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Y'all welcome back to Blockspace Live presented by CleanSpark. For today's top story, Etched just raised $300 million at a $10.3 billion valuation to build AI computers in a way that no one else wants to.

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Big risk, big reward for our first story.

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Following that, we have Jay Patel of Lagos Finance on to talk about the recent shakeup at 21 Capital with Jack Mallers out and Strike dropping from the proposed merger with Electron in '21.

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And then we also have Harry Sudock of CleanSpark on to talk about their Sandersville lease, what it's gonna take to extend that tenant to Texas, and what else the company is eyeing with its AI expansion.

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To cap the show, we've got gumshoe Charlie Spears on the prowl, uncovering the inside view of a new Fluid Stack data center in Oklahoma. Yeah, they said doom scrolling Facebook was gonna ruin my brain.

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Well, actually, Mom, it's helping me with my job. So [claps hands] Blockspace goes live at 1:00 p.m. Eastern every weekday, with the exception of today, 'cause we're pushing it back for a guest.

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We got Harry Sudock, as Colin said. We feature the sh- uh, sh- the latest stories and hit on data centers, AI, markets, and emerging tech.

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If you like what you hear, this turns into a podcast shortly thereafter, and our podcast and all of the Blockspace content, including a lot of written content you can find on sources such as Yahoo Finance, you can find those in full on our website at blockspace.media.

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If you like this show, go to blockspace.media 'cause you'll love the rest of our content. This show is brought to you by CleanSpark, NASDAQ-listed ticker CLSK. More on CleanSpark later in the show.

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Colin, let's go back to ASICs finally, a topic we could actually-- we, we, we, we used to know a lot about, but apparently ASICs can be used for a lot of things, including AI.

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[lips smack] Yeah, and we're having to learn from the ground up. But there's a lot, a lot of lessons from Bitcoin mining for this specific pivot or attempt to rewrite what makes sense in the terms of compute for AI.

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So the headline here from Etched, Accelerating Inference, and the blog post here reads, quote, "We've raised $300 million at a $10.3 billion valuation led by Sequoia Capital alongside Andreessen Horowitz, Jane Street, Diffusion, Argo, and SK Hynix."

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Interesting point there, given the memory squeeze. We'll touch on that during the segment. "We're grateful for their support on our journey to gigawatt scale."

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[lips smack] This is coming from Etched, which is a startup that was started in 2022 by two Harvard dropouts in classic Silicon Valley excellence fashion. And what they are building is,

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as Charlie mentioned, an ASIC specifically for AI, [lips smack] but it differs a little bit from the ones that we've seen announced by Anthropic and OpenAI.

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We'll touch on that towards the end when we talk about risks for the business model, and one that could totally upend the current meta of relying on Nvidia for GPUs.

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So to set con- set the-- or before we set some more context here, I just wanna go over a little more of the history of the company. [lips smack] Um, specifically, this is a Series C round.

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The company has been busy over the last few years, gobbling up funding wherever it can get it, and its prior raises included its first, its Series A raise, 120 million in June 2024.

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That was led by Primary Venture Partners, Peter Thiel, and Amjad Masad.

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There was a $500 million raise between December 2025 and earlier this year, January 2026, $5 billion post-money valuation led by Stripes, Thiel, Positive Sum, and Ribbit.

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There was a June 30th raise, um, for roughly, um, I wanna say roughly $280 million for 800 million cumulative at that point. And this was led by VentureTech Alliance, which is a TSMC-affiliated fund.

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And so I find that interesting, Charlie, because it proves that TSMC is kind of backing a horse here with regards to a product line that could significantly benefit their business if it ends up taking off.

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So what is that business exactly?

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[lips smack] Etched builds a transformer-only ASIC, which is a, a chip with the transformer architecture physically hardwired into the silicon rather than executed as software on progra- programmable hardware.

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So f- a transformer in this sense, it's not the electrical infrastructure.

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It's referring specifically to the logic by which LLMs currently produce outputs, and what the transformers allow them to do, stripping it down to the most TLDR, explain like I'm five,

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um, explanation that I can, is they allow the model to basically put every word in context with each other.

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So, like, if you were writing a sentence that said, "TerraWulf is pivoting to AI in a move that will mean the infrastructure provider can provide compute other than Bitcoin mining," within the context of a transformer, it would take that string of, of-- that would take that sentence and allow all the words to be processed in parallel with each other and in concert with each other so that the LLM knows that the-- that infrastructure provider refers to TerraWulf in that instance.

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This is, like, basically the way that the LLM is allowed, uh, is e-enabled to cognitively process all of the context within an input so that it can provide the appropriate output.

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[lips smack] The way that Nvidia's GPUs work currently is, as Etched claims, only about 30% of the entire computing processing power is actually used towards that end for the transformer logic.

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Well, everything else is also baked into the other processes that make that GPU work.

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'Cause the GPUs can be used for multiple different things, so there is, uh, a decent amount of math and processing power in them that is geared towards functions that are not just specifically producing AI outputs.

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And this is where the corollary to Bitcoin mining comes in, because GPUs were really good for mining Bitcoin before we realized that ASICs could do it much more quickly.

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And it's a similar dynamic here, because what Etched is basically building is an ASIC that's only mandate is to perform that transformer logic. There's, there's nothing else in it that you would have, uh, like with GPUs.

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There are no instructions for decoding. The chip doesn't... Uh, the GPU chip doesn't know in advance what it'll be asked to do, so it needs circuitry to read instructions, right?

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To make sure that it can actually process the task. Um, there's a scheduling, a control flow circuitry to handle branching within the GPUs, and again, there's flexibility for other workloads.

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But Etch, it, the chip is, uh, just specifically for this transformer logic. And Etched claims that versus Nvidia's 30% for its GPUs, it can produce 90% efficiency for the entire computing processing for these tasks.

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I've got a few more things, Charlie, but just wanna toss it to you really quickly for second takes and color. Yeah. To summarize, [clears throat]

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these new chips can do what the GPUs do much cheaper, lower power, and at greater speed. The, the kicker is, is that they kinda have to be married with the model so that you...

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It, it, and maybe you're gonna go down this road here, but, um, when models are changing so rapidly and we have such competition at the frontier,

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and the, and we don't know, like, what even the, the meta for building these language models will be in two to five years, or at least I don't,

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um, it can make it difficult because the hardware and the software, if we want to call a, a model software, they have to be built kind of in tandem.

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So it is depend, you know, the, the chip architecture is de- and how effective it is, is dependent on the software. There's also an interesting dimension here, Colin, on the memory side of the things.

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This is why I think SK Hynix investing in this is really interesting because, uh, as we know, we're in a multi-year memory crunch, and this is why SK Hynix, Samsung, and others, Micron, are ripping.

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'Cause we can't manufacture the memory. Uh, it's very difficult to scale up, and everybody wants it. ASICs do not need onboard memory the same way that GPUs do.

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In fact, as you mentioned, the, the GPU only being used, like, 30, 40% for inference, the actual processing.

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The rest of that is actually largely used to kind of batch and keep track of the instructions in the memory, and this is one of the reasons why these, the, the new GPUs have so much memory, uh, so that they can hold all those instructions.

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Whereas an ASIC doesn't really apply, it doesn't apply as much here. The, the instructions are embedded into the chip architecture itself. So, um, I can speculate as to why SK Hynix might be investing in here.

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Probably a diversification play, but also, uh, you know, they have tons of money. It makes sense to invest in chips. I'll throw it back to you. Y- yeah, it makes sense to hedge, right? I mean, if you're...

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If this competitor comes out and some people are hailing it as the Nv- an Nvidia killer, then maybe it would be best for you to have a piece of that so that you don't lose ex- significant source of revenue once GPUs become obsolete, if they do.

