Power Analysis

Bitcoin, Big Tech, And The AI Data Center Selloff: META, IREN & HUT!

• Anthony Power & Bryce McNallie • Season 1 • Episode 623

Share episode

Use Left/Right to seek, Home/End to jump to start or end. Hold shift to jump forward or backward.

0:00 | 38:31

Red markets set the tone as we map the current Bitcoin cycle, the growing influence of hyperscalers, and why AI infrastructure stocks are dropping even while demand explodes. We dig into treasury-company mechanics, data center valuation per megawatt, and the execution milestones that could re-rate names like IREN and Hut 8. 

• Bitcoin cycle context, drawdowns, and why patience matters 
• Strategy and Michael Saylor updates, cash reserves, preferred shares, dividends, and mNAV 
• Strive adding bitcoin and what corporate treasury rankings signal about adoption 
• SpaceX IPO pullback dynamics and the six-month lockup effect 
• Meg 7 positioning, Apple as a sleeper compute story, and Microsoft’s relevance to infra deals 
• Sector-wide selloff in miners and AI infrastructure, plus volatility versus BTC 
• Meta’s Hyperion supercluster expansion in Louisiana and why hyperscalers chase massive campuses 
• Nebius facing local opposition and how community impact shapes AI data center builds 
• Per megawatt valuation gap between traditional data center REIT deals and miner conversions 
• IREN’s Childress Microsoft timeline, why revenues and performance will be the real proof 
• Hut 8 earnings date, contracted megawatts, and the long runway in its power pipeline 

Let us know in the comment section below your current thoughts on both Iren and Hut and if you're holding shares in either one of these stocks!


Anthonys Info:

Website:

https://www.powermininganalysis.com

X: 

https://twitter.com/cazenove_uk

Patreon:

https://www.patreon.com/Cazenove_UK

Bryce's Info:

X:

https://twitter.com/McnallieM

Patreon:

https://www.patreon.com/McNallieMoney

Merch:

https://shop.mcnalliemoney.com/

Website:

https://www.mcnalliemoney.com

Business Inquiries:

Email - powermininganalysis@gmail.com

Red Market Open And Agenda

SPEAKER_01

Hey guys, welcome or welcome back to the channel McNally Money, the official home of power analysis. Another deep red day in the markets to kick off the trading week. We're gonna be talking about this in addition to news out from Meta, Iron, and HUD 8. We've got a lot to talk about before we get into it. Take a second, smash a like button, you guys. Big help to myself and the channel. Anthony absolutely loves it. If you're not already subscribed, McNally Money, feel free to join. And let us know in the comment section below your current thoughts on both Iron and Hut and if you're holding shares in either one of these stocks. With that being said, let's get into today's video. All right, guys, away we go. The start of another trading week. This is gonna be a great episode. We've got some hyperscaler news, we've got valuation per megawatt analysis and some big news in terms of what's next, not to mention a critical date for iron. So

Bitcoin Cycle Check And Patience

SPEAKER_01

before we get into that, Anthony, Bitcoin, quick update there. We just came off the weekend in that $62,000 range. We've pulled up a one-year chart here. And I gotta say, the four-year cycle pretty much repeating to a T uh from those 126k highs.

SPEAKER_00

Yeah, it's uh it's following the cycle there, and you can see you know 47 down since uh a year ago. Um, remember go back to uh 2021-22 when we saw the bear market there, take the price from 69,000 all the way down to 16, just under $16,000 at the end of 2022. So if there's more to come during this cycle, but we can expect um you know a bit more of a pullback. But um hopefully between now and the end of the year, we get towards the end of this player cycle and we start seeing then a a long um undulating growth. We saw you know the Bitcoin price rally literally for the best part of 21 months after the uh after that low in December 2022.

SPEAKER_01

Yeah, patience is a virtue, they say in the Bitcoin game. We've survived a few cycles. We're uh not going anywhere with our Satoshis. Another key player in the cycle and the Bitcoin ecosystem, Michael Saylor. He put out a tweet yesterday, the cryptic orange dot chart, but this time he said orange dots only tell part of the story. Lo and behold, this morning, Anthony, no Bitcoin purchased and another addition to the USD or cash reserve.

