[upbeat music] What is up, y'all? Welcome back to Blockspace Live. We are capping another week in AI and Bitcoin with our final live stream here on Friday.
We are your hosts, Colin Harper, Charlie Spears, and we've got a packed lineup today.
We are gonna be leading with a story of Eiron raising the largest convertible note of any public miner to date, go into our hash rate index update, and then we've got a really interesting story on an anonymous Twitter user named Soup, I should say pseudonymous, who recovered five Bitcoin using AI.
Yes, if you think that you have lost life-changing amounts of money, maybe the LLM gods can save you.
After that, we will be having Luxur's Mike San Miguel on to talk about GPU market, then we will hop into some news about Trump disclosing some crypto holdings, specifically Bitcoin equities, for his family trust, and then news that Hut 8 is facing a stonewall with its Logan County data center in Illinois with a 90-day moratorium.
And to cap off the show, we have Kush Bavaria of Ornon to talk about how their index is being used for the latest and first, I believe, compute futures market on the CME.
Uh, and don't forget, we have a little, uh, guest named Mike Alfred also lined up. He's gonna give- Thank you, Charlie.
He's gonna give you- We have Mike Alfred coming on as well to talk about his Alpine Fox Hedge Fund, and which Bitcoin miners turned AI companies he is most bullish on, and also his thoughts on the current Bitcoin rally.
Mike's gonna give you the best stock picks that you should absolutely follow.
Um, Blockspace goes live Monday, Wednesday, Friday at noon Eastern, featuring quick hits on the latest in mining, AI, emerging tech, and sometimes Bitcoin still. [laughs] Make sure you like and subscribe.
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This show is brought to you by CleanSpark, NASDAQ listed ticker is CLSK. More on CleanSpark later on in the show. Let's kick it off.
Colin, um, when I got into this business, I thought I, I thought we were firmly out of the, the GPU era, and we'd be talking about ASICs, but we are only talking about GPUs.
Every single story we're doing today is about GPUs. Just about. Yeah. I think that's right. In, in some form or fashion.
And before we get into that, and we'll actually cover, you know, the other side of the compute market that we usually cover with the hash rate index update here in a second. But just a quick market update.
If you are wondering, are we so back or is it so over, guess what? Nobody knows. Everyone's confused. We have a salad bowl market opening up today on Friday.
Pretty, um, interesting considering it's Jerome- Uh, Colin, Colin, what's, Colin, what's the salad bowl? For those of us who aren't- I call it a salad bowl when it's to- mixed returns.
Like, so you've got a lot of red, Nvidia bleeding, while Microsoft is pumping. You've got Apple gaining while Google is dumping, Amazon dumping.
And what's funny about this is, is it coincides with Jerome Powell's [laughs] last day as Fed chair. So there's something maybe, uh, uh, you know, uh, twistedly poetic about that.
But just wanted to throw that up there, because seems like we really are reaching a point in the market where everyone's kind of groping for what valuations make sense.
But we'll leave that where it is and go ahead and move on to our first story of the day. Eiron closing a massive $3 billion convertible note offering at 1%.
These convertible notes are due 2033, and they have a 32.5% conversion price.
So that 32.5%, uh, shakes out to $73.07, um, priced from, you know, roughly [laughs] $50, uh, per share as of May 11th is the reference rate for the convertible note.
And Eiron, with this convert... I think we may have lost [laughs] Colin. Uh, I'll, I'll keep the show going while, uh, Colin, uh, figures it out.
Um, so yeah, this is a massive, uh, deal- All right. Sorry about that, y'all. A little tech- Okay. You're welcome back. Welcome back. Welcome back. Keep going. Thank you, Charlie.
Um, with that said, and as we've seen with other convertible notes in the Bitcoin mining ecosystem, they are entering a cap call transaction.
That cap call allows them to hedge future dilutions, basically a way to net out any dilution that would nes- necessarily occur from the convertible note. That cap call transaction is capped at $110 per share.
So anything between 73... Uh, any, uh, conversion rate between $73 and $110 per share for Eiron will give them the opportunity to hedge future dilution on this note.
Um, as I said at the beginning of the show, this is the largest convertible note for a public Bitcoin miner to date, $2 billion from a senior note in Q4 2025. So [sniffs] pretty big deal for Eiron.
It's interesting to see fundraisers back in the news cycle. We kinda had a lull there for a little bit at the beginning of the year. Yeah. Um, absolutely wild.
Um, I think we'll probably come back and talk about this with, uh, Mike Alfred too. He, uh, notable Eiron bull, so we'll hit that in a second. Uh- 100%. Yeah. Um- One last note before I jump out to hash rate index here.
Eiron's gonna need every ounce or every penny of fundraising they can get, because unlike other Bitcoin miners that are doing the infrastructure play where they're just building the data center, managing power, Eiron is doing that, and they are deploying the GPUs.
We've got a really good report coming out next week on how to value megawatt. Covers the, uh, different CapEx scale for all these different AI builds.
So if you're curious about the dollar per megawatt cost of a data center, like Eiron's building versus its peers, stay tuned for that on Blockspace next week. All right.
Before we get Soup on, he's waiting in the wings here-And Charlie, it looks like we are going to maybe get, uh, we actually just got a difficulty adjustment on live during the show. So- Oh...
the current- That's the first time that's happened... difficulty adjustment just... Yeah. A, a, a day of firsts it seems.
Uh, the f- ed- we had a 3% adjustment just now, following a negative.3% adjustment in the last difficulty epoch, and this comes as hashrate is gunning for 1,000 exahashes, one zeta hash again.
We are currently at 998 exahashes. Hash price sitting, uh, not necessarily pretty, but a lot better than all-time low. It's at about $37 per peta hash per day.
So miners aren't starving, they're not exactly feasting right now either though, I would say. Yeah. I mean, not a lot to be said here.
Again, we're just kind of sitting on our hands while Bitcoin figures out if it's gonna go up or not, or if we're gonna go down, and that's really all we can say about that.
Um, uh, do we wanna talk, uh, I think we were gonna talk about the, uh, the, the American royal family, uh, doting, doting out, um, shares of, uh, their money. Oh, that. Uh, we have that later. Okay.
So you can go ahead and get Soup on. Okay, let's do this. Here we go. This is the interview, the interview I've been looking forward to. Um, uh, pseudonymous guy, OG Wallet. Let's bring on Soup. Let's do this.
Soup- Let's go... welcome to the show. Hi. Welcome. How are you guys? Doing great, man. Fantastic. Uh, let us be the f- maybe not the first to say, but congratulations on recovering- Thank you... uh- I, uh-...
you know, a huge hoard of Bitcoin. That's a r- Oh my gosh... it's a really, really cool story. Yeah. I never thought I would see the day. Yeah. Okay, so, um, like, the tweet went viral.
You were main character for a couple days, probably still main character. Just give me the, like, the TLDR on what happened, and then we'll throw some more questions at you.
Um, yeah, I mean, long story short, got a bunch of coins in college. Um, went back home, you know, all my friends were like, "Dude, you are so dumb," like, "I can't believe you bought these coins." Whatever.
Um, ended up changing my password one time and, uh, yeah, just could never get back in. It was one of those blockchain.com, like, legacy wallets. Um, kinda a forced hold.
Forgot about it for, like, five years, then started to try to break into it, like, could not figure out Bitcoin Recovery. Hired a couple of those, like, prominent hacking teams. None of them could do it.
Um, and then t- eventually just got really AI pilled in the last few months and just started dumping all my old documents, files, going through math notebooks, finding old seed phrases, anything, any context I could just feed into Claude.
Um, and then it was crazy. It... I ended up finding this old seed phrase, Claude decrypted it, and then it was my old password, so I was like, oh my gosh, that's like, that's not helpful at all. What, what- And then-...
was that password, by the way? Can I, can I invite you to- [laughs]... yeah, tell us what the old password was? [laughs] Yeah, yeah. That was the LOL420fuckthepolice- [laughs]...
with some symbols, which is hilarious and just sums up, like, who I was in college. Um, and then I had one last-ditch effort two days ago. Woke up, um, dumped a bunch of...
I found this other computer, just started dumping all the downloads, documents, et cetera, and it found this old wallet file, and I was like, "Great," like, "Old wallet file. Oh, I have the old password.
It doesn't matter, I changed it." And not thinking that the old password and the old wallet file works and, you know, I had everything the whole time, I just didn't realize how to, how to piece it together.
So yeah, so, uh, I think, you know, a lot of people, like, see the headline, like, "Guy uses AI to recover old wallet."
I'm actually pretty interested, 'cause you gave a little bit of, like, insight into exactly what you were doing. You said you'd hired some of these hacking teams.
I know these guys, you know, that you, like, give them all your info that you can. They take a, you know, a bounty or a pound of flesh. Mm-hmm. But they weren't able to do it.
What exactly are you doing when you say using Claude? Like, what, yeah, what, yeah, walk me through the process here.
Yeah, I mean, it really just, I was just feeding it context, um, feeding it all of my old passwords, asking it to, like, run Bitcoin recover for me, 'cause I'm technical, like, but not a software engineer or anything.
Um, asking it to, like, try different regex combinations, um, run it in the cloud, you know, save everything you've tried. We essentially tried seven, I think, or 3.5 trillion passwords, um, over, like- [laughs]...
the last six months. Um, and I, as you can tell, make really complicated passwords that, like, would never be brute forced.