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And that, to your point, is the big question mark for all of this because Etched is specifically betting that the transformer architecture for how LLMs work currently will be sticky, and if that goes out the window, then their entire business model is in jeopardy because they're building their chip specifically for that.

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And this works because if the chip only ever runs transformers, you don't need instruction coding, and the instructions are the same every time, so it's fine, and it's going to do that one task ef- uh, efficiently and better than the GPUs can.

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But if AI models converge on another form of processing this information and the logic behind producing the outputs, then Etch's a- Etch's ASIC doesn't work.

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And that, that's kind of the last, that's the note I wanted to leave on, Charlie, when looking at the competitors with regards to, uh, custom silicon and AI ASICs.

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[lip smacks] Um, specifically, you know, we have Amazon's Trainium, we have Google's TPU.

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Um, they give up general purpose flexibility, but they keep architectural flex- flexibility, and so they're not nearly as, uh, pigeonholed in the event of a change of, of form fac- or of form factor here for how, uh, for the transformers and for the logic behind the LLMs.

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[lip smacks] Um, whereas Etched gives up everything for maximum efficiency on one, one workload. And also looking at OpenAI's Jalapeno and also, uh, Anthropic's chip that they're reportedly designing with Samsung,

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um, they're just a little bit different. They're an inference-optimized accelerator, not a fixed function transformer engine. So, um, even if the Frontier Labs, uh, so the Front...

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Even, so even if the Frontier Labs building custom silicon around their own models aren't going as far as Etched is, uh, th- there's kind of a signal that Etched either has an edge that no one else dared to take or a signal of the people that are actually working on these models think that maybe the transformer only bet is too aggressive, and they don't wanna go that far because their ASICs won't be nearly as constrained as Etched in, in the sense of a change.

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Lot of people taking shots at the king, the king being Jensen Huang and in- and NVIDIA and CUDA. I mean, we have Anthropic with AMD, story yesterday. Anthropic with Samsung also building a custom chip.

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We've got OpenAI with Broadcom's Jalapeno, and we have, yeah, Trainium. We have all sorts of other, you know, edge chips, but NVI- NVIDIA still remains king for the foreseeable future.

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However, uh, yeah, will the kings, uh, will, will, who will take a successful shot at the king? I... Who knows? We have Jay Patel in the backstage.

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We're gonna talk about the latest going on, the latest drama in Bitcoin Treasury land, but we'll bring him on up here after a word from our sponsor, CleanSpark.

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[gentle music] 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.

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This is our proof of work, and we are setting the standard for what's next. Learn more about the intersection of energy and Bitcoin at cleanspark.com. All righty.

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Let's get Mr. Jay Patel on the stage. Jay, welcome to the show, sir. How you doing? Good. How are you guys? Fan- Not too bad, man. Yeah, fantastic.

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And, um, I know there's a bunch of other things going on in finance and treasuries and yada, yada, yada, but the hot news this week related to the type of things we talk about is Jack Mallers stepping down from XXI, Roman numeral 21,

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uh, capital. Jay, what's going on here? [laughs] Why did Jack step down, and what did you think of his apology video? Or, or, I'm sorry, his announcement video? Yeah.

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Uh, um, so I guess his stated reason was basically there were differences between the board or majority ownership and him in terms of the vision that they saw for the company, or at least the path that they saw to get to that end goal.

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Um, in which case, I guess it makes sense. Like, obviously he doesn't want to continue operating a company where he's a minority shareholder, especially if he's bringing in Strike.

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Um, it was interesting though, because from day one, there was obviously going to be this kind of contentious situation where he's the CEO of the public company, 21.

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There was a plan to merge it with his private company, Strike. Obviously, the public shareholders wanna pay the least they can for Strike, and Strike shareholders, Mallers included, wants 21 to pay the most they can.

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So I don't know if there was a... I don't know if the falling out was purely on, like, what was the valuation they were going to merge Strike in at, but I imagine that could've been one of the big factors here.

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Um, and then I guess the next question is really, like, where does 21 go from now? 'Cause obviously, you know, Tether put in a bunch of capital. They bought out SoftBank.

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Um, I know that they're trying to push the mining business, but obviously Bitcoin mining has not been in favor by the markets in any way, so. Yeah, I mean, what do you think is the clearest pass, path forward for them?

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I mean- Is, is there an argument to be made that you just take Electron, you turn it into an AI play, and then you just have 21 Capital as kind of like the piggy bank?

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Assuming that the treasury model actually has any, [laughs] you know, desirability with the, with- within public markets now. Yeah, so I'm increasingly of the view, and I think this is probably

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interesting in the, you know, you know, the fact that there was, like, the, the news about Orange Juice and, you know, the Lyn Alden-backed, or was it Salinas?

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You know, Lyn Alden and the folks at Ego Death running, uh, a fund, you know, basically acquiring cashflow businesses, cashflow-positive businesses and buying Bitcoin.

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I'm of the view that, like, these public companies, these treasury companies, I think the market's coming around to the realization that if you just have a pile of Bitcoin, like, I'm not gonna pay you a premium just to hold the Bitcoin for me, right?

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You can go the MicroStrategy, Strive route and try to do the kind of financial alchemy and financial engineering and monetize the stack that way.

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Um, and whether you agree with what Strategy and Strive are doing or not, I think it's, you know, it's reasonable to expect that if we're back in a bull market, they will trade at a premium to NAV because they're able to do the things that are possible with a big stack of Bitcoin to increase Bitcoin per share.

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Um, I'm not as sold on this idea of, like, we have a bunch of Bitcoin and we're gonna do AI and s- mining on the side to accumulate more Bitcoin. I'm almost thinking, like, you know,

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if I believed in that kind of business model, which is cashflow positive, steady income, buy Bitcoin, you know, I would go buy, like, Procter & Gamble stock or, you know, any of the tobacco companies or something like that and just hold the Bitcoin for myself.

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Like, um, I, I think that realistically the model, which, you know, maybe Mallers was pushing for, is like you need to get a company that is actually able to use the Bitcoin in some creative fashion, whether it's through deploying it as capital towards mining or financial products or whatever else, to actually generate more BTC, 'cause people aren't gonna pay you a premium to just hold onto the Bitcoin, even if you have a cash flowing business on the other side.

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It... Maybe that's where some of that tension came from that you were intimating at earlier between what was going to be the actual right price for Strike. Yeah.

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Especially when you consider that you have, I don't know, uh, exactly what Strike's revenue profile is, but you have the mining business on one side with Electron, then you have Strike on the other side.

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And so the question then becomes, okay, well, which business is the one that's actually the most important for the cashflow of this company to make the treasury company actually more than just a glorified fund holding Bitcoin?

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You, you- Oh, go ahead, Charlie. Well, I, I know there's a question, but the one burning on my mind, and I, well, I kind of vocalized this yesterday, is, like, okay, what about the intangibles?

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Like, Jack was the frontman for this, and that's kinda what he was paid to be, and that's every good treasury company play had to have a, a frontman, a hype man. However, uh, that's also a fall guy, basically.

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Um, to what extent do you think this is, like, a reputational thing where you're just like he's gotta get out and he doesn't wanna be tied to this thing from a reputational angle for the next six to 12 to multiple years?

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Yeah, I mean, I think there's definitely some aspect of that.

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Like, most of these treasury companies, there is the frontma- you know, there's, there's the, the podcaster, you know, Twitter personality, you know, whatever, whoever it is that's kind of, uh, I don't wanna say shilling the stock, but telling the story of what it can be and why you should buy the stock.

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Um, I think in Jack's position, it's kinda tough though, because he doesn't have control of that company, right?

