even within the same state you've got numerous jurisdictions. So is it legislatively mandated or is it done by a rate case? Or in the case of Northern Indiana, have the companies themselves, data center companies themselves, gotten ahead of it and said, we're going to put in a solution where ratepayers are absolutely protected and get money back. So you look at NiSource, which is a Midwestern utility, they own Northern Indiana Public Service nipsco, and they've got a deal where they've got an inside rate base, they've got a separate genco, so they sold and that genco is doing a deal with Amazon and they're going to kick back a billion dollars over 15 years to ratepayers. So rather than have a debate, oh, who's funding what, it's like done, and you get $67 million a year and that's the blueprint, that's the gold standard. Now keep in mind six months before that Genco was launched. Nice. Or sold 20% of Nipsco to Blackstone. So you could argue Blackstone said, hey, let's go ahead and do this. And then the utility right north of Indiana or northeast of the Indiana is Ohio and the CEO of FirstEnergy is an ex Blackstone guy. So maybe they look at doing a genco or something like that. That's pure speculation. I have no idea. Pack Gas, Pacific Gas Electric, they've done a deal where they've got rates in place that protect residential ratepayers. Ameren has, but a lot of utilities don't. They don't have these protections.

[Joe Weisenthal]

And the point is someone, if it turns out that there's an overbuild, not as much demand for it, someone's paying for it. And it either it's going to be the customers or perhaps utility shareholders.

[Andy DeVries]

I mean you just the political risk of having mom and pop bail out, you know, Mark Zuckerberg, Jeff Bezos is just, you can't have that happen. But again, six months ago this was coming up on the tail end of conference calls and now these utility CEOs are having in their prepared remarks. So I'm pretty confident they're going to figure it out.

[Tracy Alloway]

You mentioned Blackstone just then. I do want to talk about who is currently making a lot of money from the data center build out. But just to stress test the thesis a bit more because it is a contrarian take and so I think we should ask a bunch of questions about it. But does it take into account time lags for projects? So I think, you know, capacity buildout in the energy sector is notoriously bureaucratic. That is one thing that Joe and I do actually know about the sector. Is it possible that a lot of these committed projects actually take much longer to get working on the ground than currently forecast?

[Andy DeVries]

I think the delays will be on building the new generation, not the data center. So a data center takes two, three years. Even if that slips to four or five years, the power plants take six, seven years. And as you know, you can't get a G. Vernova gas turbine for years and years, which is obviously a bullish backdrop here.

[Joe Weisenthal]

Yeah. Talk to us more about that element of it all. Because building out, if you overshoot on production, then that's a problem in itself. If you overshoot on production at a time when it's gotten really expensive because there's massive inflation in the the construction sector, that's an even greater problem. Talk to us just about like per any given unit of productive capacity on the utility side, how much more expensive has it gotten and what are you forecasting for that?

[Andy DeVries]

Sure. So to build a combined single gas plant 10 years ago is 1200A kW to build. Then it got to 2000 and utility analysts like myself like, whoa, that's insane. Now we're up to 3,000. And it's like, who's actually spending this? But that $3,000 a KW for a new gas plant compares to the data center itself that cost $40,000. So for big tech to spend another three to lock in their gas price or their fuel source, it's like it's nothing. Oh yeah, it's de minimis, which goes back to the output. Forward power is 55, 60 and Big Tech's paying 95. In the grand scheme of things, the cost of data center, it's nothing. So that's why our utility and I'll just just jaw dropping on how shocking it is Big tech's willing to pay these amounts.

[Joe Weisenthal]

What about if you don't measure production of new plants in dollars, but new plants in time and again, if you're talking about, okay, well, we can't get this turbine that is several years ago, we could have got delivered next month. How much longer are these projects taking?

[Andy DeVries]

So if you can figure this out, I think you're alluding to this. If you figure this out, you can make a lot of money because obviously inflation reduction act has had enormous.

[Joe Weisenthal]

I'm going to vibe code a thing to figure it out. Keep going.