[laughs] Um, so yeah, essentially just feeding it a ton of context, and then eventually it, it connected the dots. S- so Soup, this must have been gnawing on you for years, right?
Like, did you have previous recovery efforts, and what was the, like, light bulb moment where you're like- Yeah, I mean-... "Oh, I have to use Claude for this"?
You know, it's like, I pretty much put 1,000 in, so, and then I stayed in the industry, like, you know, made whatever. Um, did all right too, like, didn't give up obviously and, like, lose faith in the industry.
And did wanna shout out CB Spirits, 'cause I was heavy early on Ordinals. I had a few of the- Heck yeah... first 500. That was life-changing as well. Yeah. Um,
but yeah, kinda gave up for a long time and, um, yeah, just decided this year, um, "Hey, I'm gonna give this, like, a final effort.
Gonna go through all my old paperwork, documents, computers, and just, like, get this thing out of my head."
Um, so yeah, sorry, went on a, a bit of a tangent there, but yeah, just, just have gotten AI pilled and, uh, just figured that, hey, Claude can kinda probably help me figure this out.
And this might not, this might be kind of a dumb question, but, like, when you say trying, what, 3.5 trillion passwords, you gotta, like, rent GPUs or something to do that.
You gotta, like, rent compute to, to run all that.I spent $15 on Vast AI credits to do that. [laughs] So that was like the- va- yeah, 15 bucks- Yeah. Yeah That is, that is insane. And some quad credits.
That's insane to me as well. And that was probably... Oh, sorry, you go.
That was probably the thing that, like, prevented me from trying all this stuff before, was, like, I was like, "Oh, I need to, like, buy a GPU," or, "I need to, like, figure out, you know, how the cloud works."
Um, so it was nice to just kinda have, yeah, this, this little handy buddy piece it together for me. The, the, the, the, uh, reduction in the cost to compute is just insane to me.
Like, when you think about how much anything cost, like, in the '90s, you know- Yeah... for your computer. It's, it's crazy to me to think that you could run 3.5 trillion, you know, passwords with $15 in credits.
[laughs] Oh, my gosh. Yeah, it was crazy. I forgot the, like, nu- it was running, like, hundreds of thousands, like, per second.
So it, yeah, and that took a few days to try, which was, which was quite ridiculous in itself. So, uh, I bet you everybody's asking, you've given a little bit of a hint. You know, you got this nice, uh, windfall.
Um, you know, are you, are you gonna, are you HODLing it? Are you gonna reward, are you gonna go on a spree? I don't know, what's your thought process here?
Um, you know, I would say I'm still bullish, cypherpunk, believe in Bitcoin.
I'm slightly disillusioned with, like, the industry as a whole, and, like, think there's other cool sectors going on in, like, AI and defense and stuff, so I kinda wanna, like, do that.
I'm also at the age where, like, getting, like, some land sounds appealing, stuff like that. Um, I'm already a holder, like, I'm already exposed, so yeah, definitely not, ch- definitely not dumping or anything.
But it feels like we're starting to run up again, so, uh, you know, I think the best thing to do would be sit tight, and, uh, yeah, just be, be a little patient about it. I mean, I see we're not, it's, uh, no Lambos.
We're, we're buying land. I think that's, like, the new, uh, land is the new Lambo, you could say. Yes. Yeah, we need some, we need some acreage out here. A be- a better Lambo, some might say. Yeah.
I think I'd rather have that than, you know- Land... a depreciating asset. [laughs] Land over Lambo. So you mentioned, you know, you were just saying th- you're a little bit disillusioned with Bitcoin right now.
Can you unpack that a little bit?
Like, what exactly about, like, the current place and time that we're in in the market, and specifically the participants, that has you kinda being like, "Ugh, this isn't really what I signed up for"?
Um, I would say more so, like, I feel like the crypto industry as a whole has, like, tainted Bitcoin, but then on Bitcoin itself, obviously we have, like, the Michael Saylor owning, like, a huge chunk of the supply, and now all of a sudden he says he wants to sell.
Things like that. Obviously there's the quantum fears coming around as well. Um, I would say those are probably the, the main two things. Um, which, you know, I, I don't think are, you know, uh...
Yeah, I, I, I, obviously I see a, a, a future where, you know, Bitcoin's gonna hit hundreds of thousands and, and, and millions of stuff, um, and it still, like, retains the, the cypherpunk mentality.
But yeah, I would just say there's, those are some of the fears. Okay, so last question. You know, you mentioned you're interested in other stuff.
You know, maybe you got some wind at you want, you know, at your back to go pursue other things. I don't know. Tell me about what you're interested.
What i- what, uh, what is most of your attention focused on these days now that you've recovered the OG Bitcoin wallet? Yeah. Um, yeah, I mean, still in the industry. Um, doing, like, automation work, that kinda stuff.
So I really just, like, I enjoy using Claude in my free time, like, building a ton of little scripts and bots. I love, like, chatting back and forth with it. I probably have a bit of, like, AI psychosis, as they call it.
Um, so I would just say, like, getting more acclimated to the AI stuff. Um, it's just, it's fun, you know? Soup, so happy for you. What an absolute fantastic story. Love to see it. Uh, yeah.
I actually have, um, o- one mo- one or two more closing questions here, Charlie. Okay. [laughs] You said you've been getting really AI pilled here, Soup. Like, what are some of your favorite tools to use?
Like, what, what does your- Um- What does your stack look like? Yeah, I just have a bunch of little folders.
Like, I have one for health-related stuff, and I'll just feed it contacts or when my doctor's appointments are, and, like, stuff like that. I have one for finances.
Um, I have one bot that's, like, sending me land and houses in the area that I desire whenever they pop up. So just, like, little things that I do manually in my life.
Like, you know, you can just kinda create these little folders and, and have it bounce back and, and give you some ideas and stuff. Are you tapping into, like, a public API on, like, Redfin or Zillow for the homes- Mm...
and things? Or are you going into the, like, what is it, the, uh, there's a database for r- uh- Yeah... for real estate brokers. It can- Yeah.
Yeah, and the thing is now it can just, like, do headless browser and, like, go right onto the website and bypass, like, the need for the API and stuff, so yeah, it's, it's, it's really neat, kinda, kinda all the stuff you can do.
Yeah, that's awesome. It's, it really is kind of this, uh, dare I, like, use a cliché, a brave new world of compute.
I'm just amazed every single day I log on to X and someone used AI for s- for an edge case that 10 years ago no one would've even thought about. Yeah. Uh, it's, you know, I was reflecting at the top of the show, like,
I'm in a, you know, longtime Bitcoiner. I thought, like, my days of GPUs were way behind me. Now I used to be like, you know, Bitcoin miners, ASICs, but now all we do is talk about GPUs.
Kind of, like, feels like a throwback now, now GPUs are back front and center, so, uh- It's crazy.
Um- Yeah, I feel like, uh, we're in a really pivotal year for, yeah, technology as a whole, and I think the crypto industry too, so excited to, excited to see where it takes us.Uh, yeah. Colin, I think,
uh, I don't wanna waste any more of Soup's time. He's got land to go buy. [laughs] Thank you guys. Also shout out, uh, shout out Mike Alfred. Excited to, uh, see him on here next. Yeah. We'll get... We'll, we'll have...
We'll get him, we'll get, uh, him to give a take on the, uh, the recovered Bitcoin wallet. You know he's always got a good take. All right, I'm ready for it. Cheers. Thank you, Soup. Thanks, dude. Appreciate it, man.
Thank you, guys. One of the more interesting stories I've heard from AI recently, I mean, you always hear wallet recovery stories, right?
And there's kind of this impossible outcome that people are chasing, and typically, like you were pointing out, Charlie, y- you would go to a kind of like white hat- Yeah... and say, like, "Here's a bounty.
I, I want this wallet back. You can have X percentage." Runs anywhere from like 10, 25, maybe 30 on the high end, right? Yeah.
And but it, it raises an interesting question that as these AI tools get much better, the cost for recovery should theoretically come down, right? I mean- Yeah... you know, Soup just did it with, with what?
With his Claude subscription and $15 in tokens. You know? Yeah. It like, think about it, like, 'cause, you know, this is a pretty serious business model and, like, they... it can be very profitable.
'Cause usually the recovery takes like a percentage of the wallet, like 30%, 25%.
And if you're recovering, you know, wallets with, you know, 10, 20, 100-plus Bitcoin, you're talking like- Or maybe one from like 2012, you know, with- Yeah... like a thousand or something, right? You know?
Yeah, you're talking massive, massive amounts, and, uh, this used to be kind of a really an arcane specialized practice. You basically have to run all the GPUs yourself, maybe if you're really savvy.
But now you can have people who are kinda technically inclined but not fully there. Claude handholds them. They spend some Claude credits plus a few bucks in compute, and now they're guessing their own passwords.
Like, this is what... Um, it goes both ways, both for like the individual like Soup, who's like recovering his own wallet, or the hackers. So, I mean, it's about time you get on top of your stuff.
Like, if you have that wallet, you might be racing against other people out there to get your Bitcoin recovered before they recover your Bitcoin for you, so. 100%. And one last note on this before we get Mike up here.