SPEAKER_00

Yeah, um, yeah, no, no, no purchase of Bitcoin this week. Uh, one of the few weeks he hasn't purchased Bitcoin, but remember this the stretch and price has to reach uh $100 uh dollars before he's allowed to utilize that to sell those shares, and it's nowhere near that at the moment. So selling some of the strategy shares to increase that USD reserve by $450 million and taking it to now a total of three billion dollars in reserves uh whilst holding $843,775 Bitcoin in the Treasury as well. There, so pretty strong uh on both accounts there. If we were to look at the um the the the the the current stretch price there, $86.98 there, it's thir 13% lower than the par value of $100 there. Uh Satra's uh on the other side of it is actually only 3.1% down there. But just final thing to say on on strategy that $3 billion uh dollars of reserves there um is more than enough to cover the annual dividends for the next 20 uh point four months there. So raising that reserve value there to give them plenty of runway to cover these annual dividends. If you look at the market capitalization of the company, $34 billion. The enterprise value is $53 million there.

Saylor Reserves And mNAV Pressure

SPEAKER_00

Now, enterprise value is is effectively taking the market capitalization, adding any debt, which is about $6.7 billion at the moment, adding any preference shares, again, uh adding to it, and then reducing any cash reserves there. So you can see uh you know a significant amount of preference shares in issue there, the stretch shares, um, also that debt of 6.8 billion there. And if you look at the M now, this is uh uh one of the metrics that these treasury companies I look at there, 1.02. So anything above one is probably a uh favorable. Um, don't really want to get it down into into less than one there because that suggests then that you're um you're valued um at you know lower than your Bitcoin um HODL value. So um that's something to keep in mind there. But uh interestingly enough, there you know, we've highlighted the three boxes. They've got quite a lot of runway paying these. People are saying are they going to be able to pay these forever? Well, they've got 20 months to think about it, and they have a number of levers um should they have to continue paying it post those periods.

SPEAKER_01

I know last week we looked at that SATS per $1 invested. You can really see that now with the market cap to hodl here. A strategy in a difficult spot right now. I actually think it's an interesting or compelling stock at these prices. Bitcoin hitting lows for the cycle. We've got stretch under pressure, mNAV under pressure, and now this discussion around payments of

Strive Adds Bitcoin And Rankings Rise

SPEAKER_01

dividends. So, with that being said, we'll move over to their counterpart, SATA or Strive Asset Management. You said they're holding up a bit better in terms of their preferred uh Matt Cole posting. They've now purchased an additional 18 bitcoin, and this one slowly but surely has really worked their way up that HODL 15 top 100 list, now in the top 20.

SPEAKER_00

Yeah, they purchased 18 bitcoin for around about uh 64,000 uh dollars per coin, so slightly higher than today's price there. That that's a total of 1.2 million, so able to use their SATA preference share to deliver that there. The total now held 19 uh nine hundred Bitcoin. If we look at the, as I say, the Huddle 15 puts out a chart every week to highlight any changes in the um treasury balances of the top 100 companies, and that now puts um you know Strive um you know firmly into seventh place in the table there. Uh their next target is bullish, and they've got around about four and a half thousand Bitcoin uh to get past bullish, and then the you know, a similar amount of about five thousand to start getting closer into that top that top five, which is currently held by Bitcoin Standard Treasury. But as you can see there, American Bitcoin, we cover those and we'll talk a bit more about American Bitcoin uh later. Uh 8,000 uh Bitcoin on their treasury balance sheet. Interestingly, uh their sister company Hut 8 is only uh three slots above them there with uh 10,275. So maybe maybe the team at um at ABTC starting to think about um competitiveness of having more Bitcoin on the balance sheet and looking for that as a as an interim target to achieve there. Um but uh going going to the hundredth company, BitDear, we cover BitDear on a regular basis, 171. That was because their last update there, they had they're selling it on a pretty much on a most daily basis. 171 Bitcoin was probably just held over before the next sale. Um, but interestingly, you now need 171 Bitcoin to get in the top 100. We talked about this before. If you go back two years, you only needed three Bitcoin to get in the top 70. This is how things have changed um so so quickly, and you can see you know a lot more companies now having Bitcoin and increasing their Bitcoin holdings. Uh, not so many uh red arrows on this week there. A bit foo foo. We talked about them. They sold some uh Bitcoin to pay for this advanced nine-month period of extra hash that they're uh they're using to drive some of their uh put some of their machines and then drive their hash rates through a third party. So you can see theirs has gone down there. But um overall, um, you know, the majority of companies uh still looking to maintain a significant balance of Bitcoin on the balance sheet, as as can be seen from the from the uh from the companies on that list.