[Andy DeVries]

Inflation Reduction act, enormous tax credits for renewables, and then the one big beautiful bill, obviously clip those if you're not aligned by a certain date. So all this data center numbers are weighted towards the end of the decade, whereas the new solar is right here right now, crushing power prices. So you actually want to be a little short power for the next few years and then flip to being long. And if you can figure out when that flip is, you can make a lot of money in either the forward power curves or the natural gas curves. But as far as your original question, as I said data centers, 2, 3 years to build new power plants, 4, 5. But then you don't need as many new power plants as everyone's saying. So Constellation CEO said on a call the other day, he said, use the Texas market, he said 87 gigawatt peak market. You could add 10 gigawatts to Texas tomorrow, which would be the equivalent of sending every single Nvidia chip for an entire year to Texas and running them 24, 7 7, that's 10 gigawatts because you could run it right now. Existing grid, existing plants for all but 40, 50 hours a year. We stress tested it. There are some coal plants that can ramp up capacity factor. There's plenty of gas plants that can. So I don't know if it's 40 hours, 100 hours, 150 hours. But it makes more sense to pay someone else not to run their chemical company, their refinery company for 40, 50 hours a year rather than have the utilities go out and spend $10 billion connecting far away wind farms. That's the argument. We're sort of come in the middle of it. But there is plenty of existing capacity on the grid that could ramp up to meet it. And then of others guests have pointed out on odd lots, you know, the peak demand of the grid is 850 gigawatts. The overall size of the grid is 1200 gigawatts. And then you're adding 50 gigawatts a year of solar and then you're going to start adding 20 gigawatts of gas. I mean we're going to handle it. I'm not really worried about any or anything.

[Tracy Alloway]

Oh yeah. Talk to us about regional transmission because this is something that we hear a lot. It's not necessarily the power generation that's an issue here, it's the transmission which the US seems to struggle with, to put it mildly.

[Andy DeVries]

So there's regional markets, miso, Midwest, the Mid Continent, ISO. These guys retired the most amount of coal so I think they're gonna be in the worst shape. And then Texas and then it depends if anyone builds anything in New England. New England's got, got the far away most expensive power prices $70. The rest of the country's, you know.

[Tracy Alloway]

I am well aware.

[Andy DeVries]

Yes, I am too because I live in Connecticut. So if anyone builds a data center in New England they're going to be the tightest. But after that it's really myo.

[Joe Weisenthal]

And no one's building data centers in Vermont where they occasionally have to switch over to oil and wood. Right.

[Andy DeVries]

I mean the ISO New England app, which we all have on our phone. Right. They were getting 40% of their power from oil.

[Joe Weisenthal]

Yeah, yeah.

[Andy DeVries]

The cold snap the other day and it's tough to talk about New England power without talking politics. We're not going to go down that route. So anyway, transmission is very important because you've got to connect all these far away renewables to the grid.

[Joe Weisenthal]

You said something that I think is actually kind of important. There is this narrative meme. You know, people talk about the AI race, US versus China, and that one of the things I've seen people say China is going to win because they could just build out power more easily than we can. It sounds like I know you're not an AI analyst, but sounds like from your perspective, we don't know like what it means or who's going to win US versus China. But then from your perspective, power is not going to be the decider here.

[Andy DeVries]

Not in China it's not. But it doesn't.

[Joe Weisenthal]

You said like, you know, that we could ship every current with existing capacity. We could put every Nvidia chip in Texas today and we could run them for 50 hours with all exception of a few really hot hours in the summer, I assume.

[Tracy Alloway]

I like the imagery of all the Nvidia chips going on a field trip.

[Joe Weisenthal]

To Texas, but it sounds like to your view, that really isn't going to be from the US perspective, that won't be the binding constraint.

[Andy DeVries]

It's going to be a little tight. But I'm not one of these doomsdayers. Oh, it's the absolute gating factor. It's all going to stop. I was in Shenzhen, China last year and a robot got in one floor and the elevator went up and it got off another one and I was like what is going on here?

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[Tracy Alloway]

There's another reason we wanted to talk to you aside from your capacity analysis, which is one of the interesting things that's been happening in the credit market is obviously private credit has been a big story for the past few years, but now private credit is getting in on the data center build out as well. They're sort of, I guess getting on your turf a little bit in the public bond market, but what sort of activity have you seen there?

[Joe Weisenthal]

Sure.

[Andy DeVries]

So we think that's where the risk is going to happen. And frankly, Bloomberg News broke the story and Pimco made $2 billion on day one loaning to the Meta Data center in Louisiana. So they priced $25 billion debt at 220 over Treasuries and it immediately started trading at 140 and handed Pimco 2 billion. Great for Pimco, but then everyone else.

[Tracy Alloway]

It's nice to be Pimco, isn't it?