He just entered the green room. When, when, when I hear him saying that he spent $15 to run 3.5 trillion passwords, the m- you know, the math doesn't make sense to me in the sense of like that seems incredibly cheap.
And I keep wondering, I was talking about this with my dad the other day, when are AIs gonna have their Uber or Airbnb moment? And what...
But by that, I mean anyone who used Airbnb and Uber in the early days was shocked at how cheap it was compared to the alternatives in hotels or taxis.
And part of the reason for that is that to bootstrap these platforms had discounted rates more or less, or weren't taking as much off the top from the riders or the home providers on the platform.
But that changed once the VC money dried up. So I'm just curious, like, you know, AI kinda almost has this, uh,
it has this almost chicken and egg problem where the revenues right now are not gonna be enough to run, you know, O- you know, ChatGPT, ChatGPT's or, or, or Claude potentially.
ChatGPT is thinking about using ads, right, to supplement that revenue. When are we gonna have real price discovery on what it actually costs to use these models?
I don't- Well, the supplement, they'll get the revenue from, uh, recovering old Bitcoin wallets.
[laughs] That's, that's the, that's the near, that's the, uh, bootstrapping- Yeah, or in OpenAI's case, they'll get it from TBPN sponsorship or something like that.
[laughs] Okay, we got, uh, Mike San Miguel from Luxer, but right before that, a word from our sponsor, CleanSpark. We are CleanSpark,
America's Bitcoin miner, a publicly traded company with the largest operating hash rate, powered entirely by self-operated infrastructure across four states. This is our proof of work.
We are setting the standard for what's next. Learn more about the intersection of energy and Bitcoin at cleanspark.com. All right, let's bring on up our boy, Mike San Miguel.
Welcome back to the show, Mike. Thanks. Thanks for having me. Always nice to have you, Mike. Appreciate you hopping on.
Charlie and I were joking, you know, when before or when this started, that almost every single topic today covers GPUs in some way, and the most absurd one that I wanna touch on first with you, I didn't even hear of this until we were prepping in our group chat for this.
What is this Pearlcoin nonsense where you can apparently mine this thing called Pearlcoin by renting GPUs? Can you explain to me how this works? Because it's not like mining, right?
They're basically issuing a token if you rent GPU space. Like, what is, what is this thing? Yeah. Yeah, there's, there's a small hardware requirement. That's mostly where my specialty lies.
Um, it does require running some algorithms on the, the actual GPU hosts itself. Um, not sure what that algorithm looks like. I know that's something other parts of my team are working on. But it's, it's popped up.
It's less than 10 days old, and, uh, you know, we've been getting hit up. I think I've been on two or three calls so far this week just around it.
Uh, basically the, the tough part with the math here is that renting GPUs, the ones that can run at H100 and H200, are costly because they're in demand from normal AI users.
Uh, there's a subset of GPUs called NVL that aren't really optimized for doing training, uh, at scale, 'cause they don't have like the back-end networking features.
Uh, it's a perfect fit 'cause those don't have too much of a place in the marketplace.Uh, yeah. So, okay, so you're getting outside and we'll just one more.
This is the only time we're gonna talk about, like, a crypto token. Um, uh, [laughs] like, okay, so who, who is hitting you up? Because it's not just, like, degens who want, like, a token.
Are these, like, legit counterparties who are looking to actually figure out how to acquire this thing? Yeah. Yeah.
It's, uh, you know, VCs, private financial firms, uh, miners, uh, that are interested in getting in on this early.
Uh, you know, nobody knows really where it's going, so the first two to three months are sort of where the demand is. Um, seeing some interest for 12 to 18 months.
The difference with deploying these is that, you know, these come in a server. It's not a, a mining ASIC, so everything has to be engineered to work together.
Um, and that has to be deployed in a way where you can actually manage the servers.
Um, the hardware requirements are very different because it's low RAM, low storage, low CPU on the server, which is completely different from doing an AI install, which requires multiple fiber, uh, networks that are very expensive.
So it's, it's a great way to use up equipment. Um, the real question is whether or not this is gonna be staying long term and people can make the investment in, in the hardware specifically for it.
All right, so moving, uh, back into big boy topics, so to speak, [laughs] getting away from the new tokens of the day. Mm-hmm.
I've been hearing chatter about apple s- application-specific integrated circuits, ASICs, uh, being rolled out or being R&D'd for AI workloads. You know, we're, we're using GPUs currently.
There is this future where we will use ASICs for those potentially. Uh, what's the latest on how far along this technology is? What is your understanding of the feasibility of ASICs for AI as it stands today?
No, they're, they're totally feasible. Um, they're just starting to hit the open market. Now, the hyperscalers have been doing versions of these for about a decade.
So if you've used AI features on Google, AWS, uh, you know, any of the big players, they're already using it, and the deals are already in place. Um, Cerebras had a $10 billion deal with, uh, OpenAI earlier this year.
Nvidia bought Groq for $20 billion. Um, so these things are moving forward.
What's different now is that, uh, as opposed to being bespoke chips for, um, hyperscalers, we're starting to see, uh, new manufacturers, uh, that are producing these, and as a result, these are gonna start hitting the neo clouds.
Um, the feasibility is that, you know, when you, you look at a GPU, you can use it for inferencing, training, and agentic. With these, they're purpose-built for one or the other. They can't do both.
But that's the advantage. You get a much higher output, uh, going to something like this.
Yeah, and, and that's what I've, I've, I've talked to some people, so I try to, like, imagine what this industry looks like over the next 10, 20 years. Like, with your GPUs, you...
They're, they're typically much more flexible with the type of compute. And... But, like, if this industry matures, as I assume it will, billions are being poured in.
Like, you will have spec- What's the, what's, like, the implementation here, I think, at the, at the manufacturer level? Like, you know, are GPUs actually that great to own in 20 years? Yeah, that's a great question.
So, you know, what it's, it's probably gonna look like in the next, you know, two to five years, 'cause these things take time to roll out, is a, a hybrid approach.
Uh, and that's where, you know, a lot of the OEMs for these that I've spoken with, and the ODMs, that's where they're, they're headed is, you know, maybe out of a deployment, 20% is gonna be an inference ASIC.
Um, the supply chain is, is building out around it.
Uh, a lot of these are optimized to make the supply chain more efficient, where they've got SRAM that's printed onto the chip as opposed to using that HBM3, uh, HBM3 that, you know, everybody's trying to get their hands on these days.
So it'll make things easier. Um, in terms of the actual deployment, you still have a lot of networking, liquid cooling, all of the, the fun parts of, of doing AI at scale.
Um, no, the ODMs are starting to produce these and starting to figure out deals to get them into production.
You're probably gonna see them hitting in scale in 2027, is when they're gonna start entering fleets for a lot of these neo clouds. Interesting.
So 2027 roughly for when we should see these rolled out with the, uh, neo clouds and smaller players on the market.
I'm curious, Mike, what does this mean for ASIC allocation at top foundries like TSMC for the Bitcoin mining ASIC manufacturers? This, this has to be kind of an alarm bell moment for them, right?
Or am I wrong about that? Uh, everybody's trying to get as much space in fabs as possible.
So far, at least on the AI side, the hurdles I've seen are more around memory and, uh, storage than they are necessarily around GPUs and chips. Um, I think overall the, you know, the foundries are gonna be doing more.
I don't necessarily think this is gonna be starting out a large enough, you know, drop in the bucket to, to make a lot of waves that'll affect, uh, ASIC manufacturing. So basically the idea being that they're gonna...
the foundries will scale accordingly with this new demand. I mean, it makes sense, right?
So but perhaps all the other ASIC manufacturers won't really have any problem with, with the securing allocation for ASICs in the future.
Not that, that I foresee, but I'm also not an ODM, so there, there might be some part of knobs that I'm missing there. Uh,
how, how, uh, likely is it, do you think, though, that these ASIC manufacturers for Bitcoin mining try to move into AI? I mean, is that just... It... Can they... Is that, like, way beyond their capabilities?
Do you think they could bring that in-house to design tape outs for that?You know, because when you look at the industry at, at large, uh, these ASIC manufacturers are kinda getting hit right now with a double whammy.
Bitcoin price is down, hash price is down as a result, and their largest customers, public miners, are moving into AI services.
And so the, the kind of massive orders that would, you know, give them a foundation for their annual revenue, it, it has kind of crumbled away.
So do you think there's a future in which they try to switch into other forms of compute, or is that off the table? I think it's possible.
Um, if you look at Etched, Etched, uh, I believe has been an 18-month trajectory, and they're one of the big players in the AI ASIC market. Um, so you can do this quickly.
Uh, uh, Cerebras I know has been around for about a decade. Uh, TensorDyn that's spinning up, uh, I think is maybe a year or two old. So you can move fast with this. Um, you know, what's...
W- what it's looked like historically is that Broadcom and Mellanox have done the majority of the actual designing, uh, for these, uh, for the hyperscalers.
And, you know, it's changing now as that the people that are designing that are not part of, you know, that traditional space. Uh, to my knowledge, Bitmain, um, has actually developed some of these in-house.
I think they are for the, the Chinese market, which, you know, there's a lot of US, uh, requirements around security.
So that could be more of a limiting factor than actually doing the, you know, design and bringing it in. That being said, it- these are expensive things to design.