SPEAKER_01

Another

SpaceX IPO Cooldown And Lockup

SPEAKER_01

one that I caught on that list was SpaceX. Now, this is an interesting update. We covered their IPO. We had said traditionally IPOs come out of the gate pretty hot. We've seen that with a lot of these big tech IPOs. Then they trail off a bit leading into that six-month IPO lockup expiration. It appears that's what's happening. We have a chart here for SpaceX getting pretty close to their initial IPO price.

SPEAKER_00

Yeah, that they are getting close to that. And uh, this has happened probably quicker than people expected. Um, I mean, you know, it started very much trading um above $150 on the first day. The IPO price itself was $135 for those people that are registered. And if you registered for somewhere in the region of about $2,500 to $3,000 worth of shares, you probably got your full allocation at $135 a share. So maybe 20 shares per applicant. I think that was sort of like the limit. If you apply for more than that, you got a percentage of your um of your allocation. But if you apply for 20 shares or less, you got your full allocation. I think um uh it was very sensible of the company to make sure that you know as many people as possible were able to participate in the IPO, and that's how they managed to set sort of a lower threshold. And that's what normally happens when you have a significant number of applications exceeding the number of shares available, uh, making sure that you give widest opportunities to shareholders. But uh, as you can see from that chart there, $139 uh dollars or just slightly less $139. Now, this was trading over $220, uh, you know, literally a couple of days after the IPO, and we've seen that pull back there. Not not unusual at all in IPOs. Uh, we see that many times. I can remember, you know, Coinbase pulling back significantly, you know, in that first sort of six, seven months after it IPO'd. IPO was in the sort of like $200 to $250, or sorry, $300 to $342 range. Actually, the share price drops about $40 before we started to see it rise and gain some momentum. But um, this is what can happen in those very early periods there, especially you know, when you get closer to a lockout period. Now, the lockout period for SpaceX is about the six month period, and they've only issued a portion of the shares, so there are more shares to be issued, uh, more shares to be released. Um, so this will be an interesting journey. Be in putting the comments if you manage to get any SpaceX shares on the initial IPO, whether you've bought since they became available on the exchanges, um be interesting your thoughts. There's been a sort of a mixed uh number of comments in terms of people saying that where the value is in terms of you know where's the revenue is going to come from to deliver these type of uh prices. Um, but equally, everything that Elon Musk uh touches turns to gold, and and just like all these other companies, um, this is one you know that a lot of people want to be in there. So be interested to see where your comments are. Put some in the you know in uh below below the video and we'll we'll sort of like have a have a read through those as we go through, Grace.

SPEAKER_01

Yeah, definitely not a guy I want to bet against. I'd like to get in on SpaceX, but not at

Meg 7 Signals And Apple Angle

SPEAKER_01

these levels. I'll probably be waiting a little longer. Uh, we know SpaceX, one of those revenue streams is actually compute or HPC Compute. We're gonna talk about Meta in a second, but we wanted to flash the Meg 7 here just to give some frame of reference in terms of how they're performing. You can see those longer durations, pretty healthy for the top seven companies in the world. Apple, another one I'm starting to hear a lot about. They've been pretty quiet in terms of HPC AI, but it's starting to sound like they may be able to use some of the iPhone capacity globally to actually support compute on individual devices. So that's one we're continuing to watch. We've got some news on Meta, but in terms of the share prices here, what are you feeling about the Meg 7, Anthony?

