By Eric Peters, CIO of One River Asset Management
“No one’s going short here,” said Biggie Too. “You need the technical to turn first, things to roll over. Or more conclusive evidence that shows people are fully committed again,” continued the Chief Global Strategist for one of Wall Street’s Too-Big-To-Fail affairs.
“It’s unclear whether the asset allocation crowd has reloaded (ZH: actually it is clear, they have). But if they’re coming in now, at these levels, then they’re aiming for new highs,” barked Biggie. “And you know, if they haven’t come back in force yet, why now?” he asked, obviously not waiting for an answer.
“Back in 2020, when the market started climbing, and people couldn’t quite believe it, Biggie was talking to this guy who asks good questions,” said Biggie Too, sliding effortlessly into 3rd person. “The guy asked Biggie whether maybe the market knew we were gonna get a vaccine?” said Too. “And the market kept going straight up, and the guy had got it right,” he said.
“So, this week, the same guy asked Biggie if maybe the market knows this war between Russia and Ukraine is gonna come to an end?” said Biggie.
“And Biggie was like, hmmm.”
“Take any application, add AI, and you need 7x-50x the compute power,” said the entrepreneur. “AI is a black hole, it’ll suck money out of everything else and into its vortex,” he said. “The arms race between industry giants is a 20 on a scale of 1-10.” He’s building data centers for tech giants. “The whole industry is priced off of power – megawatts - that’s how we price our projects,” he said. “Data centers are really just selling power, and there are tens and tens of billions of dollars of demand for it. The cost of entry is staggering. It’s a big boy game.”
“Our clients tell us they’ll take as much power as we can deliver,” he said. “If we have 500 megawatts of data center capacity coming, they say get us a gigawatt.” AI requires a limited number of people, Nividia chips and a massive amount of electricity. The projected consumption curves are breathtaking. “The firms with the clearest advantage had the largest data center capacity coming into this.” Microsoft, Google, Amazon. “Who else wins? It’s kind of hard to see China win. Killing Alibaba wasn’t the smartest move. And Europe is far behind.”
“If anything in world history could aggregate economic power into a small number of hands, it is unambiguously AI,” he said. “If you got into the game now, you’d need $100bln, maybe $200bln, and your odds of winning would be no better than 20%.” Winners will keep sucking earnings from the economy. “Adapt your business to this trend. In real estate, build beds for machines. That’s what a data center is. Get short humans, long machines. People say buy Austin real estate, buy Miami, but that misses the opportunity. Find ways to buy Machinistan.”