They're not easy, and it's a very different design from a mining ASIC. That's interesting. Wait, so-- Sorry, so Bitmain is already producing AI ASICs for the Chinese market to your understanding? Yeah, to my knowledge.
I've seen a few articles on it. Um, that really... It hasn't hit where, you know, we play in, 'cause by and large the market that I serve is more US-based and, uh, European-based.
Um, but there are a few articles out there about them m- starting to make the shift back, I think, in twenty seventeen. Twenty eighteen was the, the first news that I saw about it. Wow. So it's, uh...
You know, every single news show like ours is always trying to li- is now trying to, like, basically look at the stock market and try to make picks based upon, like, this ground-level intelligence.
I mean, like, my cursory looking around, I don't see a lot of these AI, I mean, AI ASIC ODMs. Like, I don't see a lot of them, like, listed on the US stock market.
I mean, where [chuckles] do I go to be long AI ASIC chip companies and, and manufacturers? Yeah, that's a great question.
So, uh, the, the spot that people aren't looking at, uh, is really the, the people that actually manufacture all of these.
So if you look at a lot of your OEMs, like your Dells, your Supermicros, your HPEs, they really don't actually manufacture everything. They're kind of like a US car manufacturer.
They, they actually assemble parts, if not just order them, um, directly from... There's these main manufacturing ODMs. They're sort of like TSMC but for actually putting the systems together.
Uh, those are Foxconn and Ventec. There's a few others. Uh, and they do the actual manufacturing. They'll brand them whatever, uh, person ordered them.
But these people are gonna be doing the same manufacturing of Cerebras, Etched, uh, TensorDyn. Uh, TensorTorrent is another one of them.
Uh, it's probably a better bet to bet on the people that are actually making them than to bet on which out of these five is gonna be, you know, the big manufacturer there. Um,
Nvidia is also another one because Nvidia bought Groq for twenty billion, so they're including that. Uh, um,
you know, I'd go for a portfolio of them, but the people that are actually making them, that's not gonna change. Yeah, it's funny 'cause all these... Everyone's like, "Buy the picks and shovels, and buy the..." So you...
And they're like, "Buy the, like the, the OEMs," but actually you wanna buy the folks who are, y- you know, uh, manufact- smelting the iron ore to make the shovel head in a way. It's kind of a funny inversion. Um, okay.
So the... I guess another thing is of a lot of folks we're interv- we're talking to today, uh, we're talking about GPU rentals, GPU compute futures. We're gonna come back to it with our guest later.
Um, what are your thoughts on, like, GPU compute futures? The CME Group announced, uh, compute futures this week. Uh, I don't know. Open question here. Yeah.
There, there's a lot of different people that are trying to do this. Uh, there's Aorn. Um, there's Compute Exchange. There's a number of different people that have, have looked at it.
It's tough to do because there's so many different factors that go into those contracts.
Uh, I deal with them daily because you have to get an offtake contract typically to get financing to get the GPUs and the infrastructure to go from mining to, uh, uh, AI.
So I look at these a lot, and there's a lot of variability. Um, I don't necessarily think it's something, uh, that anyone has really made a good comprehensive product on yet.
It seems to me that, going back to what you were just saying about this being difficult, there are so many different forms of compute and so many different ways that you can use that compute that I, I'm-- I struggle even to think about how you structure a futures product for compute when there are so many different applications for it.
This-- You don't have the same problem with hash rate, right? 'Cause it's like there's one function. But with these other things, you could do so many different things. You can do inference. You can do training.
You can do a suite of different things even within the inference category. So I, I struggle to think how you even narrow that down and wh- and where the market starts, right? Like, what do they focus on first?Yeah.
Well, and, and, you know, within the, the actual reference architecture that all of this technology is based off of, there's a lot of variability, not just between your GPUs, but between the storage technology, uh, the network, and then even just the network out to the site itself.
Um, it gets really complicated, and I've seen a lot of people that are doing this come up with other products outside of just the futures, uh, as a way of, of generating extra revenue.
Uh, I don't know if there's a good way to do this, honestly. I haven't seen it done in a way that makes sense yet. Well, we have Kush, uh, co-founder of OreN Exchange, on later on the show.
So we're-- I'm gonna take this question, and we're gonna, uh, hit it with it later. So, uh, Mike, thank you so much for coming on the show.
Uh, very excited to talk with you as this, uh, as this trend continues over '26 and '27. Yeah, it's exciting. It's gonna change more than it stays the same. [laughs] Cheers. Thank you, Mike. Bye.
All right. And we have another guest, the Mike Alfred, coming at you right after a word from our sponsor, Luxor.
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So if you wanna get started, try it for 60 days, go to luxor.tech/commander. All right. And now we got Mike and Mike. We got back to back. We've got the Mike Alfred, head of- We have too many Mikes on the show today.
Let's bring him up. Mike, welcome to the show, sir. Thank you for joining us. Hey, guys. How you doing? By the way, I actually led the Luxor Series A way back in 2021. A lot of people don't know that. Oh, wow.
Um, early mover with that one, and early mover with a few other things as well.
We've got your disclosures for Alpine Fox up here, and we really wanna touch on some of your bull theses for some of the holdings you have here.
And I would love to start with two sh- two stocks that we cover a lot on the show, Cipher and Iron. Those are your two biggest stock positions as I understand it from your filing.
Why did you choose these two as your front-runners? What, what do you see in these companies that make, that elevates them above their peers? Sure.
Well, look, this is critical to my, my original thesis way back in Q4 of 2022 when I started to look at taking these bigger positions in the open market. I was already on the board of Iron, so Iron's...
you kinda have to put that aside because when you make a big bet and you choose to join a board and participate in the corporate governance directly, um, obviously you're, you have higher conviction, but also you have more restrictions.
So part, part of the reason why the Iron position has been historically smaller, uh, than Cipher is 'cause it completely limits my ability to trade. I can't use options. Um, I can't hedge, uh, right?
I can't, I can't reduce the size of the position or increase the size of the position very easily. Uh, in fact, you'll note that I haven't once sold a share, uh, since I acquired the Iron shares in the open market.
So I, I just wanna say that at the outset to, to, to lay the kind of foundation.
But when I looked at the space, uh, four or five years ago, I basically talked to all of the top 20 or 30 management teams in, uh, in the world, uh, private and public, and my conclusion from that process was that Dan Roberts and Tyler Page were head and shoulders above every other executive in the sector.
So I placed a big bet in Q1 of 2023. Looking at their site portfolios, I thought they both traded for about a quarter to a third of what I could liquidate the value.
So the liquidation value, assuming the businesses didn't work at that time, I thought I was buying, like when I was buying Cipher, about 7 million shares between $1 and $2.
Uh, I thought I could sell all the sites for $4 or $5 at that time, right? So to me, it was a, it was a classic value investment with a margin of safety.
Uh, I, of course, modeled that in the future there would be an d-a desire to use that energy for either Bitcoin mining, AI, synthetic genomics, high-frequency trading.
Of course, all of those categories are now competing, uh, for that compute. And I, I placed a big bet, uh, three and a half years ago now, uh, on those names. And, and thankfully, they've outperformed the group, right?
I think Iron, from the absolute bottom, it was $1, uh, and 2 cents in December 27th or 28th of 2022, and, and the high price in the regular market was $75.
It went as high as 80 in the, in the pre-market, uh, way back in, in early November last year. Uh, so approximately, as of right now, like a 55X, right? Uh, Cipher was more like a 35 or 40X, uh, off the lows.
It traded at 39 cents, uh, way back then. So, uh, you know, that was a good time to buy.
And I think, look, the last couple months, if you're on X, a lot of people were trying to scare other people out of stocks and, and Bitcoin at the lows, and that's kind of a story as old as time.
I try to, uh, do the opposite of those folks. So, uh, you know, you mentioned you talked to a bunch of management teams from some of these companies.
A- as I see it right now, there are like five formerly public Bitcoin miners that are going hybrid into AI and eventually will be just totally AI companies, and the leaders to me are Iron, Cipher, Wolf, Cores, and Hut.
Um, I'm curious, no shares of Wolf, Cores, or Hut in your portfolio for Alpine Fox. W- uh, why, uh, put those to the side versus the two front-runners that you have?
Well, I've, I've owned all of those stocks, uh, on and off over the last three years, right? And at one point I had a, a fairly large TerraWulf position. At one point, CleanSpark was in my top three or four.Right?
Or much earlier in the cycle. But I think, you know, I, I'm a professional invest- investor, right? So, like, I already am heavily exposed to this sector.
It really doesn't make sense to have your third, fourth, or fifth best idea in a category. Like, I need to express other ideas idiosyncratically that are gonna behave differently.
Like, what's the point of having 17 data center developers, right? Like, you'll... If you look at my 13F, you'll see a bunch of other completely, uh, you know, different names that have nothing to do with the sector.
In fact, coming into this year, if you look at the previous 13F, I had p- quite a large exposure to consumer staples. Like, I was heavy into sodas and alcohol, right?
I was heavy into the railroad industry, uh, just as some examples, right? And so I'm looking for where the best, best leverage is, the best asymmetry at any given point in time and along a, a, a curve that changes.