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And so maybe his, his perspective was really, "Hey, if I'm attaching my personal brand to 21, and I'm not going to have control longterm of the decisions we make or the direction we go in," you know, maybe that's a r- the risk he didn't wanna take.

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On the flip side, though, there's kind of, like, the double-edged sword of, like, you already kind of attached your personal brand, right?

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Like, he had been pitching the fact that 21 was gonna do something that no other treasury company had, in that it was gonna build profitable Bitcoin businesses and, you know, really kind of follow through on the promise that a lotta treasury companies had made.

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And obviously, you know, most of the media for 21 was just Jack to his followers and his audience.

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And so I'm sure there's a decent amount of backlash from folks who bought into 21 believing that they were going to own a piece of Strike at some point, and, you know, it doesn't seem like that's gonna happen.

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So, uh, wanted to sw- switch gears to another unfortunate story in the realm of Bitcoin treasury companies, and we've talked about it before, but we need a kind of an update from you, and that's MicroStrategy, or, sorry, Strategy.

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Old habits, everyone, die hard. Strategy's down 5.5% today, which doesn't surprise me that much considering the entire market's actually getting routed right now. Nvidia's down 2%. Tesla down 14.3% on the day.

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I mean, I know it's no longer the golden boy of Elon Musk's companies, but still, that's an incredible bloodletting.

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And the thing that surprises me about it is, or not, it's not totally surprising, but Bitcoin's down about 2% today, but Strategy is suffering much worse.

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Strategy also down, like, 9% this month, while Bitcoin's barely up 1%. And Stretch is still teetering.

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It, it, it almost broke 90 earlier in the week, but since then, it has fallen off like a rock, and it's back to where it was basically a month ago, actually a little bit down.

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All that to say, Jay, we've seen Strategy sell Bitcoin. We've also seen them sell common stock and then not deploy it and just add it to the cash reserve.

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Has that done anything to inure the market to what they see as existential risk for Stretch and for Strategy? Or is the market signaling that, "Hey, that's, that ain't doing it, chief."

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I, I, I think, you know, as we talked about last time, I'm still in the same camp that I was before, which is, you know, at some point you have enough dividend reserves that getting more dividend reserves is not the thing that's gonna get Stretch back to $100.

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And I think that, you know, the market is basically screaming, like, no matter how much you continue to dilute common shareholders and just sit on more cash, like, that's not gonna be the thing that moves the needle because in, in reality, like, you know, a couple hundred million against all of the potential converts and, you know, or, you know, the debt that could be, um, you know, due in the next two years, um, I think that's the bigger thing, right?

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Is, like, if you look at the difference between Stretch and Seda, Strive hasn't had to deal with as much pressure from the fact that they have this debt overhang.

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Um, and, you know, in an up market, you know, there's a sense that, oh, this debt will get equitized.

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There's not actually, you know, an outflow of cash, and so maybe, you know, we had the ra- the rally, um, earlier in the week, and folks thought, "Hey, we're gonna head back up towards 100K, and we don't need to worry about this debt."

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But the longer that the market thinks that we're not gonna be above 100, 120K, wherever you need to really clear that debt, um, I think that's gonna be the bigger issue.

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Um, and obviously, you know, Strategy has a tough job to navigate this because the worst thing that they could do is use the cash to pay back the, pay down the debt or repurchase it because they tried that once, and obviously that's what kind of kicked off this whole, whole situation.

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So I, I do think that they're kind of in between a rock and a hard place, and maybe it's just survive until Bitcoin price rallies. I mean, that's, [laughs]

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that's pretty bleak, man, when you think about the kind of ultimatum that they're having here in, in a way, or rather a dilemma in the sense that there doesn't really seem to be a good option.

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I wanted to flag one tweet really quickly 'cause you retweeted a response to this, uh,

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saying that Strategy, I believe it was from, yeah, Josh Mann saying, "Strategy seems to have a short attention span," and that specifically was underlining this

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disclosure from one of their filings, quote, "Our current intention, which is subject to change in our sole and absolute discretion, is to adjust the monthly regular dividend rate in such a manner as we believe will maintain Stretch's stock trading price at or close to its stated amount of 100 per share."

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And that was in a, a, a quote tweet with a reply to this that said, "Stretch is the right idea, but without a real buyback program it will continue to be volatile."

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So my next question for you, Jay, is with that in mind, is the only thing that Strategy can do to actually address this problem with Stretch to buy back Stretch at this point?

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And then building on your prior response, does that just further endanger strategy? Because then they have less cash to actually address these converts if the puts are exercised in a year or two.

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Yeah, I think, look, you could probably get stretched back up to 100 or near it by doing a buyback program.

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But I, I think that that probably puts a ton of pressure on the common, because what you're saying is we're gonna dilute the common just to keep the pref's towards 100, even though we can't issue any more pref's for liquidity.

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Um, and then you gotta think about like, okay, when these converts come due, if you're not gonna be able to tap the pref's, you know, there's only, there's only one, one party left to screw over, and that's the common again.

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So I, I don't, I don't see them doing that. Um, I think the short intention span is across kind of all parts of the capital stack though, right?

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You know, before they said they weren't gonna issue common below 2X NAV and then 1.6, now they're issuing it at or around 1.

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Um, and then clearly, you know, I don't think that they're gonna take extreme moves to get STRC back towards 100 right now if that puts the rest of the company in danger.

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Um, but I think that, you know, that's the risk with like

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the, the kind of company strategy is, you know, all of their followers, everyone reads into every word Saylor says, everything that they say on an earnings call, and I don't know if it's them not being careful enough about what they said or, you know, their view evolving, but obviously, you know, people kind of cling on to, um, the, the, the guidance in the past, even if it's changed.

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Jay, Lagos Finance, thank you so much for your time today. Uh, I hope that our conversations about Bitcoin Treasuries get more ebullient in the future as opposed to doing, feel like doing like a postmortem.

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So thank you for your time today. My pleasure. All right. Thanks, again. Take care. Cheers. Love, Jay. We have Harry Sudock in the audience. We are gonna bring him on up here in just a moment.

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All right, we've got Chief Business Officer of CleanSpark, Harry Sudock, in the wings. We're gonna be talking about Sandersville and what comes beyond it. Let's get Harry on the stage. Harry, welcome to the show, man.

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Thank you for joining. Sup, nerds? Hey, good to see you. [laughs] Good to see you guys. Well, Harry,

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prior life, we might be grilling you on ASIC orders and maybe even ask you to weigh in on strategy, but CleanSpark came out with a banner AI deal earlier, um, and...

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or f- a, a month or so ago, a few- or, uh, sorry, last week. Last week. We're good. Last week. I lose track of the timeline, man. I mean, there's so much news flying around.

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Can you give us a brief breakdown of the Sandersville lease, and specifically, um, how y'all got to this point? Like, when was the groundwork laid? 'Cause this seems...

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I mean, y'all announced your pivot later than some of the other Bitcoin miners, and this deal seemed to come out pretty quick considering the, um, the, the pivot timeline. So give us a little background on this. Awesome.

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I'm, I'm happy to. Um, really proud that our first AI and HPC data center project's gonna be in Sandersville. Um, it's been a flagship mining location for us for close to four years, and so I think that

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there's just a lotta, a lotta poetic continuation for our business having that be the first one. Um, you know, let's talk high level about what the, what the transaction specifics look like. It's a 250-megawatt campus.

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We're gonna be turning that into 175 megawatts of critical IT compute. The headline number on the deal is 6.6 billion. What's really important is that it's a true triple-net transaction, so there's a lot of,

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you know, complexity out there in the market, like what do, you know, does triple-net really mean triple-net? Like, how do those margins and cash flows break down?