[Andy DeVries]

It's nice to be Pimco, especially the weather in Newport Beach. But everyone else in private credit is like, oh, these guys just made $2 billion. We need to start lending to data centers. And we all know how this ends. Covenants start falling, rates start falling. And again, if you're big tech, who cares if you overspend like you think AI is the be all end all, you're going to overspend. It's when you get down to the second tier, the qtss, the vantages of the world and then you get down to sort of the ones below that and you get like, you know, the core weaves and the nebbyses of the world. And you know, there's a lot of shorts going out on Equinix and obviously your guest Jim Chanos, and it's all about the chips. I'm not going to get into chip debate, but it's interesting. You look at a core weave and they got a $50 billion market cap. That's a real company you're going to be around for a long time. But the bond market's saying we want a 10% yield to loan you 2030 paper. You might not be a real company. And if you look at our supply demand outlooks, we're kind of in the camp of the bond market. But timing, which you mentioned earlier, Joe, is so key because this data center is going to ramp for a couple years and the oversupply is really a 2030 event. So good luck timing that one.

[Joe Weisenthal]

One you said something, you talked about that Pimco Meta deal and this question has come up and I still don't think got a totally satisfactory answer to it. Meta is a very highly rated company, as you see it as a credit analyst. What is it about the private credit? You know, they'll talk about, oh, it's flexible, etc, but you 220 spread over treasuries is not nothing at all. And is that re. Is that 220 spread really like worth it for like, oh, a little bit more flexibility, et cetera. Like what are they paying for exactly in the private credit market that they couldn't get cheaper? I would think in the public bond market?

[Andy DeVries]

I don't know. But I could speculate. There's a couple reasons. If the question is why did you put this off balance sheet?

[Joe Weisenthal]

Yeah.

[Andy DeVries]

All right, so you've got this state of the art data center with the best Nvidia chips out there and you're a tech company and AI is the be all end all for everything. Did you kick it off your balance sheet because you didn't want to damage your balance sheet, but the agencies are imputing it. But maybe quant funds running their screens, they don't impute that, so maybe that helps. Or maybe you didn't want the depreciation running through your income statement, maybe that helps. Or maybe you want to walk from this thing in five years, I don't know. But one of those is definitely the reasons because why else would you pay that much bigger spread, 150bips over their borrowing costs?

[Joe Weisenthal]

But so the key thing is here, when you talk about that Pimco Meta deal, technically this is not Meta debt.

[Andy DeVries]

It is not.

[Joe Weisenthal]

It's balance Sheet. Okay. So they create a vehicle they're not going to. Okay, that's a. I think that's an important element that they're not just arbitrarily paying a lot more for like a sort of. No, that's their.

[Andy DeVries]

And if you read the credit docs, they've guaranteed this debt.

[Joe Weisenthal]

Yeah.

[Andy DeVries]

Even if the data center shuts down. But our understanding of the docs is if they sell it, then the guarantee goes away. And so that would create a little risk. But back to my utility roots, please. What happens if data center shuts down for ratepayers and they actually have an explicit guarantee from Meta to protect ratepayers? So they have that a lot of other utilities don't. So a lot of states, Louisiana, Mississippi, Tennessee, Texas, they need to do better job protecting their ratepayers. And by the way, that's just one line in the dock that could fall away in other new data centers. And that's what we spend our time looking at.

[Tracy Alloway]

You mentioned the credit ratings just then. So the rating agencies, they, they look at the off balance sheet vehicles, even though it's not officially part of the.

[Andy DeVries]

Company'S debt, they impute the lease pay payments and include that as debt.

[Joe Weisenthal]

I see.

[Andy DeVries]

And for Meta specifically, they won't do that until the lease starts when it comes online. But everyone's doing it.

[Tracy Alloway]

And then I was just thinking, I don't mean to labor this analogy too much, but you know, you started out by talking about all the exciting moments in the history of being a utilities analyst. And one of those was Enron, which I assume means, you know, you have some experience with circular deals. But what do you think about all the sort of incestuous financing deals that seem to be happening between all the various players in the data center industry?

[Andy DeVries]

You mean we'll buy your equity so you can buy our chips?

[Tracy Alloway]

Yeah.

[Andy DeVries]

Again, I'm on the side of bondholders in that one. Just look at the market caps and look at the bond yields and explain.

[Joe Weisenthal]

What you mean by that. For people who don't have a Bloomberg.

[Andy DeVries]

Core weave goes on.

[Joe Weisenthal]

For people like me who have a Bloomberg but are too lazy.

[Andy DeVries]

So these names are going out in either OpenAI and or Nvidia is going out and buying equity in these neo cloud companies. So then they can go out and either supply the compute to OpenAI and buy the chips from Nvidia. So it's all very circular and I think the example people used 20 years ago is Nortel was doing this called the vendor financing. So there's A little bit of skepticism on that.