I think those teams are wonderful. I would say T- TeraWolf is right up there. Uh, TeraWolf, I think is a, is a fast... Like, it's, it's in the group of the top three, right?
And now, now the question is there's a separation of the pack between the folks that are doing cloud and the folks that are doing colocation, right?
So Cipher and, and TeraWolf, I think are the closest peers 'cause they've really decided to go all in in colocation. I think they're both quite good at it, although we need to see how well they execute.
Uh, uh, and then on the other side, you've got CoreWeave, Nebius, Iren, uh, Crusoe, and others that are, are really trying to go more the verticalized cloud stack.
But again, even within that group, there's quite a few differences. Some of the companies don't really own all their infrastructure, and some of them are really trying to go fully vertically integrated.
So what I think is happening, the paradigm shift that I really think is important to call out, is we've had this period over the last two years, basically since CoreWeave signed the original deal with, with Core Scientific, where there's been this rush to see who can sign the best deal.
And I remember being told two years ago in spaces that no one would ever sign a better deal than CoreWeave's deal with Core Scientific, and I thought that was complete, uh, lunacy at the time, and I called people out for that.
One of the reasons why some people don't like me is 'cause I can't help myself when I see something being said that's that, that dumb.
Um, but what's happened over time is we've seen a lot of other deals and the pricing has just gone up. So actually, like, now the pricing is accelerating to the upside. The demand's actually accelerating to the upside.
So the folks who have the most capacity in the future may see better monetization opportunities along the curve.
And then separately from that, just 'cause you announced a $20 billion or a $10 billion deal, that doesn't mean you'll actually be able to deliver that compute, uh, successfully or that you'll keep that customer across a 10 or 15-year period, um, that that customer will be as profitable as you model originally, right?
If power prices go up or if the relationship with the grid changes or you have to shift out chips to a l- to a mo- more modern generation chip, and that requires a change out in the cooling or some of the other infrastructure.
So I just think a lot of investors are reading headlines and not focused on who's actually gonna be operationally excellent.
If you look back to 2023, my argument is that Iron and Cipher were better than Marathon and Riot. That they were better than Hut, that they were better than pretty much any of the legacy Bitcoin miners.
And I thought that was true because I looked at, really closely at their, uh, operational effectiveness and talked to the teams and, and, and really studied them.
And that ended up being true, and it turns out that that created the most shareholder value. I think the same thing's gonna happen in the AI space, where it's gonna be a lot of noise at the beginning.
It's sort of like a group beta experience right now, where everybody trades together and everybody kinda goes up when one company signs a deal and everyone goes down when there's a negative, uh, news item like DeepSeek or something.
And then over two or three years, you'll see real dispersion between the folks who can actually deliver, uh, and the folks that can't, and that's not clear yet, right?
So, like, I think it's way too early to draw conclusions. I see very, like, less, like, less sophisticated, more novice investors drawing conclusions by very recent price action.
And they sa- made the same mistake in 2023 by saying, "Oh, because Marathon was up as much as Cipher that year, that Marathon was just as good of a company as Cipher."
Uh, I was very confident that was wrong, and I'm very confident there's, uh, still mispricings in the market even right now. You mention the AI trade broadly and the, you know, these within the, the broader...
You know, AI's carrying the stock market right now. This is a sub-sector, the data center sub-sector. How long do you think the AI trade has left? Is this a super cycle of the AI, AI trade?
Are we still talking about this three years from now? Or at some point, do we see, uh, clear leaders, uh, pull from the pack and differentiate?
Well, people asked the same question in 2002, 2003 about the internet, uh, and it turned out it had 20 plus years to run and, and, and it was actually the wrong question, right?
Because basically, ubiquitous information became ubiquitous, right? Like, you can use the internet instantly anywhere in the world to, to, to transfer information.
That didn't exist in, in, in large scale in 1995, and if you did access it, it was through, uh, a very sort of dated way, like a, like a dial-up modem where you block the phone connection.
Your kids couldn't call their friends because they were trying to use AOL Instant Messenger, right? So, like,
uh, a lot of people called the top of the internet in 2002 and 2005 and 2010 and 2015, but these, these megatrends, when something's just better, like ubiquitous information is better than a fax machine, right?
And AI is better than less, uh, intelligent intelligence, right? If, if we have ubiquitous intelligence, I think that's a 50, 100-year, 200-year type of trend. And for...
Certainly, the CapEx cycle is signaling at least two to three more years of, like, pretty parabolic growth. So, like, I don't see a topping or even a flattening of that demand till 2028 or 2029.
The markets can certainly front run that and some... Like, SanDisk could sell off a year in front of that. Like, SanDisk could go down 80% or something, right? Micron could go down. Um, GE Vernova could go down a lot.
Like, anybody who's serving the AI value chain could certainly go down, but those will probably be buying opportunities for approximately 20 to 30 years if it mirrors the internet.
So basically, like, anytime people are dumb enough to be distracted, uh, by short-term macro or technical factors, like, a- and you have a longer term view, you, you close your eyes and you look out five years and you know we're gonna be higher, or 10 years we're gonna be higher, then you basically wanna buy every single artificial, external, uh, driven, uh, dip, right?
So there will be... The, the interest rates will go up or Wash will mess up and, and, and try to shrink the balance sheet too fast, or we'll have another geopolitical entanglement like Iran. People get scared.
The algos go nuts.
They try to liquidate all the stops and, and, and trigger a bunch of people who, who bought too many call options like they do every Friday, like today, which is just a kick in the face, risk-off day, which literally will be retraced probably in two days, as it always is.
Uh, but people will be scared by that and, and, and so I, I try to focus like 10, 20, 30 years out, and then I make sure my philosophy, my investment philosophy in the short term mirrors that, right?
So instead of getting sucked into will we top in, in AI in the next week or month or whatever, like, I certainly think with the IPOs coming, like, you're not gonna see any sort of top with SpaceX and-OpenAI and Anthropic still in front of us.
Like, that's just not the way markets work.
When you have big inventory of the, basically the best private companies in history and they haven't even gone out yet, there's gonna be a building of sort of fervor until that happens.
We may top around that time for in the mid to short term, we may top three months after that, we may top a month before, whatever, right? But I think when we look back on three to five years, it won't matter.
Like, whatever the next dip is, you should probably buy that is my opinion. So Mike, you mentioned that there are some, uh, companies in the Bitcoin mining space that are pivoting to AI that you think are overvalued.
Kind of a two-part question here. What are some of the companies that you think, uh, are ge- are, are attracting more market share than they should right now?
And are there any companies that haven't signed deals yet but are actively in talks that you're excited about? Um, look, I, I think the b- the best ideas are the best ideas.
Like, if I, if I thought there were better ideas, then I would change the positions that I have, right? So, like, I still think...
I- I think people are underestimating because, because Cipher's gone from 39 cents to 25, they think it's over, and I think it's gonna go from 25 to 100 or 25 to 200.
And I think Iron, you know, this is not financial advice and this is, this has been my view, uh, from dollar a share.
Like, way back in December 2022, if you listen to my spaces, I got yelled at by kid analysts 'cause I said I thought Iron could be a $200 stock. I still think it could be a $200 stock.
So I wanna, I wanna own the stuff where I think you have the most certainty about execution.
Um, all that said, like, I do think CleanSpark's gonna sign deals, uh, Marathon's gonna sign deals, Riot's gonna sign deals, uh, Hut 8's gonna sign more deals, TeraWulf's gonna sign a deal probably in the very short term, right?
Like, that's what's being k- sort of signaled in the market. Applied Digital's gonna sign more deals. Uh, the demand is just so high that a lot of people can win, uh, on the deal signing.
The question is just how much of that gets translated to real economic net profits for shareholders, and that's where I think there's gonna be something lost in translation, uh, along the way.
In terms of, like, who, who I'm a little bit bearish on, I've, I've said this publicly a few times, like, I think CoreWeave is, is out over its skis a bit.
Like, I, I'm not sure that they really have, uh, what's required to, to be a world-class company at scale over time. We'll see.
Um, certainly they'll probably be motivated if they hear these types of comments from, from people, like, that's why I don't spend a lot of time, like, uh, being too bearish.
I think, like, in the short term, everybody's stock can go up, right? I just...
If I needed to use a hedge, which I'm not gonna hedge right now 'cause there's too much upside left in the sector, but when I do need to hedge, right, like, when I wanna sort of net out, uh, some of my long exposure, I would probably start with a company like CoreWeave.
Mike, last lightning question, uh, 'cause we gotta get you outta here in a minute. Bitcoin's rallying, thoughts on the rally and do you have an end of year price target? I mean, I don't really do price targets generally.
I, I joke around on, on Twitter and I make calls like Babe Ruth. Um, but those are largely for entertainment, uh, purposes. But I do think, like, the longer term, yeah, a little bit of that.
Like you point, pointed out, people get so angry about this stuff. They, they don't realize that a lot of it's just a shtick, you know, that you do, uh, and that people enjoy, right?
A l- a lot of people who follow me know that, like, a lot of it is for entertainment. But, um, I still think 300,000, 315 area, like, is possible before the end of this cycle.
I think what we just went through is a mid-cycle blip, not like any sort of end of, like, true end of cycle.
Yes, we, we drew down over 50%, but I think Bitcoin can draw down more than 50% and not really be at the end or beginning of a cycle.