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This is true triple-net, which means that we expect, you know, near 100% NOI margin on that 6.6 billion.

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It's a 20-year transaction, so I think only one other one of those is in the market, and I believe we're the only one to be interacting directly with a high investment grade counterparty as the other side of the tenant relationship.

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Let's rewind the clock, talk back to, um, middle of last year. You know, we were not the first Bitcoin mining company powered land acquirer to say, "Let's go build HPC data centers."

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Um, you know, our friends at, at a number of different shops made that transition sooner than we did, and that was deliberate because we wanted to look at two key indicators in the market to validate the thesis.

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The first was, is there gonna be a durable demand profile for tokens that's gonna grow over time? I think everybody knows the answer. [laughs] The demand for, for AI tokens and intelligence tokens is, is ridiculous.

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Um, and then the second is, are the hyperscalers and the largest counterparties gonna be willing to do business with our sector, um- Part of that is a, a asset quality perspective.

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Like we don't own acreage in Northern Virginia or in, you know, downtown Chicago or, or, you know, right in central Dallas. Like those are traditionally the hottest data center markets.

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And so are we going to see the largest technology companies take more of a geographically diverse demand viewpoint for their rack space? And both of those were proven true.

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We aggressively migrated the business to be ready for this capability and this type of transaction, and the list of customers isn't that long, and so we spent a ton of time engaging across all of them and, and ultimately landed at this transaction for Sandersville.

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Uh, Harry, I'm curious, one point with regards to the announcement is that the tenant itself was not named. This is a trend that's becoming increasingly common with a lot of the Bitcoin miners in the cohort.

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Hut 8, for instance, has, has demurred from talking about its own tenant at Beacon Point. What's the rationale behind that specifically?

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You know, look, I think it's from a, from a shareholder and an open market perspective, like it's not good for the news day and everybody wants to know exactly who it is.

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Um, but on the other hand, it's also just a huge positive because the, the close to the vest approach that these tenants are asking for is a signal of how aggressive demand really is.

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Um, even if, you know, you saw the, the progression with Cipher as an example, they came out with their, um, with their seventy megawatt lease with-- They, they didn't even say which site it was at in the original announcement.

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And then ultimately through additional filings, especially around the financing, we got a lot more detail about that project.

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Um, but I think that the viewpoint on the other side of the table more broadly, you know, not, not just for, for our particular circumstance, but across the sector, is that even sixty or ninety days of anonymity is hugely beneficial in the data center strategies that these companies are rolling out.

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And so if you're in a market where sixty or ninety days is, is high value, then it means that demand is extreme and supply is constrained and, and I think we've seen a very similar behavior in the market. Yeah.

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And that makes sense to me.

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We, we asked Ash Ranganath the same question we had him on recently, and he said more or less what you just laid out, that the tenants are asking for this partly because it chips away at a competitive edge they have when they're negotiating for other deals.

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So, um, makes total sense to me.

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I just-- It's very notable compared to the early days of these AI pivots where a tenant was in like every release, and then now it's becoming much more commonplace that tenants aren't announced at all, so.

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Charlie, you look like you were about to jump in there. Yeah.

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Well, you know, Harry, you mentioned financing and, uh, this again, it seems to me that the, that is kind of where the meta has shifted in that creative financing deals.

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Uh, can you speak to like the, the broader trends in financing these sites overall and any insight you can give us on specifically the Sandersville build and how, uh, we could think about that from a financing standpoint?

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Yeah, I mean, I think...

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Look, the, the, the first thing to know [clears throat] is that the capital intensity for these projects is, you know, orders of magnitude more than a traditional Bitcoin mining build where you, you know, you were looking at maybe up to a half a million bucks a megawatt for infrastructure and then a couple million bucks for servers at the peaks.

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Um, this is a totally different ballgame. It's ten to twelve million dollars a megawatt for infrastructure alone.

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And then when you layer the chips on that, you know, the chips aren't part of our obligation for this project, but the value of those is gonna be, you know, three plus X the infrastructure price tag.

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And so you're looking at, you know, billions and billions of dollars of assets sitting on, on these data center campuses.

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So the financing is interesting because while the capital intensity has gone up, the credit worthiness of the underwriting has also gotten a lot stronger.

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The way that these leases work, especially under a triple net structure, is that you're getting the best guarantee for cash flows, um, of anybody in the market.

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You know, the, the high investment grade counterparty that we're working with on this, you know, they fall into a short list of folks who have the true best of the best kind of credit ratings that are out there.

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And so it means that while traditionally I think Bitcoin mining companies used a lot of ATM products to finance growth, then there was a big wave of convertibles to finance, you know, depreciating assets basically.

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What we're seeing in the HPC data center landscape, and it's gonna be a playbook that we're gonna look to mirror, these are comments that, um, that Gary made, Gary Vecchiarelli, our CFO and president, who talks about this more eloquently than I do.

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Um, he, you know, he, you know, he loves it because it gives us the opportunity to use project-level debt financing. Oftentimes for our sector, that's looked like the high yield market, but there are also examples of,

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you know, more investment grade kind of construction real estate credit product. But what's important is that these, these financings sit at the project level.

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They don't sit at the parent level, and they're collateralized against the project, the power contract, the hard assets that sit there, as well as the lease value and economics in the data center that the money ultimately gets used to fund.

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And so the collateral package is incredibly high quality.

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The counterparty who sits on the other side of the lease in our case is incredibly high quality, and that lets us unlock this lower cost of capital, even in the event that we're going down this more capital-intense road.

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It's very, very accretive to shareholders. It's protective of share count and dilution over time, and it lets you scale the business without needing to scale the equity base.

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So if I'm, I'm hearing that correctly, I'm not putting w- not trying to put words in your mouth, but, uh, looking at potentially some project-level financing, something secured, uh, not putting the whole parent company at risk in something that is unsecured further up the stack

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And that's representative of where the sector is, right? Like, we, we have the benefit in, in our view of the second mover advantage. You know, you called us late to the party, but we said fashionably late. Um, and so

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ultimately, other people have done an incredible job building their businesses down this, this road.

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And so what we have the opportunity to do is w- you know, we had this opportunity in the lease negotiation process, is to kind of pick off the menu of the things that we thought were the most attractive and accretive, and then we're going to have the same opportunity on the financing side to say, "Hey, there's 20 deals in the market.

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We loved these features. We didn't love those features." And we're going to be able to pick and choose a little bit to arrive at what ultimately we think is most accretive from our viewpoint.

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I'd like to ask you something, uh, for kind of a blunt take and a blunt question for the sector as a whole. Blunt person.

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[laughs] I'm curious if you think that the true thing separating the serious operators at this point from the Bitcoin miner pivots to AI is this financing piece where unless you can actually get investment-grade credit for a project...

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I, I struggle to see how you're going to be able to procure enough to actually pay for some of these builds, and I won't name names specifically, but there have been a few names in the usual cohort where they have pretty grand plans, and they do have tenants that they've signed up, but they're not approaching project-level financing, or they don't have investment-grade backing, and so we're seeing things like equity issuance, uh, we're seeing things like converts.

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Um, the debt stack is not maturing to the extent that I think that you would hope to see seeing a Bitcoin miner going to an AI pivot.

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All of that's kind of a long-winded way of asking, uh, to- in your mind, is the investment-grade credit piece kind of a make or break for whether or not these companies can really move into this industry at scale? Um,

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it's a hard question because I think, like, number one, equity financing and convertible financing, like, those aren't dirty words.

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Those are great tools that get used sometimes incredibly effectively, sometimes less effectively, is what we've seen, you know, in our market, but, but even more broadly than that.

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So I think that the, the key is, are you marrying the right source of capital to the right business activity?