[Tracy Alloway]

Okay, so we can't do a utilities episode. I know we've been focused on data centers, but we can't do a utilities episode without mentioning nuclear power. What's it going to take to actually get, you know, some capacity from nuclear?

[Joe Weisenthal]

Sure.

[Andy DeVries]

So obviously the Vogel plant was the last big nuclear plant came online. It's supposed to cost 14 billion and ended up costing 32 billion. It came online 10 years late. No utility wants to take that risk. Now everyone's talking about these small modular reactors, and I think that's what you're going to start seeing is more talk of these. The only way we think a small modular actor goes final investment decision fidget is if Big Tech agrees to do two things. They agree to buy some SMRs and they invest equity in those SMR manufacturers to give them the capex to build.

[Joe Weisenthal]

Which sounds like something they would do, to be honest.

[Andy DeVries]

For sure. And I think that's the only way you get one of these off the ground. And I think if those stocks rally on that deal, they're all shorts because they're already reflecting several of those deals happening. So the big ones are Nuscale and Oklo. And Sam Altman of OpenAI used to be the chairman of Oklo and then he stepped down so they could do a deal. So something along those lines would happen. That being said, Donald Trump has talked about doing work with Westinghouse and taking equity ownership to build another AP1000. And obviously, President Trump is all about taking equity, but none of the utilities in my coverage are going to build something without some sort of backstop.

[Joe Weisenthal]

We did an episode recently with an infrastructure investor and I, you know, I'm a journalist. I look at the past. I don't talk about the future. But I was put on the spot and I said, I think in the next 20 years, gun to my head, we will never have another Vogel. We're not going to have another project like that in America. And sounds like you agree.

[Andy DeVries]

I agree. I do think you see some SMRs.

[Joe Weisenthal]

Okay.

[Andy DeVries]

I mean, frankly, our country's been making nuclear submarines for 67 years. That's an SMR right there. So I think that's the way it happens, is Big Tech goes in and does that for sure.

[Tracy Alloway]

In 20 years, we'll have you back on to see whether or not. Well, both of you, this is my.

[Joe Weisenthal]

Only right or wrong. I know nothing about the future. This is my only, only one call is I just don't think we're gonna ever get right. That's we're not gonna get a bunch of those.

[Andy DeVries]

I'm with you on that. And in 20 years, hopefully I can dial in from the beach or a boat.

[Tracy Alloway]

See you in 20 years then. No, probably before cuz this was a fantastic conversation. Thank you so much for coming on op on.

[Andy DeVries]

Thanks for.

[Tracy Alloway]

Joe. That was a really fun conversation.

[Joe Weisenthal]

That's super fun. I love that.

[Tracy Alloway]

My, the opinion or framing that I'm sort of coalescing around is that AI can be simultaneously underhyped and overvalued. Right. And actually throughout history that's kind of what we've seen with transformative technology. Right. Like think about the Internet bubble. The Internet changed the world, but it was a bubble. Think about railroads. Railroads in the 1800s changed the world, but. But also a bubble. So I think that's kind of, that's kind of what I think the key issue which Andy and you both touched on is the timing, right?

[Joe Weisenthal]

The timing. And yeah, I mean I think it's, it's very interesting because of course his argument doesn't even, you know, doesn't even rest on any valuations right now. It's like there is all of this expectation for build out. There is a, you know, as he put it, there is a number for the amount of the volume of data center demand. There is an amount that's being built up and he's like the second number looks bigger and that's going to be a problem. And to your point, I thought really interesting observation he had is a little bit not tangential to his core idea. But this idea that some of our energy policies are encouraging a lot of production right now, particularly the expiring solar credits. At the same time a lot of this demand is going to come online in the back end, et cetera. I do think, you know, seems like a really, it definitely seems like a fun space. It's very far from when we were just talking about like utilities as rate proxies. So I think for old people to get income.

[Tracy Alloway]

Well, the other thing I was thinking about on the demand side is I think there's a tendency among AI bulls, vibe coders such as yourself.

[Joe Weisenthal]

That's right.

[Tracy Alloway]

To think that demand is just going to go one way. Right. So there's going to be more demand for AI because I don't know every piece of software is going to be replicated through Claude code or whatever and so power demand is going to go up as well. But what we've seen so far is that these things are getting more and more efficient.

[Joe Weisenthal]

They're Definitely getting more and more efficient.

[Tracy Alloway]

Like, faster than anyone expected.