Uh, so my argument would be we're still moving off the 16 level from Q1 of '23, like January, and I think, like, the, the high price for sort of the next year or two could be 300 to 500.
Um, and then, uh, and then in 2033 to '35, I'm, I'm looking for, like, a million. Um, potentially before that, right, you, you know how Bitcoin is. It's very reflexive.
It's very impulsive, and it hasn't behaved that way in so long, people forget.
Uh, but when it, when it goes back into a more impulsive, reflexive cycle again, it can go up quite quickly, and so I think it's kinda silly to try to predict it, uh, with any, with any exactness.
But I think it's more important to just constantly be adding it or just holding. Uh, and so in the fund I express some of that.
I do have Bitcoin in the fund by the way, but it's not considered a 13F asset by the SEC, so, like, uh, actual spot Bitcoin doesn't show up there.
Um, and then I have some call options which I use just to create a little extra convexity. Those are usually between two and, call it, six months out, and I keep kinda rolling them forward, right?
I'm, I'm, I'm going to catch one of these next, uh, up moves. Thankfully I've made tons of money in Cipher options, so that, that's covered all my, uh, continued losses in iBit calls.
Uh, but that's, that's the nature of the game, right? It's probabilistic. Like, if, if I keep betting and eventually I'm right, maybe, maybe that covers, uh, all the previous bad decisions.
So I th- I think Bitcoin is just something you hold, right? Personally, I'm just gonna hold it forever. So, like, everything else I do is just to support my Bitcoin habit.
Mike Alfred, thank you so much for joining us, Mike. Appreciate the comments and, uh, best of luck with the rest of the year. Thank you, guys. Have a good one. Oof. Making me bullish, man. I hope he's right.
Oh, man, we're- Like you said though, you can't, you can't, you know... It's all for fun. Yeah.
But I do think there's something to be said about, like, Bitcoin surprises when people le- are expecting one thing versus the other, and everyone is so bearish- Everyone's so bearish...
and neutered on the timeline right now. We do seem kind of primed for people to get their faces ripped off. Maybe one way or the other. Yeah. I mean, look, this is a GPU show now. That's so, it's perfect.
It's perfect for Bitcoin to, to, to do a ripper upwards. Um, Colin, let's talk about the Royal family. [laughs] Yes. Let's talk about the Royal family.
So we covered this story, uh, this broke yesterday at the end of the day, about Trump's holdings at the end of Q1. This is his disclosure to the, uh, US Office of Government Ethics.
But Trump has increased his exposure to Bitcoin and crypto, but through more, how should I say, buttoned up means than the Trump coin and the World Liberty Financial of yesteryear.
So according to this disclosure, Trump holds Mara-He holds Robinhood, he holds SoFi, and he also holds Strategy as well. And there's one other here we're missing, Coinbase, of course. How could we forget Coinbase?
So Gordon- Wait, is this, is, is, is Trump, does the Trump family have the inverse Mike Alfred portfolio? [laughs] Ah, that's a good thing to point out, man. Yeah. That's hilarious.
You know, um, because actually that's kinda true because, uh, i- i- in that 13F, we didn't cover this 'cause I don't really wanna talk about Bitcoin treasury companies, but Alpine Fox holds, uh, exposure to Strive, right?
Yeah. So, uh, which is interesting. They just released their d- uh, daily paid out preferred this past week. Again, uh, we're not really covering treasury companies right now.
But to get back to the Trumps, uh, these are held in a trust controlled by the president's children. Just as a reminder, Trump is a family man, everyone. He's a family man. He's setting up trusts- He's a family-...
for children across three baby mamas. [laughs] So if you're yelling at him for doing this for personal gain, gotta do it for the kids.
But anyway, just to break down some of the details here, uh, the largest of any of the crypto stocks dated February 10th was, um, some, uh, positions taken out in Coinbase between 100,000 and 250,000.
There are two purchases of Mara in the filing valued at between 15,000 and 50,000. And, uh, and then, uh, there's also the Strategy holding.
And in aggregate in Q1, there were 2,000 transactions with roughly, for roughly 220 million to 5 to 750 million. This includes Nvidia, Apple, Microsoft, Amazon, Meta, and Oracle,
with those trades ranging between 5 million to 25 million individually.
And just for more context, all of this buying Q1 in the run-up to the CLARITY Act advancing through the Banking Committee in the Senate, which just happened yesterday in a 15 to nine vote. So thank you, Mr. President.
Please pump our bags. That's all I have to say about that, you know? Yeah. I, I actually, no, I, I have one more thing to say. If he's gonna be trading anything, let it be these equities.
I don't want any more of this Trump coin, Melania coin, World Liberty Financial chicanery. You know, th- th- there's something really disgusting about that.
But this, you know, you could say the president shouldn't be buying equities. He shouldn't be buying stocks. Well- Maybe that's true... now, now he's aligned.
Now he's aligned with the Ameri- American economy, finally, at long last. So if you look at- Aligned with the American economy right as he comes off of a trade deal trip to China.
[laughs] Never for- never forget that, everybody. Never forget that. No, and Chi- uh, I, I don't know. You see the stuff he was saying about China this morning.
He was singing Xi's praises, uh, today, um, being very happy that, uh, the, how do I put this politely? The Chinese are buying up American land. He loves that. He thinks it's a great idea.
Xi Jinping's gonna make America great again. You know what it kinda reminds me of? Yeah. Like, this kind of, uh, diplomatic dance of saying- Yeah...
nice things about a country when, like, in back doors you're probably cursing their leader, and this goes for the US or China. It reminds me of, uh, the movie Mean Girls with Lindsay Lohan and Rachel McAdams.
There's this scene where they're all calling each other, and they're jumping between, they're merging calls and jumping between calls, and they forget that they're on a merged call.
Or, or, or one character forgets that she's talking, uh, to the person that she was trying to h- hang up from, and then she was badmouthing that person. Like, it's just so catty, man, and it's so duplicitous.
You know, statecraft- Uh... really is a kind of, like, Janus-faced business, so. [laughs] Yeah. I mean, uh, I love, yeah, I, I do love the, uh, image.
Uh, somebody make one of those AI edits of, like, Trump and Xi and all the, the, you know, American and Chinese oligarch titans all hopping between each other in, like, a Mean Girls edit. That's a freebie.
There's some free, uh, there's some free, uh- The, the question is who is Rachel McAdams and who is Lindsay Lohan?
I think that probably Trump is Rachel McAdams, and then, and then Xi is Lindsay Lohan, like the up-and-comer with China. Or maybe it's already flipped. I don't know. I, I don't know.
I think Lindsay, uh, had a rough few years there, so, uh- She's back though, dude. She's back... she's doing the Hallmark movies now. She's doing the Hallmark Christmas movies. Oh, okay.
Anyway, we won't, we won't touch on that. Look, yeah, I'm so sorry. I'm so sorry that you had to listen to us talk about Mean Girls on- Well-... this show about AI.
[laughs] But now you'll have to listen to one more story about AI that we'll throw up here, and then we will wrap up with our interview with Kush. Logan County panel backs 90-day data center moratorium.
Hud 8 says delays could sink project. Now, we've covered this story a little bit on the pod in the past few months, uh, I believe maybe just at the turn of the year or before the turn of the year.
But basically, uh, Hud 8 wants to build this 500-megawatt facility in central Illinois i- in Logan County, and they are getting stonewalled by this local zoning committee.
So most recently, the zoning committee voted three to two on Wednesday to recommend a 90-day moratorium on the data center construction. Uh, this follows a recommendation for a 60-day moratorium early.
And Hud 8 is on the clock here. This is why this is notable.
Hud 8's Greg Irwin warned the committee that the moratorium would likely kill the project because the company's agreement with utility provider Ameren would expire.
So, you know, the, the, you can file this just under the continual PR nightmare that the AI CapEx boom has been for some of these businesses.
We can cite other examples if we want to in terms of all of these different z- uh, you know, these different rural communities or even urban communities, the people or, or the citizens in them kind of uniting against this, this, you know, data center creep.
For, for sometimes, I don't wanna totally dismiss concerns. I'm sure sometimes there may be some legitimate concerns. But let's just look at some of the-Headline numbers here for what this would bring to the county.
Now, admittedly, this is HUD-8 reporting this. This is their n- their, this is their numbers. I, I imagine it's probably close to accurate though.
HUD-8 said the project would create about 200 permanent jobs and more than 1,500 temporary construction jobs, and generate $65 million a year in property tax revenue for the local government.
65 million for a rural county in the middle of Illinois is a huge windfall. So for me, I, I, I just kinda get confused sometimes.
A- again, I'm, there's, as my grandma want- used to say, there are three sides to every story, so I know that there's a truth somewhere in the middle, you know, that I'm missing from the detractors and the proponents.
But I, I, I just don't really understand, you know, and I'm sure the two council members who voted for the zoning are probably banging their heads against the wall. 65 million's a huge number for a place like this.
But still, there was a protest of, like, 100 people recently [laughs] against the data center. So,
um, again, just w- another headline to show that, you know, this whole data center boom is really kind of turning into a more vicious version of the anti-Bitcoin mining stuff that we used to see of, like, you know, the kinda Greenpeace marketing pushes and astroturfing campaigns to demonize Bitcoin mining.