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Um, in our view for the data center build piece of things, project-level financing, debt financing, it just, it just creates the best return profile, you know, for our business as we scale in this kind of way.

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Um, but I think that those other types of capital formation opportunities, like, have a time and a place depending on your business and, and depending on your growth story.

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'Cause at the end of the day, when you look at our, our portfolio and our asset mix, you know, we've got Sandersville now off the table and leased.

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We've got eighty- eight hundred and eighty-five megawatts of power in Texas that's under LOI with the same counterparty. We've got some other sites that have some AI applicability. But when you look at our...

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You know, if we've got a 2.1 gigawatt portfolio, and we've got 1.15 gigawatts either leased or under LOI, and we've got a segment of those remaining megawatts that are still gonna be used for mining, or maybe they're not big enough or in the right markets for an AI use case, we want to be hunting land and power, and we spend a lot of time investing in our pipeline.

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And so when we think about site power and growth acquisition, we're not thinking about project-level debt to do that. We've got a balance sheet we're able to use to do that.

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We've got Bitcoin-backed collateralized, um, revolvers that we can use to do that, and we've got all the different types of market activities.

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So to, to parrot Gary again, you know, he would say, "We have optionality," um, which I totally agree with.

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And what's important, the way that we think about it, is that can we put incredibly high-quality counterparts at our projects, because that unlocks the debt component for us.

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And then can we continue to rinse and repeat the powered land acquisition thesis that has pow- that has gotten us to where we are today?

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And, and I think we've been, we've been tremendously successful, and I think we've added a gigawatt since the, you know, just this, this, um, most recent fiscal year.

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So we have a, we have a growth engine there, but, but really running a business that's as capital intensive as the HPC data center business is, it's about understanding all of your different funding levers and then all of your different business application layers and marrying the right sources to the right uses up and down the stack.

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So that's a long way of saying basically there's a time and a place for lots of different things.

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Internally, we've got a very clear-eyed view about the type of tenant quality that's important to us because of what it does for the financing and what it does from a, a confidence in the longevity of the cash flows.

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'Cause the other thing that I think is, is not talked about maybe enough is that it's not j- just about getting these projects financed.

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It's also about being able to have sufficient confidence that they are going to pay the, the lease bill every one of those years all the way out for two decades from now.

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And so when we went through our, I don't know, I wouldn't call it speed dating because it's not quite that quick, but, but ultimately, you know, when we went through the exercise of, of match finding for our portfolio, having a viewpoint on the financing was, was top of mind, but just underneath that was making sure that the counterparty was one that's going to thrive for decades into the brave new world and be able to fulfill the entire duration of the lease term.

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Matchmaking for data centers, triple net is the new six foot five, six figures. Um, you, you mentioned- Wise In finance. [laughs] Harry, you, you mentioned the, uh, the 800-plus megawatts in Texas.

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That actually leads well into one of my final questions. We got a few more, and then we'll get you out of here. It's kind of a two-part here.

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KBW Steven Gladwell argued that the Texas LOI exclusivity was more significant than the Sandersville site itself, and I think his reading on that is most people expected the Sandersville announcement. It's...

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It, it was... If you were reading through the tea leaves, you could see it coming.

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But the Texas expansion could, could be massive in, in the, in the sense that it's, you know, triple what the Sandersville lease would be on a gross megawatt basis. First question, do you agree with that?

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Second question, what specifically needs to be done and what milestones need to be met in order to get that LOI to be actually executed on?

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Um, I'll never say anything is bigger than the name at the bottom of the paper on a definitive lease agreement, just because the amount of work that it takes our internal team to go through that exercise, the rigor, the technical expertise, all, all of that, the, the work product that they brought to bear to get that over the line is just unbelievable.

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Um, and so on, on behalf of their hard work, I'll never say anything's bigger than, than the definitive agreement. Um, I think from a scalability perspective of our portfolio, I agree.

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You know, I think that it, it was important to us, um, to demonstrate that this is, you know, CleanSpark is not a, a project-based company. It's a scalable platform that we're building on.

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And, and when we think about our core competency, it's about the ability to acquire and mature powered land assets into HPC-ready campuses.

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And then it's about the financial and technical acumen around that to convert those campuses into commercialized assets and then built assets and then cash flowing assets. Um, and so, you know, I think that when we

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went through the process getting, you know, getting zero to one is the hardest part in anything, right?

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Any business, that first dollar of revenue is the hardest, that first megawatt of leasing is the hardest, you know, always.

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Um, and then as you get into a more repeatable cycle, you're able to refine your process and enhance, you know, what you're able to achieve, whether that's value or speed or quality, you know, all the different metrics that, that we're gonna be assessing our portfolio on on a regular basis.

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Um, and so getting into that repeatability position was critically important to us because we wanna move quickly and take full advantage of the second mover advantage that we think we have. Um,

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so I think that, you know... And, and listen, Steven is incredibly sharp, and I think from the market's viewpoint, um, I think that he's probably right.

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I think we came, came with a bigger, you know, a bigger push out of the gate than, than would've m- potentially been anticipated.

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But the other thing that's really important to us is that we wanna be able to give the market a tremendous amount of confidence, that when we go out and we secure an additional powered land asset, we're gonna be moving through the commercialization process rapidly because speed is king in all things.

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Um, and so we want to move with discipline and deliberate approach, but also on a very, very aggressive and accelerated timeframe. Charlie, did you have something?

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'Cause I, I have a closer, unless you've got something else. I got... Well, I got one more kind of cur... I got a curveball for him, then I'll let you close. Um, okay.

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So Harry, I don't know if you saw OpenAI announce they're doing 3.2 gigawatts in Georgia. And CleanSpark has, I believe, over half a gigawatt in Georgia. It's kind of like a stronghold of your mining operations.

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And they're doing it off Georgia Power. And I'm a little bit curious, can you give me any insight to what's going on in, with Georgia Power? Do you think that utility can scale to service 3.2 gigawatts?

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And, like, what needs to happen for that, uh, for OpenAI to actually realize that scale of a site in Georgia? Um, look, I mean, I think that from a, from a utility system perspective,

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Georgia functions a little bit differently in that it doesn't necessarily run all of its own gen.

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While they do distribution, transmission and distribution, they can also use the open market to fill their wires on a more kind of liquid grid-to-grid basis.

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Um, and so the way the RFP process works and the bidding process works to secure long-term capacity doesn't necessarily mean they have to have that gen on their system, but it does mean that they need to have the import capabilities cross systems to be able to achieve that kind of scale.

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So I, look, I don't... I think it's possible. I think it's achievable. I think the, the tougher part is gonna be around the actual delivery of, of the power into the data center over what kind of timescale.

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Um, but this is... You know, we saw this in,

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in Bitcoin mining, um, many years ago, which is that when you bring a demand profile that the market has never seen before to an existing behavior, but the economies of scale get unlocked for the first time, the levels of innovation that are able to be achieved on a rapid basis are incredible.

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You know, I, I think about... I'm, listen, I'm a, I'm a left curve guy. So when we look at, like, the PSUs, the power supply units that, [clears throat]

248
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that the ASICs ran against, if you go to the airport and you know all the outlets that sit on the, the, you know, terminal seating areas.

249
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The PSU that runs those outlets is basically the same size and, and wattage, et cetera, that a Bitcoin miner is running against.

250
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If you buy them in the airport, they're like $600 when you're building the airport 'cause there's all this red tape and you gotta do it and bid it out and competitive and there's state involvement and whatever. Um,

251
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those don't cost $600 when you put them on a Bitcoin mining rig. anymore. They cost, you know, $170, maybe $70, and just keep scaling down.

