Could Political Pushback on Data Centers Drive Financial Discipline?

0:00 Wanna dive deeper into tech markets. Joining us now is Anna Rathbun, founder and CEO of Granadilla Advisory. Anna, Ian doesn't have a view on on where we are in the cycle, but I'm wondering if if you do and if that changed given what we saw happen on Tuesday. You know, I think it's a hiccup to the broader market cycle of building these AI infrastructure, buildings, data centers. And it's a big hiccup. And part... That's partly because the markets have sort of priced in an undisrupted build out of AI into the future, and now we have a disruption potentially in the form of, you know, more legislation potentially, you know, moratoriums, tax breaks might go away, you know, you name it. So I think this is just the market readjusting itself and correcting itself for when it's going to get paid for a lot of these investments that we've been making into the data centers.

0:53 Okay. So make the call for us. How big of a correction is this going to be? Well, you know, I think some stocks, today, they're... Even just today, they're in correction, if not starting yesterday. So, from a stock level, there are corrections already happening, but I think it's useful to look at this disruption from two different perspectives. One, there there are companies that are going to get paid simply because there's CapEx. Right? So, you know, hyperscalers have been borrowing. We know they're going to CapEx. You know, companies like NVIDIA chip makers, construction, anything that goes into the data centers, they're gonna get paid. Even as the data center build out slows down, it's still gonna get built. The companies that are going to get paid when the data center is done, when it comes live, those are gonna be delayed for a long time, and there isn't going to be cash inflow that they were expecting sooner. Now it's gonna be later. So if you look at... Those two perspectives, the companies are going to react differently, and stock market is gonna ultimately, after today's and yesterday's knee jerk reaction, price those things in differently in my opinion.

1:58 Do the midterms change your thesis long term at all about where you're putting your money? No. I do think that this is a a momentary disruption, and a lot of the the sell off, I think, may be a buying opportunity for for some of the high quality names. But over the long term, it's not like we're going to be stopping the build out of AI data centers. It's just slowing down. That changes the profile of the internal rate of return, not necessarily that the companies are going to get paid. Now having said that, there are companies that are much more highly levered, and this is going to be a quality game. Do you have the cash to actually wait it out? Because that's what delaying does is that you have to continue to be going concern. And that puts pressure on highly levered companies, and new clouds in general are not only highly levered, but they get paid when data centers go live. So that's a double whammy for certain industries.

2:50 I I know you have sort of a glasses half full view or maybe there's a silver lining here about about what could actually happen politically as a result of this blue tsunami that we saw this week. Talk a little bit about that and and sort of the discipline angle when it comes to cash burn. Yeah. I mean, so when there was nothing, no hurdle, we were thinking borrow, borrow, borrow. We're gonna build this as fast as we can. We're gonna build it faster than our competitors, and we're going to buy capacity faster than our competitors and more. Right? So there there was no discipline here. Do it as fast as possible. But the political process has told us that there may be some hurdles here, and that hurdles... It may be... There may be a positive, side to this, which is that now it may put some, discipline, financial discipline to these companies putting money to work in building these things. The worry was always that, okay. If you build it as fast as you can, at some point, you're gonna overbuild, and perhaps that will actually, mitigate some of that that risk in the future. The Nasdaq one hundred is down close to 6%. It was down 6.2% earlier in the session. That was the worst day going back to the COVID depths of March of of twenty twenty. Are you actually buying today, or are you waiting to buy?

4:05 You know, I'm, dipping in. I'm dipping in because sometimes you don't wanna be catching a falling knife, but most of my clients are very long term investors, and some of the prices look very, very cheap. So if you're thinking long term and that AI build out is gonna happen over the long term, it might be potentially a point to go in.