You know, there were stories, Granbury, Texas, of, uh, locals really, really, uh, kind of beside themselves over the noise from one of Mara's data centers there.
A- and so this to me seems an extension of that fight, but o- on a, on a much larger scale, right? [clears throat] Yeah, I mean, Bitcoin walked and stumbled so that AI hyperscalers could run in full face plant.
If we're talking about, like, you know, public perception, this is one of those things that c- the, the beauty of the, the mechanisms of capitalism and supply chain doesn't really, like, have a good solution for.
Because you can have, um [laughs] you know, you can move mountains to get semiconductors in the right place, and to build out supply chains, and figure out how to, you know, move those giant transformers and substation parts through the Panama Canal because you, you know, you, and you've got money and capital flooding in.
But what you can't do, you can't just make people like you. And so this is one of the things where, like, you know, I don't know. Do you have to up the size of the check? Do you have to figure out a comms issue?
Like, this is an industry-wide plague now. Um, your conservative voting counties are now protesting the new AI data centers. And, and that's really the interesting part about this too.
Like, it, this is really a cross aisle thing with certain people, right? Yeah. I mean, maybe the 100 people who are out there were like, you know, [laughs] the 100, you know, Kamala voters-
Yeah, it, it might be the 100 Democrats in-... in Logan County It might be the 100 Democrats in the county, but it's a, that's Illinois, baby. That's corn length- Yeah, but you know, you, you listen-...
and near and darling...
you listen to these county meetings, and it's a guy walking up who, like, I'm pretty positive didn't vote for Biden or Kamala, you know, kind of worried about this thing, and it really is kind of becoming a cross aisle problem.
And also, it's really starting to pick up steam in social media in terms of people, like, spotting when areas might be scouted for a data center. Bro, you- Bro, it's wild... you dropped this in the channel yesterday.
Okay. Can you unpack this? Yeah, so, uh, I didn't, I have not done a lot of research [laughs] on what this is.
But this is a tweet showing a helicopter dragging what appears to be a giant, like, metal loop of some kind, and the tweet says, "If you see a helicopter towing one of these over your neighborhood, bad news, your town is getting a data center.
They're running airborne electromagnetic surveys to map groundwater in the area," and, um- So like some form of, like, lidar or something like that, right?
To, uh, ground penetrating radar to see where the watersheds are within a given area. Yeah. Right? 'Cause that is one thing that is true. These data centers require a massive amount of water.
Now, there's some- Unbelieving...
quibbling over a closed loop versus not, but, um, you, I, I've seen a few of these tweets actually of, of people taking photos or videos of this exact setup and being like, "What the hell is happening here?"
Yeah, and this goes along with, um, I would say, um, a mixed and probably ill-informed public understanding of the r- the amount of water and context that it's used by AI data centers. But nonetheless, these are...
Like, imagine you're on Facebook and you see this in your, like, anti-AI data center, you know, Facebook group, and you, you know, you're retired.
You voted, you know, you voted Democrat the past three times, and you're angry. And this is a very scary looking picture, and they're coming to take your water. So, like, that is a, you know...
I, I think this has, this gets 10 times bigger before it, uh, turns into something else. I mean, we'll, we'll have to see where it goes. Uh- It's gonna end with, you know,
you know, rows of rabid anti-data center folks breaking into data centers and pulling GPUs out of the racks, and then destroying them Office Space style in the lots outside of the data center. You know- Yeah...
curb stomping them and hitting them with baseball bats. I, I do, to your point, Charlie, this is only going to get worse before it gets better when you look at the CapEx spend for these things.
And I think that what you're probably gonna end up having is you're probably gonna end up having a real bifurcation between states that allow these data centers to be built or have l- fewer regulations and restrictions on them, and those that d- uh, that are, you know, just like, "Nope, we're gonna try to fully restrict them within the laws that we have on the books, you know, without stepping on anyone's constitutional rights."
And, uh, you could almost argue that we're already seeing that. I mean, Texas is emerging as one of the premier data center markets in the US.
Um, hard to say whether or not they'll catch up to Virginia in terms of percentage of... percentage of the grid used for data centers. I believe G- Virginia's insane, it's like 25%.
But in terms of probably gross megawatts used for data centers, they have to already be, if not ahead of Virginia, close. So, you know- Um, defin- definitely a st- a story to, uh, to keep in mind 'cause,
yeah, I, I don't really see... Going back to your original thing, Charlie, of like is this a PR problem, is this a comms problem? Honestly, dude, I think this is a cultural problem.
Like, there is a lar- no, I'm being serious. Yeah, yeah. There's a large segment of this country that legitimately thinks de-growth is the o- is the b- is the best thing we need to do.
Like, I've had conversations with well-meaning progressives who say we need to use less energy.
And you can try to explain to them that there's, like, no civilization on Earth that has quality-of-life improvements if they reduce their energy consumption, but then they'll just cl- you know, claim climate change is existential or something like that, right?
So, like, I legitimately think we're seeing, like with many other issues in the US, social, political, et cetera, there's a completely divergent view of reality and what priorities should be.
And I don't know how you solve for that, honestly. There, there absolutely is. I think, um, and I, I, I go back to a point I made on the show earlier this week.
Which wa- which is, okay, so, like, look at this, I mean, Hudayb- look at this Hudayb deal. It generate, you know, an estimated, the 65 million a year in property tax revenue to the county. Um, that's great. That's huge.
That's significant. That county apparently is not making much tax revenue right now as it is. This would be huge.
But what we see is, um, while these data centers do often generate significant revenue to the townships and counties that they're in, they don't typically...
Like, they'll bring some jobs, but they don't typically enrich, like, people who have been there. And then I contrast this with oil and gas. Yeah. With oil and gas, you have both/and.
You have, um, revenue in the form of, like, gross production tax or excise of some kind to the state often, or the count- you know.
And, um, so you have an extraction tax which goes to the public revenue, the public coffers. But then you have the increase in value and, through the royalties of minerals and property,
that revenue goes to individuals and property owners and families. And you have many stories of, you know, a, a family who had a bunch of land in West Texas,
oil came in, drilled a bunch, maybe built a pipeline, and now they're collecting, you know, near generational-wealth royalty checks. So, like,
you, th- I think this is a, a, a big tough nut to crack for the data center industry because what speaks louder than, like, a public outcry against, you know, energy use and de-growth? Um, money.
So if people are getting rich, people will feel more amenable to these data centers. I think let's wrap this topic up, and we'll go to our last guest, Kush, here right after a word from our sponsor, Ligos.
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wrap up the day, Len. Talk about compute and compute futures. Let's bring up Kush. Kush, welcome to the show. Hey, guys. How are you? This is exciting. Yeah, fantastic. Um, we're a, we're a Bitcoin show now turned...
Now, now we talk about GPUs. So that's just how everything- It's, we're a Bitcoin show that identifies as an AI show, is what I'm gonna start saying.
Hey, i- it's, it's you guys, CoreWeave, Nevius, Crusoe, Irid, Terrible, every other player, so. 100%. 100%. That, that's- W- Yeah. That's absolutely the story. Uh, yeah. Um, I, I...
Sorry, Charlie, I just have to, I have to, uh, I wanna take, to kick this one off because I just have a burning question.
So really interested in this news of the CME's futures and y'all- them using y'all's index for the H-100s.
Uh, I'm just curious, just to kinda get, uh, to set the stage for this, we had, uh, Luxor's Mike San Miguel on, and I kinda asked this question, so I'll also ask it to you.
When I think about a compute future for GPUs and for AI workloads, I kind of, my head starts spinning because there are so many different forms of compute, and there are so many different applications.
And the only analog I have for this are hash rate futures with Bitcoin mining, where there's only one form of compute, so it's easy to standardize.
So when structuring a product like this or, like, your index, for instance, for the H-100s, how do you narrow down what you're gonna focus on so that you can give a more or less accurate picture of what the cost of compute truly is?
Yeah, so I'll, um, I think the easiest way to standardize it is we think of it very similar to how oil works. So if you look at oil markets, right, every barrel, the WTI crude, for example.
I'll just, I'm gonna take that example. There's, like, Brent crude, Saudi crude. There's different ones, but let's just take a look at WTI. In Cushing, Oklahoma, there's an exchange that happens between oil.
So oil from all parts of the Permian Basin in Texas come there, and they get transacted, and that's what the benchmark at WTI crude is.
Now, if you drill oil in Odessa or drill oil in, like, El Paso, obviously they're gonna be different, like, sulfur quantities, different gradients. There's gonna have different variations in that.
Yet they all go through the same, um-Benchmark, and they're all s- classified as the same type of oil, even though they're very different inherently.
And I think the same thing is true about GPUs, where the way you kind of do this is you have a minimum grade or above sort of specification, where it's like if the quality of the GPUs meet a minimum grade, which we have a specification on our index methodology for, then that GPU could be considered a valid H100 to be priced into the contract.
It's the same way financial contracts for other sort of commodities work, right? You take a look at corn or, uh, cattle, for example.
Cattle futures and, like, you probably know, like, all cows are different from each other, not kind of the, the same cow, and yet it's a very liquid financial market that exists for that. So, uh, I'm...