252
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But that's just because if you're gonna build a whole airport, maybe you're gonna buy a thousand of them. If you're gonna build a Bitcoin mine, you might be buying 100,000 of them.

253
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And so the supply chain got brought, um, into focus with a wave of demand that was for a component that already existed, but it had never existed at that type of concentrated scale.

254
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And so I think we're seeing a similar behavior with the way that AI and HPC data centers are working is that data centers are, have been in demand for 30 years, but they've never been in demand at a gigawatt or 3.2 gigawatts at a single location, and able to realize full economic value in that way.

255
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And so what about the supply chain? What about the construction process? Can we reimagine because we've got an order for a million units, not 1,000 units?

256
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Um, those types of dynamics, I think, haven't been broadly understood or digested yet. Um, but I think it's where we're headed.

257
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I think that, you know, the, the growth and proliferation of this industry is gonna, is gonna be relentless. Uh, last question, Harry.

258
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In terms of charting expansion, sorry, not gonna give y'all a chance to rest on your laurels, as I know y'all wouldn't anyway. So Texas obviously on the docket if that LOI gets executed.

259
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Where else is Queen Spark looking at expansion? Would you look in Mississippi or, or Georgia or Tennessee for your current sites? I know some of those are smaller.

260
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I believe all of them are smaller than the Sandersville site. I'm wondering if there are opportunities there, or if you'll look to Greenfield similarly to what y'all are doing in Texas going forward. Yes, and.

261
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[laughs] Love it. We're looking at, we're looking at, we're looking at the existing portfolio.

262
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We've got a, you know, double-digit gigawatt evaluation and growth portfolio that we look at, um, from a pipeline perspective.

263
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We're pretty conservative about what we put in our this is ours, and we are going to point your focus to it. We think it's an incredible asset, and we have certainty.

264
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Once we sign a c- a power contract with certainty of, of delivery, that's when we talk about it as part of that expanding 2.1 gigawatts of contracted power.

265
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But there's a huge piece of pipeline that sits out beyond that, that frankly we don't talk about often because we wanna give the market sure things, and

266
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it means that we're saying no to more than we say yes to by a wide margin because not every project is mature enough or living on the timeline it needs to or in the right jurisdiction where we're gonna have the type of community tailwinds that we've enjoyed in Sandersville.

267
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So we're looking all over the US. We've seen some interesting stuff outside of the US, but we're focused here to begin with because we think there's just so much fertile, you know, room to grow.

268
00:51:12.808 --> 00:51:23.548
Um, but I think that it's, you know, it's a lot of the same kind of story around here. There's val- you know, there's valuable growth in Georgia still. There's valuable growth in MISO.

269
00:51:23.608 --> 00:51:32.998
There's growth, you know, to be had in ERCOT once some of their permit, you know, their approval process shakes loose a little bit later this summer. Um, there's behind-the-meter opportunity.

270
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There i- you know, all this, this wide range of electrons moving into their highest value form, that story is in the early innings, uh, right now.

271
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And so we're just, we're excited to look at new projects and, and kind of put them through our internal process and add to that 2.1 as quickly as possible. Well, Harry, thank you so much for joining, man.

272
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We'll have to get y'all back on later in the year once that LOI is signed. Not using if, using when. I know you can't, [laughs] but I'm gonna put- I would ne- I would never dream of coming up there-...

273
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the positivity out there that you guys- But I look, I look forward to coming back. [laughs] Harry, thank you so much, man. Have a great week. Awesome. Thanks, gentlemen. Cheers. We're gonna keep on rolling.

274
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We're gonna dive into the wacky world of Facebook groups protesting data centers with a little case study at the Fluid Stack deal in Okmulgee, Oklahoma, my, my stomping grounds.

275
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276
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281
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What glean you of Facebook rage posts? Well, in order to get there, we have to start at the beginning, and the beginning starts with a little company named Fluid Stack, who we've covered here a few times.

282
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They've, uh, we covered their deal up with TerraWulf and some of their other partnerships. Fluid Stack has been working on a project in Okmulgee, Oklahoma. Okmulgee, Okmulgee is a, uh, I believe a Creek Indian word.

283
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Um, and it's about a south, it's an hour south of, uh, me here in Tulsa, Oklahoma, and this is a two-phase 200-acre campus just outside of the town of Okmulgee, Oklahoma.

284
00:54:26.028 --> 00:54:32.478
Well, we had not a lot of details on this deal, um, until the past couple weeks.

285
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In particular, a notable community meeting where Fluid Stack entreated the community to some community relations Uh, song and dance as your, you know, uh, dog and pony show, if you will.

286
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Um, and it's kind of blowing up on Facebook in my neck of the woods, and through that we've actually learned some interesting things about the deal.

287
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Um, let me pause there and say that another story happening alongside this is that Bloomberg reported that Jane Street, the trading firm, was planning to build and finance its own data center, and had been talking to companies about this.

288
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The firm was reportedly seeking 100 to 200 megawatts, primarily for their own operations, so they could perhaps, say, run circles around the Indian stock market once again, if you're familiar with that obscure story.

289
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Um, but, uh, when, uh, I believe the first time that we learned that Jane Street was a customer of this FluidStack site in Okmulgee, Oklahoma, was when they put out the community relations page to the residents of Okmulgee County, naming Jane Street as the first anchor tenant of this two-phase, 200-acre campus.

290
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S- it's not confirmed, so I cannot assert that this is the same project that, that the Bloomberg report was about, uh, last month. However, you might infer that they're related.

291
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Um, so O- Jane Street is an anchor tenant, not an investor in this project. By the way, that's who you're gonna be trading against in the future.

292
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It's not, it's no longer a quant who is smarter than everyone you know put together. Now it's a quant with a genius in, in the freaking box that he's clacking on. Like, he's, he's- Yeah...

293
00:56:24.412 --> 00:56:34.902
the ghost is in the machine, and it is going to be running models day and night for how to beat you at trading. Yeah. Which- If, if you're familiar with- You know...

294
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if, yeah, I mean, if you're familiar with the data center full of geniuses, uh, concept, that's probably what's going down in Okl- in Okmulgee.

295
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But the big question is, Colin, will this data center of geniuses actually be built? And therein is the fun Facebook opportunity. So, let me pull up... Let me get some little context on the screen here.

296
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Um, here is, I'll play the first, I'll roll the tape on this first, uh, local news reporter on Channel 2 News Oklahoma. Here's a little rip on it.

297
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FluidStack is full steam ahead on building an AI data center west of Madison Avenue, but in the jurisdiction of Okmulgee County. The only thing the company will need from the city of Okmulgee is its water supply.

298
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Last night was by far, uh, the worst- The worst... that I have ever seen- Yeah. Yes. Right... out of these.

299
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A day after I listened to both neighbors and company representatives at the sole open house hosted by FluidStack, residents let city council know their thoughts on the data center, even though it was not on the agenda.

300
00:57:43.492 --> 00:57:52.292
They're not doing anything for us. They wanna come here. They're gonna use our land. They're gonna... In my opinion, I don't think that they're gonna do right by us.

301
00:57:52.792 --> 00:58:08.692
I've written software that makes servers 80% more efficient on RAM and CPU. There are ways that we can make a difference, and right now we're letting things happen to us. It- So mind you, this is Okmulgee.

302
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This is one of, you know, a very, very red county in a very, very red state.

303
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You can hear the heavy Oklahoma drawl accent in a lot of these folks, and they're pretty indicative of the average resident's sentiment towards such a data center.

304
00:58:24.052 --> 00:58:40.192
This, so they all showed up at this community meeting held by the, the, the city executives and council members, um, and even though the, like, the actual data center discussion was really not on the docket, that's what the coun- that's what the meeting came a- uh, became about.