[Joe Weisenthal]

Yeah, you know, this is a little bit tangential to the point, but I do think, like, one of the recurring phenomena that we're seeing across this industry is that every, I mean, and this is, I guess it's a bull case, which is that, you know, even the optimists keep getting turned out to be too, too pessimistic. The pace of, say, like, efficiency gains for the cost of processing a token dropping faster than people expected. This morning we're recording this January 28th ASML, the big chip equipment company, way better than expected. The evils, the benchmarks for the models where it's like the optimists say, like, maybe it could code at this level by 2027. Turns out it hits there by like, you know, early 2026, et cetera. So, like, if you want to just make. I'm not making any case here, but if you just want to, like, make a bull case, it's like even the optimists keep getting surprised to the upside. On the other hand, it's fascinating to hear him say, look at what the markets are saying. They're not pricing in any of. And I was particularly surprised because I didn't realize this, that even, like, you know, for all of the talk of lng, export terminals, et cetera, that gas is expected to be cheaper a few years now than it is right now. Very interesting dissonance between that and the popular narrative.

[Tracy Alloway]

Maybe gas traders just aren't vibe coders yet.

[Joe Weisenthal]

Then they would understand exactly how much more of this.

[Tracy Alloway]

Just from an energy perspective, though, there is a push and pull factor here. Right? So on the one hand, everyone could use AI and demand goes up, but on the other hand, then maybe it gets super, super efficient and then demand goes down. I think that's the difficulty.

[Joe Weisenthal]

Or it's just there is a number that's out there with sort of some reasonable inferences about where it's going to go. And it's very high. And it was actually very striking listening to him talk about some of those super, the hyperscaler numbers, because it's like, where does it add up? Right? Like, as he pointed out, okay, chatgpt, like, came out 2 gigawatts, et cetera. Like, there aren't a ton of chatgpts out there. Right. And that's one of the most computationally intensive things. Like, maybe there are reasons to think this is all going to go great, there's going to be a ton of money made in AI, but you can't really just like get to the number. I don't know. I think this was a very useful perspective just sort of on some of the simple math and the math sounds like it's subtraction like this sounds like what my son is learning about right now.

[Tracy Alloway]

The other thing I thought was really interesting was the response to your question about why would you finance these things off balance sheet if you're, you know, this massive cash rich technology giant. And the suggestion there was, well, maybe at some point in the future, like five years down the line, you need to get rid of this liability, you don't want to deal with it.

[Joe Weisenthal]

This is why we did that episode with the guy who has, you know, the company doing the legal docs, right? Et cetera. This is why it's pretty crucial to understand some of these things because some of the questions sound like Facebook's or Meta's option to walk away, right? There's some call option implicitly to walk away, etc. And what scenarios and what they would allow it to be due is obviously going to be pretty crucial for any investors in this off balance sheet paper. I did not know until you asked this whole idea that the ratings agencies, while they don't look at it as debt, they do back out a lease cost and therefore it can inform their overall credit sustainability.

[Tracy Alloway]

Well, the other thing, you know, we touched on this, but there's more and more demand from investors for data center debt, right? Like the space is getting more, for some reason the space is getting more competitive. And so naturally what you see in any other credit cycle throughout history is as demand grows and people are competing for deals, the documentation and the protections tend to diminish.

[Joe Weisenthal]

So weird. You know, I find the existence of hype cycles for debt to be a little bit weird because I get like, oh, I really want to get into AI equity, right? Because that could 100x next year, right? And it's like, oh, I'm really excited about getting into data center debt because it might pay me 50bps more I find to be very strange or 100bps more. It's like if I have a fixed look, I'm a simple guy, but if I have a fixed income allocation, all I care about is minimizing downside and I don't really care like what sector it is. I'm not participating in the upside.

[Tracy Alloway]

You're not going to get greedy, you're.

[Joe Weisenthal]

Not going to get rich, you're going to get super rich on like, I just don't want to lose my like for fixed income. I just don't want to lose my money.

[Tracy Alloway]

Fair enough. All right, shall we leave it there?

[Joe Weisenthal]

Let's leave it there.

[Tracy Alloway]

This has been another episode of the All Thoughts podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway.

[Joe Weisenthal]

And I'm Joe Wiesenthal. You can follow me at the Stalwart. Follow our producers Carmen Rodriguez at Carmen Armin Dashiell Bennett at dashbot, and Kell Brooks at Kalebrooks. Now for more Odd Lots content, go to bloomberg.comoddlots for the daily newsletter and all of our episodes and you can chat about all of these topics 24. 7 in our Discord, Discord, GG Oddlauds.

[Tracy Alloway]

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

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