You know, you, you mentioned Cushing, Oklahoma. I'm an outs- I'm an hour outside of Cushing. I could go there and check the, the National Strategic Oil Reserves, you know, if I needed to.
Um, so, you know, you bring up oil, and this...
and in the, and the context of the CME Group announcing they're gonna do futures, uh, you retweet a really interesting, uh, writeup from, I believe, Caleb Shack at Varian Fund, talking about, like, the challenge of bootstrapping one of these futures markets.
And, uh, one of the challenges you have is we don't... It's like the, the compute class is, uh... it's not, it's not, uh, fragmented enough.
Right now, a lot of the compute kind of exists in a handful, uh, of companies' control. That may make a futures market difficult to build. What are your thoughts on this?
Am I c- accurately characterizing the, the landscape, and, like, does this, does this have to...
Do we have to have more diversification of, like, who, who manufactures and provides compute in order for a futures market to develop? Yeah.
So I don't know if you guys have dealt with before, uh, semi analysis, but you probably know that there's around, like, I think...
I don't know what his number is, like, 200, 250 neo clouds now, and there's, like, all sorts of people getting the neo cloud space.
So in our perspective, like, the neo cloud space is becoming more and more liquid, where there's more participants. For example, like, the funniest one recently is Allbirds. Like, the shoe company is now a neo cloud.
Uh, so that was pretty funny to see, and I think there's gonna be a lot more of that happening.
Given, like, the scale of infrastructure that's needed to support all the AI demand, I think there needs to be tons of more compute launched into the world, and you're gonna see, start to see more and more fragmentation as companies that control electricity in these, like, regions of real estate are like, "Hey, like, I can play in this game, too," um, instead of just having the, like, top players play.
I mean, obviously, I think that's still gonna be a large market, but you start going down, and there's gonna be a lot more fragmentation. And it's very similar to how early oil markets evolved, right?
You start off with a few oil miners, and then it totally becomes more and more, um, liquid and fragmented as time goes on. So, um, everyone I know wants to be long compute right now. Who is hedging with these futures?
Who's short compute? Yeah, yeah. So if you think about it, look at... See who shorts oil, right? So it's the same in oil markets.
The sh- biggest, like, shorters, or the natural shorters of oils are the miners themselves, and it's very similar to, like, farmers short corn because they wanna basically lock in a price that they can sell that, uh, corn or sell that oil.
Uh, in the same example, like, who is the, the farmer or the oil rig? It's the data centers.
The data centers need to lock in a price that they could sell their future compute at, and they could do these through bilateral contracts, but they also wanna make
exposure if they're selling on demand through these, uh, various contracts, and so you get less exposure to price. It's also the lenders to the data centers.
The lenders are heavily exposed to compute prices, and so if you're lending, like, billions of dollars to Stargate, for example, and the price is like... If you're buying on demand, those prices just drop.
Like, you are... What are you gonna do? Um, and you've lost, like, billions of dollars on that actual, uh, trade. So I think it's a lot of the data centers of natural shorts.
And a- at the same time, right, it's a liquid market, so if you take any futures market, there's always... At some price, there will be an equal amount of long and shorts.
Just let the market determine what that price is. So one thing I'm, uh... I've, I've looked... You know, I see the markets y- that ORM provides you, you know, it, the H100 index. There's other indices as well.
Um, like, is there... Do you... What do you think is the best representation of the blended value of, like, the, of all compute? H- how do I even estimate that? Yeah, I mean, I think the easiest...
We could probably do some, like, arbitrary combination of, like, H100, B200, B300s or H200s and, like, blend it all together, do some, like, weighted average by estimating how many there are.
Honestly, that's probably a good idea. We'll, we'll throw that up after, uh [laughs]... Later this weekend. So you'll... We'll, we'll see how that goes.
But yeah, we could probably blend together an index with that, um, just make it clear how we're doing the percentage weighting.
So, um, one, one deal which I thought was really interesting this week, and I'm gonna ask you about the Anthropic x AI deal this past week. Um, like, Anthropic's been compute constrained.
People are complaining that Claude's not performing as well, but they just signed a big deal with x AI, or for the Colossus ONE data center, which kind of surprised me, 'cause I... Aren't they competitors?
Uh, what's your take on this deal this past week? [laughs] I... It's, it's funny to see.
I think a lot of it comes down to just, like, the Elon-Sam, um, beef that's going on, and you, you see, like, Elon starting to play with, uh...
It's like the enemy of your enemy is my friend, um, sort of dynamic that's going on. You look at, like, OpenAI. OpenAI probably has the largest compute sort of capacity that they've, uh, confirmed.
Sam has done an incredible job of gobbling up every single compute provider in the world and making them in OpenAI, and I think Anthropic has poor, done a poor job so far, honestly, about how they get compute.
And so this is, like, a huge deal for Anthropic now that they get access to the same, uh, similar amount of compute that OpenAI is getting now, and they can certainly push that frontier and get more access.
So you think Elon's doing this to own Sam Altman?I, [laughs] I mean, look, I, I don't wanna... My opinions, um, there's, there's different reasons. I mean, economically too, it makes sense, right?
XAI had underutilization, I think it was reported, on these GPUs, and so economically it also makes sense.
But if you just think about it, like, if this truly is a race to AGI and whoever gets there first, what do you think, like, Elon is like, who do you think he wants to win in the race?
Just look at the incentives on each side. Uh, we had, uh, I mean, we had, uh... I don't know if you saw the story. Some guy cracked his Bitcoin wallet with, uh, with Claude, uh, earlier this week.
We had him on, and he, uh, he said he's gonna name his son Dario. So- [laughs]... I think the, the lines are being drawn. Huh. Okay. So, um, I read that this week Larry Fink,
BlackRock, um, said that he's extremely bullish on the emergence of comput- uh, compute futures. And, um, you talk about this a lot. You tweet about this a lot.
Um, how big is the compute futures market in 10 to 20 years? Is it the biggest market on Earth long term? [laughs] I mean, our opinion, obviously the business is built off of that thesis. But all I...
I mean, the easiest way to explain it is, like, today you look at oil is in every single good that we use. The mics that you're using, the covers on them are built from oil.
The clothes that you're wearing are built from oil products.
Every single tool that we use today has some variation of oil within it, and that's come across a span of 150, 200 years, where we've slowly started integrating oil into everything that we do, everything that we use as a society.
And I think it's very similar in how compute works, right? Today, every single enterprise might not be powered by all of the GPUs in the world, but in the future they will be. Every...
The economic input for the 21st, 22nd century even is going to be compute, where most of the money that's to be made and the economic progress is a result of being powered by compute, whether that's GPUs or any sort of other form it'll take.
I think the high-performance compute is gonna be the strongest power. Uh, you know, for a former Bitcoin show, [laughs] um, we're still a Bitcoin show.
Uh, for a former Bitcoin show, you know, we talk a lot about, you know, the, how the international economics and systems work and the petrodollar. And, you know, my family, I'm in near Cushing, Oklahoma.
Family kinda tied to oil and gas. I see this trend, you know, I see the... I, I see this personally, this trend, that now oil and gas is kind of almost gonna be, like, you know, the bridge to the compute industry.
Um, I'm curious. Uh, opine a bit for me on the transition of, uh, oil and gas being the l- the large geopolitical driver to maybe compute in the, in the era of nation states and compute. Yeah.
I mean, I, I think the transition's pretty natural, right? Like, what is... Uh, if you... I mean, you... The easiest example, and it's not a great one, but if you look at the war in Iran today, they bomb what?
Oil fields and AWS data centers. Those are, like, the economically strategic targets now for a regime that's looking to take down its enemy.
And if you, if you think about it that way, like, it, that means then strategic importance, a data center is worth just as much as an oil field, and they're both nationally strategic.
And you wouldn't have said that 10 years ago. 10 years ago, everyone was like, "Okay. Data center, whatever. Like, we can just go build another one. There's, like, infinite amount of capacity," et cetera, et cetera.
But today, even in geopolitics, we look at how the world's moving. China exports of H200s, H20 are a very contested topic within the US government.
Is it safe for us to give foreign nations access to our high-performance compute? Where is this compute be- going to be located? Is the US going to have enough power to power this and lead a revolution?
There's so many questions that arise from just this, like, how does this look? I, I think it becomes...
And you just start looking at it as like, okay, this is a very strategic sort of commodity where you're trading geopolitical resources based off of this, like, one chip or this one resource with countries.
And trade deals are being negotiated off of, like, literally a, a computer chip that if you asked this, like, probably, like, 10 years ago, yeah, all the gamers use it to play League of Legends or whatever other game that they use.
And now it's, it's literally, like, a tool that they use for bargaining. Yeah. Well, I'm, uh, I'm one year sober from League of Legends, and, uh, now I can use that, those compute cycles to- [laughs]...
uh, maybe not mine Ethereum anymore, but, uh, now I can do some local cycles. Kush, thank you so much for coming on the show. Fantastic. I'd love to have you back, 'cause this is gonna be a big story over the next year.
Thank you so much. Sounds good. Thank you, guys. Appreciate it. Thank you, Kush. That wraps up our live stream for the day. Make sure to like and subscribe.
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Otherwise, thank you so much. I'm Charlie. This is Colin. [laughs] That's Colin. [laughs] We'll see you next week. Have a good weekend, everyone. [outro music]