305
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S- uh, also, alongside this, FluidStack hosts a community meeting. Um, uh, and so I even have, like, an obscure, uh, YouTube video of a guy who walked around that meeting searching for people to talk to.

306
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Kind of goes how you would expect. [crowd murmuring] We're trying to figure out more information about the history. Pretty big topics like water- So you can't really hear what they're saying, but basically it's in a gym.

307
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The gym's packed. There's a bunch of locals- Yeah, and that guy literally just said, "We have questions about water." Yeah, and that's, uh, that's what I'm getting at. This is going to be a water permitting issue.

308
00:59:20.092 --> 00:59:38.012
So, uh, the thing is, a lot of the land use, so like, um, th- so this data center b- is built on, uh, private land. Um, in s- specifically, let me pull up my notes here. Um, uh

309
00:59:39.652 --> 00:59:56.232
... Where are my notes for this? Um, it's being built on, on, on, on private land where there's no zoning restrictions. So, uh, as far as, like, what can be built there, um, it's, like, offset, it's noise related.

310
00:59:56.372 --> 01:00:04.412
All those are not really issues. This is private land, and this is one of the reasons why Okmulgee in general is popular for both residents and industry. Um,

311
01:00:05.592 --> 01:00:13.852
it comes down to the, uh, that this data center needs a permit to use water.

312
01:00:14.072 --> 01:00:30.312
So you don't need, um, you basically need a signature from the city of Okmulgee to use the city's water supply, and this is a- an elected position, uh, uh, in the city that the citizens elect, uh, towards this.

313
01:00:30.372 --> 01:00:38.472
And the citizens do not like the, uh, do not want this data center, and this is becoming the primary choke point.

314
01:00:38.572 --> 01:00:56.132
Um, it's, uh, and this is on the backs of a, uh, Okmulgee creating a th- a three-person citizen advisory planning committee to research and discuss, uh, s- uh, zoning law for data centers. Um, so, uh-

315
01:00:57.632 --> 01:01:06.812
As far as water permitting goes, um, ground, groundwater permits, uh, you only need a groundwater permit if you have a...

316
01:01:07.712 --> 01:01:16.572
I'm sorry, if you use groundwater, so water that's already in the ground, so not pulling from the city, uh, you can pull- you can use it if you recycle the water.

317
01:01:16.652 --> 01:01:25.202
Um, but data centers typically don't need groundwater or surface water permits, and they're buying it from the municipal utility. So this would be, um, does...

318
01:01:25.882 --> 01:01:31.212
I- is, is someone going to sign the permit for, uh, the data center to buy from the municipal utility?

319
01:01:31.812 --> 01:01:43.932
Um, I don't think we have actual numbers on how much water it's going to use, but it's not a ton, and this would be a closed loop system as, uh, a Fluid Stack representative confirms at these local city meetings.

320
01:01:43.972 --> 01:01:51.472
Like specifically a dialectic fluid closed loop. Yeah. They're probably using direct to chip liquid cooling. Probably. We can assume that.

321
01:01:51.512 --> 01:02:01.972
That's, you know, that is not, um, explicitly, um- I mean, I think that kind of highlights part of the thing here. This seems... I mean, do the Fluid Stack officials actually talk to people at the city council meeting?

322
01:02:02.112 --> 01:02:13.472
It seems like a lot- Not at the city council meeting. They talked to them at the public meeting that Fluid Stack hosted earlier this week. Um- I wonder how constructive that was. Well, [laughs] Let's go to Facebook.

323
01:02:14.182 --> 01:02:25.312
[laughs] Um, so okay. Uh, we got a little picture of the site. Here's a, a poster board they showed and which shows the actual site plan near West 8th Street. Um, and I figure...

324
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I found it on the actual on, on Google Maps. Here it is, um, on Google Maps just outside. So you can see you've got some residential. You've got a, you've got a church actually nearby.

325
01:02:36.712 --> 01:02:49.372
You've got a, um, another like warehouse, like a Mid America, like pallet warehouse. Um, and then kind of what looks like trees to the west, but it's right on the edge of the, like where all the houses are in the city.

326
01:02:49.452 --> 01:03:03.032
And one notable thing is, guess what those trees are, Colin? That is a wildlife refuge, specifically the Deep Fork Wildlife Refuge. Um,

327
01:03:04.472 --> 01:03:17.292
it's not particularly notable. It's filled with snakes and, um, uh, you know, swampy land and- I can already see the, the Facebook post. "The data centers are coming for endangered species now."

328
01:03:17.812 --> 01:03:28.052
Oh my gosh, I wish I had the exact post up, but I, but I... there was one, and I'll... It was basically, "Cows near the site are already stopping reproducing.

329
01:03:28.552 --> 01:03:39.712
Think of what will happen if we build the entire data center." Wait, that's the claim or that's actually happening? That's, that's the claim. Um, so that's a claim from, uh- [laughs] Yeah. Um, so,

330
01:03:40.612 --> 01:03:53.492
uh, here's another issue which I think could be the, a wedge issue here. So this is a post from yesterday on Okmulgee County United Against Data Centers, this Facebook group.

331
01:03:54.312 --> 01:04:04.142
Um, so Fluid Stack is getting water, is getting water from the city, and have had talk, and have talked to the city regarding traffic. Fluid Stack has had meetings with city employees,

332
01:04:05.072 --> 01:04:11.852
and the Oklahoma City attorney said that no one has filed an open records request on Fluid Stack or 3 Rivers Manufacturing.

333
01:04:13.632 --> 01:04:36.272
The Okmulgee City attorney said that no one has, has filed public records requests, and yet here we have pictures of two citizens, um, at, in the first week of July and first week of June filing rec- records requests to like basically tell us how much water are they asking for.

334
01:04:36.812 --> 01:04:44.092
Um, you know, ple- you know, you, we signed an NDA. Uh, what are the de- details of the NDA? It's in the public interest, those type of things.

335
01:04:44.912 --> 01:04:56.932
Um, as ironic as, uh, the water issue is, that you and I talk about how the water issue's almost always like kind of a, just a red herring, not really like a meaningful impact.

336
01:04:56.972 --> 01:05:13.272
This is our opinion, but I also think this is... Like it's a very, very like loose, weak criticism. It is, in most of these cases, actually the vector through which you can stall the permits for the data centers.

337
01:05:13.712 --> 01:05:28.652
Because, uh, the permits for like municipal water are typically, they typically have to be signed by someone, and if people are very, very angry, this is the choke point that they can use to restrict, uh, data center water usage.

338
01:05:28.712 --> 01:05:45.712
So, uh, I think it's pretty imperative that the industry figure out how to communicate that water is not really that big of an issue, um, because this is a massive, uh, permitting, like permitting timeline drag. Yeah.

339
01:05:45.772 --> 01:05:56.462
It seems like maybe a better use of spending instead of sponsoring, I don't know, like a basketball team, might be marketing on public awareness for this issue or rather the non-issue. Yeah.

340
01:05:56.472 --> 01:06:02.632
And I think it's notable that it has converged on water, and I was just thinking this through, and I think I know why that is.

341
01:06:02.652 --> 01:06:08.462
Because it seems like the more obvious thing to go after is energy draw in terms of fearmongering, right?

342
01:06:09.592 --> 01:06:17.712
The fact of the matter is, if it's designed correctly, direct to chip liquid cooling, like you said, they don't use that much water.

343
01:06:17.732 --> 01:06:24.142
But they do use a shit ton of electricity, and you can't get around that in the current form, right?

344
01:06:24.152 --> 01:06:31.712
But I think the reason why they go after water is because ultimately that is largely something that could be in control of a local zoning board.