SPEAKER_00

Uh I think you highlighted one there, Apple. I think it's the closest one to its year-to-date high there. So um look at all the different periods, it's in the green. Interestingly, Microsoft uh year-to-date still nearly 19% down. It's year-to-date high $489, its current share price $392. So there's potentially a a hundred dollars um, you know, to get back to its year-to-date highs. We'll talk a bit more about Microsoft uh in a second with that contract with um Iron. But um you wouldn't go much further than you know uh uh having a small amount of these in your portfolio because um you know there's a reason why they're the the Mag 7. Uh they are the sort of the top seven stocks, and there'll be a number of other stocks that we start talking about uh in the future there, the likes of Anthropic, the likes of SpaceX, as they also start to find their their feet um uh you know uh in in this sort of market. And um with the future, like you say, of of HPC and AI, um, there'll be other companies joining that group there for sure in the not too distant future.

Miner And AI Stocks Get Hit

SPEAKER_01

And the thing about these companies, they can afford to buy the best people in the world at whatever sector they want to get into or the companies involved. So more to come there as we move over to our stocks that we monitor, uh, very red today, getting worse by the minute here, Anthony. We've seen some pressure in the sector, really dating back to that initial meta discussion about them selling excess compute. We've seen the sector come under some pressure, continuing today in a big way.

SPEAKER_00

Yeah, it's uh it's a bit of a bluff-buff today. There's nothing showing in the green at all today. And if you look at the day range, you can see that as the month since the market's opened, stocks have only got worse. I mean, DMG, the best performing of the stocks that we're covering on a daily basis, uh, that's down three and a half percent. If you go down to the bottom there, you've got ABTC um down 11.75%. So Bitcoin price is is down, but not significantly down. Um, and yet we've seen ABTC, which is you know, predominantly a Bitcoin uh mining stock. That's their business model to either produce Bitcoin at the cheapest price or to buy Bitcoin um through their treasury and grow a hodl. Um they're not interested in selling Bitcoin, but they're sort of like you know, this Bitcoin price at the moment's not helping, but the volatility uh from share price to Bitcoin is significant there. Uh Cypher, um, you know, we we we we we scratch our heads at um you know where where the downside is with Cypher, it's constantly getting mentioned as one of the best data center builders there. You know, I don't think this is just profit taking here. I think there's just sort of like maybe uh uneasiness in them in all the sex at the moment. Remember, things in the Middle East are starting to uh kick off again. The oil price went to $80 this morning, and uh you know, it was so maybe there's some macroeconomic uh reasoning behind that the drop today, but um yeah, fairly fairly set in the red. And again, not a great start to the week. We're hoping for something better. I was actually watching the Bitcoin price yesterday, it was above 64,000. I thought that sounds like good, and once Asia come online, maybe it goes higher, but it did the opposite, it started to drop to 63, below 63, and and now getting close to being below 62,000.

SPEAKER_01

Yeah, we move over to the heat map. You can see that pressure we've talked about over the last few days in the one-day, the five-day, the weekly, the look those year-to-date and one-year columns still pretty green. So similar to what we see in the MEG 7, but again, to our point about volatility, this stuff can go down a lot quicker than it goes up.

SPEAKER_00

Yeah, and the one month now is the is the is the worst performing uh period. It usually is it's the daily or the five daily, but the one month now down now down 19% on average, and you can see there ABCC down 58%. Actually, Wi-Fi, still in green for the one month and the five-day um had a had a pretty good year Wi-Fi in terms of uh share price there, it's at $36 at the moment. Uh market capitalization, um, you know, over $1.3 billion, nearly $1.4 billion. Um, and currently valued at um you know two and a half times its parent company um bit digital. And you think bit digital owns 70% of the shares in Wi-Fi and it's valued at $518. We'll probably need to go on that uh on that website and see how much undervalue those bit digital shares are at the moment, considering they have a sizeable Ethereum uh position, and also they have the 70% shares in in Wi-Fi. Um, that'll be an interesting uh stat to look at.

SPEAKER_01

I did actually this morning. I put a tweet out 48% uh below nav. So that's pretty incredible. Again, their subsidiary worth considerably more than the parent company. Now I just mentioned Meta, Anthony.