345
01:06:32.652 --> 01:06:45.692
Whereas they don't necessarily have the authority in most places to tell a utility, "You can't sell power to this company," right? But they do have the ability to potentially restrain water rights or access.

346
01:06:46.472 --> 01:06:59.172
I, I'm, I'm assuming that in most places that's probably the case, and that's why they converge on that talking point specifically. Yeah. And I wonder if this is coincidental or if this c- if this is causative.

347
01:06:59.252 --> 01:07:07.278
Um- So you talk about, uh, criticisms. One of my, you know, my criticism is that, um, at, at, at the edge of...

348
01:07:07.308 --> 01:07:19.708
At the project level, if this is a 1 to 200 megawatt site, as I'm just kind of imagining it might be, um, there's... It, it's, you know, several million per megawatt. So we're talking like a billion dollars.

349
01:07:20.608 --> 01:07:30.188
Maybe- Just for the infrastructure... multiple million dollars just for the infrastructure. Not even, not even the GPUs. Exactly. Yeah. So we're looking at multiple billions being put into w- uh, a site...

350
01:07:30.228 --> 01:07:42.718
Like, that could be put into this site. Where does that fall in the overall economy of Okmulgee and the county? And this is where I think just the asymmetry of capital is revealed because,

351
01:07:44.628 --> 01:07:58.228
uh, far be it from me to, like, bring this up, um, Jane Street, as part of their anchor tenancy, uh, has committed $7 million to Okmulgee Public Schools th- through the county, um, which is a lot of money.

352
01:07:58.788 --> 01:08:12.188
Um, Okmulgee Public Schools does about 18.1, uh, their budget's about 18.1 million per year if I'm not mistaken. Wow. So- So nearly half their budget. Their annual budget. Now, if it's...

353
01:08:12.478 --> 01:08:26.248
I, we don't know what it is over, like, a duration, but it's still a lot, you know. It's... If, if it's over, say, 10 years, it's still 10, 15% increase. But it could be half, uh, half of their annual budget. Um,

354
01:08:27.328 --> 01:08:33.128
regardless, what is 7 million in the grand scheme of a multi-billion dollar project?

355
01:08:33.888 --> 01:08:47.188
Um, and this is, this is really where the big question is because that would be, that plus property tax would be the extent of the revenue to the community of a project which is multiple, multiple billions.

356
01:08:47.708 --> 01:08:52.568
And so this is where I actually frame the citizens as being kind of unreasonable.

357
01:08:52.928 --> 01:09:06.928
I feel like your negotiating tactic is that, um, the c- is that this, this giant infrastructure project is not paying you enough, not rather a water, a water constraint issue, but rather get your pound of flesh.

358
01:09:07.248 --> 01:09:19.528
Um- Yeah, we need to see more accretion to the community, which if the bottleneck for power is tight enough, that could work where you might be able to get more concessions out of them. Yeah.

359
01:09:19.548 --> 01:09:23.928
And I'm sure in certain areas it maybe has already or will in the future.

360
01:09:24.728 --> 01:09:36.488
But you have to look at the counterfactual, which is if that data center doesn't exist there, then you're losing out on millions of dollars of property tax revenue in places that, quite frankly, probably don't have that much industry to begin with.

361
01:09:37.168 --> 01:09:48.678
So how much can you really be clutching for that pound of flesh, like you said? I mean, I'm thinking about where I live in, in, in a rural part of the country.

362
01:09:49.368 --> 01:09:56.107
Th- there are no jobs around here, man, and if a data center came into this area, uh, I'm sure there would be a lot of backlash.

363
01:09:56.168 --> 01:10:04.517
It's, it's very conservative but, as you've said, that doesn't mean anything necessarily, especially the m- more f- the farther out in the boonies you get.

364
01:10:04.528 --> 01:10:17.808
But that would be a boon to this area in the sense of it would maybe take pressure off of homeowners and shift more [laughs] property taxes to one of these massive companies, right? Yeah. I, I think ultimately, you know,

365
01:10:18.728 --> 01:10:31.288
what this shows to me is if I'm an optimist, I'd say, "Well, the data center companies just need to do more community outreach, and they need to do more education." Some of them have done a very good job of this.

366
01:10:31.608 --> 01:10:38.728
Uh, I mean, I've seen stories of where certain towns will en- engage with a data center company, and they will actually have workshops.

367
01:10:39.258 --> 01:10:48.188
They'll go visit data centers, the town council will, and they'll come back with a better understanding of what's actually going to happen. And then most people end up having their fears quelled.

368
01:10:48.208 --> 01:10:57.388
But then there's a part of me that's more pessimistic and thinks, like most things in the culture war, this will be irreconcilable past a certain point because the truth ultimately doesn't matter.

369
01:10:57.428 --> 01:11:10.788
The narrative is more important than the actual objective reality. Yeah, um, I do believe that money talks a lot in this case, and if the citizens can feel like they're directly benefiting, uh, it's re- it...

370
01:11:10.848 --> 01:11:14.968
All of a sudden, uh, people c- become very rational about things like water.

371
01:11:15.568 --> 01:11:30.328
So if you look at, like, m- what Meta did, um, as Meta doing in the south of, uh, Louisiana, there's that $50,000 bonus per teacher in that, um, in that school district that they are building nearby.

372
01:11:30.428 --> 01:11:42.038
Um, that type of thing is a lot. That's double the average. That, you know, that's, that's basically, um, you know, you get double the salary of the average, uh, uh, salary, uh, for an area.

373
01:11:42.178 --> 01:11:57.568
And same thing with, with, uh, with Okmulgee, Oklahoma. You can get a lot of mileage out of adding an extra 1% to your project costs if it, uh, you know, by, uh, funding a lot in the area.

374
01:11:57.648 --> 01:12:08.038
So this is my opinion, but I wanna go back to the project again. Uh, apparently... So, so it's supposed to start... The, the, the project's supposed to break ground this fall, so we're talking just a few months.

375
01:12:08.668 --> 01:12:24.668
Um, a, a comment on Facebook, uh, says that so- that they're already building something, that there's already, like, a prefab building or two already up there, and that they've already, like, um, uh, pr- started preparing, like, the easement, like the, you know, access to the property.

376
01:12:24.788 --> 01:12:42.608
So, um, it looks like FluidZach is assuming that this is go- uh, that this is, uh, going to happen and going ahead with, uh, building some of it. However, the municipal water permit is, uh, TBD.

377
01:12:43.268 --> 01:12:55.358
So it, it would be really ironic if the particular choke point is around water, which is the weakest of the data center criticisms in Okmulgee.

378
01:12:55.388 --> 01:13:04.228
Yeah, but like so many other things, the most vociferous criticisms are often the least salient for a given argument. We'll keep an eye on it.

379
01:13:04.288 --> 01:13:20.368
I would be surprised if they're breaking ground if they weren't sure that the permitting was gonna go through or if they already have what they need, uh, but TBD. Yeah, TBD. We'll see. Um, this could...

380
01:13:20.408 --> 01:13:22.138
You know, if you're an elected official, uh,

381
01:13:23.048 --> 01:13:37.228
considering data centers, I would, um, I would figure out how you talk about this and how you navigate your re-election 'cause if you sign the wrong permit, people could come for your head. On that note, that is the...

382
01:13:37.248 --> 01:13:50.588
We're wrapping this Blockspace live stream. Thanks for sticking with us. If you like this stream, you'll love the rest of the Blockspace content. Find it at blockspace.media, our website, blockspace.media.

383
01:13:52.068 --> 01:14:07.088
This show is brought to you by CleanSpark, NASDAQ listed ticker CLSK. I'm Charlie. I'm Colin. And we'll see you tomorrow. [dramatic music]