Meta Hyperion Scales To 5GW

SPEAKER_01

They came out with an announcement on July 2nd, entering the cloud space. We saw Core Weave Nebius take significant hits that day. July 8th, we talked about that big one gig investment in Alberta, my home province, bringing sovereign compute to Canada. Now, today we've got another major meta announcement in relation to their Hyperion data center. Interestingly enough, in Louisiana, we know HUD 8 has some uh properties there as well, but they are significantly scaling this facility, Anthony, could reach up to a quarter trillion dollars once the GPUs are in.

SPEAKER_00

Yeah, this is uh, you know, uh the the Hyperion Supercluster is is now, like you quite right to say, um, you know, heading towards that 50 billion in terms of infrastructure cost. And if you think about uh Louisiana site as well, there's some benefits there, there's some tax incentives for being there. Now, Richland Paris um becomes Meta's largest data center, uh, and that's grown from that original two gigawatt figure disclosed in October, now to a five gigawatt site, and you're quite right. They say once you start putting the GPUs into there, and they're gonna put the most uh efficient GPUs, the best performing GPUs on the market. That's gonna add $200 billion alone to that deal there, taking it to a quarter uh of a trillion dollars. You know, the cost is 5x from inception. This you this project began with just a $10 billion estimate, and then that grew to $27 billion alongside the Blue Island Capital JV, and now it's going to exceed $50 billion as the scope expands to five gigawatts. Now, one of the benefits there is this 20-year sale tax exemption that Louisiana signed um in late 2024 for data centers built before 2029. So you can see that uh Meta will be keen to get um that development um complete or as much of that development completed before that period there. So they benefit from that 20-year sales tax exemption, and that'd be something that they've got their eye firmly uh focused on. Um, and this is you know one of the reasons is to get uh you know companies like Meta into that space there. It's going to provide you know thousands of jobs to the local area. Um, and we know from the companies that we're talking about on a daily basis, it's not just about jobs, it's what these companies put into the communities as well.

SPEAKER_01

Well, and I'm just hoping that $10 billion Alberta site turns into a quarter trillion dollar huge investment. And then think of the insurance premiums on these buildings. If you were to have a fire at one of these sites, another interesting thing we're starting to see, Anthony, the value of scale. So a lot of these hyperscalers want the big campuses and they want to increase the size. We've talked a lot about the management, the fees associated with running these sites much easier on one single large location. Uh, Nebious, the next one we want to talk about here, another Neo Cloud competing

Nebius Lawsuit And NIMBY Pushback

SPEAKER_01

directly with Core Weave Iron. They're unfortunately feeling the pressure of this NIMBY or not in my backyard movement as well. Getting some pushback on their Birmingham factory or AI factory after construction's already started.

SPEAKER_00

Yeah, so this Birmingham Air factory's hit local opposition now. The build is already sort of underway and a lawsuit's been filed as construction's proceeding there. Now, construction's underway on an 80-acre site. There's heavy equipment there mobilised at the Lakeshore Parkway location in Birmingham, Oxmoor Valley neighbourhood. And two neighbours have filed a suit to stop the project altogether. However, a judge has allowed the construction to continue for now with a hearing schedule to determine whether the case proceeds. The residents themselves, they've cited noise normally and water and the impact on the utility, and a concern centre on construction noise and how the operational facility will affect the local water and uh electricity. Now, Nebius has countered this and said that look, hey, the company's uh finished facility will use noise reduction technology, minimal water, which you've explained on a number of projects, and won't affect uh residence electricity bills one bit. And the construction concessions made, the contractors agreed to limit certain activities to normal business hours to address any noise complaints. So Nebis are certainly doing their part in this. Uh, as you can see though, just two neighbours uh filing the suit to try and sort of the project. This will be an interesting one to follow. Um, it looks like uh you know, when we look at companies like we talk about at Daily Basis, they've been building you know bitcoin mining facilities for the last you know four or five years. And if you think about the noise having been to a Bitcoin mining facility or a number of Bitcoin mining facilities, uh it's significantly higher than uh the noise created from a GPU facility for for day centres there. And so I think uh a lot a lot of the people we talk about the daily. Basis, the companies that are moving into HPC in their own mindset, they know that they're not going to build facilities on the doorstep of a residential area because they're sort of tuned into the fact that they know what works, they know that they're going to have to get the local community on side first, and then start to sort of like deliver that there promised the fact that there'll be jobs created for local community there, what we give them back to the community in terms of you know benefits. And we see a lot of companies uh providing you know power to local schools, uh electricity to homes in certain locations, and sponsoring you know, uh sports teams, etc. etc. There's a lot of things that these companies do, and um fortunately the ones that we talk about regularly are doing above and beyond um you know uh what they're required to do to make sure that they feel part of that community uh moving forward.

SPEAKER_01

And you got to remember these companies we talk about, the Bitcoin miners converting to AI, they've run data centers for years and years in these communities. They understand the concerns. Uh, the next company we'll talk about, Mara, actually had a similar noise concern at one of their sites. They were able to rectify with the community. But you got to think if you've got a Nebius, a meta, Google going in next door, these residents probably understand that there could be some financial benefit if they put up some sort of a concern. Also got to think about the construction noise as opposed to the operational noise once it's fully complete. But timing, again, is everything. We talked about last week, Mara specifically focusing on this community involvement, the uh curtailment, and of course that bring your own power solution. So, again, kind of front-running some of these concerns.

SPEAKER_00

Yeah, and I I I I go back a couple of years ago. I remember a community that they they voted to um to uh get a um uh a contract uh removed so there was no data center built in the area, and they won, they won, they won, and and and the next thing they found was there was something like $2,000 per per home added for electricity costs that was going to be provided by the uh by the by the data center build-out. So, you know, it can work really against you. They hadn't sort of like looked through all the all the maths on this, and um they were scratching their heads then that you know they voted against it, and now they're having to pay out their own pocket to make up that shortfall that was going to be provided by these companies. So um, you know, uh in the day and age now where things people are looking to sort of make sure they've got enough money to manage on, get good you know, food on the table and and and and a roof over your head, uh, you know, think twice before you start um uh saying that all these companies are doing it for just for profits and and and and to to to to you know at all cost. Uh they do uh concern about local communities. I've been to probably about seven or eight different sites now and seen what these companies are doing first hand for local communities and seen the impact of them providing employment for people working in the local community and and and how that's driven. I mean, we we talk about BitDeer at Rockdale, it was a great example there of the team there. Um, you know, the turnover was minimal. They hadn't they hadn't had to replace a member of staff in four years. The team worked extremely well together. Uh, we got to meet Mosa team and they were very, very um, you know, uh chatty with us to to talk about you know the benefits of working at the site there, living in the local area and having this great opportunity um literally on the doorstep to um to to go into a what class is like a new industry, as we see Rockdale now probably convert that power towards HPC. I'm sure that will drive even more uh jobs to the local area for for locals to sort of like um take take the benefit of.

SPEAKER_01

For sure. And again, we've seen it firsthand, you guys, huge investment in these communities.

The Per Megawatt Valuation Gap

SPEAKER_01

Now, the second kind of interesting point of differentiation here for the Bitcoin miners turning to AI is the advantage they have on actually upscaling or retrofitting these facilities. So we've talked about the fact I think Cypher, 85% of their Black Pearl Bitcoin mining facility could be actually used for AI. We've seen a benchmark anywhere from eight now creeping up maybe to $10, $12 million per megawatt in terms of the conversion price. But if you look at some of the more traditional data center companies that are going out and actually purchasing these data centers, uh Matt Siegel's found an interesting data point here suggesting there may be a significant valuation difference.

SPEAKER_00

Yeah, it looks like uh one of these uh companies now has just paid, you know, DLR just paid $27 million per megawatt uh at a 6.5 cent cap for three fully leased AI data centers with uh with escalators, 3.6% escalators and a 15-year lease. Now, when you compare that to what the miners are converting their infrastructure at, uh, we've seen the likes of Riot, who are using a hybrid um uh conversion at the moment. Uh, they've got uh this deal with AMD, they've already uh assigned 50 megawatts there. It's costing about three and a half million dollars per megawatt. It's not tier three, but the hybrid model works for what they're trying to do there. Generally, you're you're right. Anything between eight and twelve, and we have seen that 12 number get to as high as about 15, 16. If you look at the likes of um Iron, who paid additional amounts there to get things done um ahead of schedule, uh, what they call like an accelerator payment was including that as well, because they have this um uh this big deal with Microsoft that we'll talk about shortly. Um, but even if you take that that them high figures there of uh you know anything around about the 12 million mark, that's still significantly lower than 27 million. So it seems that you know some of these miners are sitting on uh some real um uh you know investment grade uh facilities, um, the same type of leases structured as DLR, but the fact is it's costing very much uh less to um to get them prepared for that uh for that strategy.

SPEAKER_01

Yeah, you can see 15 to 24 million dollars of potential value per megawatt. Digital realty is DLR. I will state these three sites they are fully leased up, but this does not include the GPUs. So these are existing hyperscaler sites. They've gone in, they've purchased the building and the lease obligation. So that was a great data point. Uh appreciate Matt Siegel pointing that out. And again, we just had him on the podcast. If you guys haven't caught that episode, now we want to talk about IRIN.

IRIN Childress Handover Date Set

SPEAKER_01

You just mentioned the Childress Microsoft deal. They came out of the RAISE Summit. We covered that last week. Headline sponsor of the entire conference. So you can obviously see a ton of speaking opportunities, some great smaller sessions talking about that NVIDIA partnership, that vertical integration. But one key point that came out on day one is actually the expected handover date for childress.

SPEAKER_00

Yeah, and um Horizon 1, which will be the first building handed over. That will that's now be confirmed for the 19th of July. Uh confirmed by Orlando Investments, who is in attending the race um day one. Um and commissioning uh will commence now in the second half of the year. Uh, another key parts of mention that came again from the conference is that Microsoft are extremely happy with Iron so far and are you know using a very much hands-off uh strategy with them, and it appears to be a great partnership between the two. So um let's see how that develops there because they've got 200 megawatts of the site there, 300 megawatts if you include the uh additional uh uh power to for the cooling systems, etc. That still releases 450 megawatts at Childress. I mean, I was saying probably about a year ago that maybe Microsoft might increase that deal there. Time will tell. You know, if they've got the opportunity to do that on one site, uh maybe they do that. We've just seen Meta in the space of a couple of weeks sign three big deals. Uh, maybe Microsoft uh feel that they can uh they've got a ready-made site there, and the conversions being done now to those Bitcoin mining buildings that were literally only put up in the last two years. Um, and again, most of those buildings can be utilized in the conversion. Maybe uh that's an opportunity for Microsoft to increase that contract. As they say, time will tell, but it gives a lot of optionality to Iron as they start to you know uh to get through Horizon 2, 3, and 4 and the remaining buildings on site.

SPEAKER_01

Now, I wanted to ask you a question. We've talked a lot about this initial Microsoft contract, the financing benefits, having that hyperscaler partnership. Uh, since then, we've seen a lot of deals come into this space. Now, to Matt Siegel's point, we're still not seeing the valuation or the market really give that valuation or re-rate to the Bitcoin miners compared to some of these existing Equinox, digital realty. Do you think the handover of this initial phase of the Microsoft contract is really that prove it point for Iron, for investors to say, okay, they can do this on a large scale for a hyperscale client, and now they've proven it?

Proving Revenues And Contract Risk

SPEAKER_00

Yeah, I think we're going to have to see the uh the revenues coming through. The expected revenues are going to have to um equate to the actual revenues. So, you know, everyone knows when these contracts are due to commence, buildings being handed over, revenues started, um, and also um if you're starting a service, it'll be then interesting to know if there are any sort of like penalties for delays or for not providing the service that's in the payment mechanism. So if you're not delivering that full service as expected, you get penalized with a with a penalty. And so when we start seeing the numbers coming through earnings, um, then I think the market will be saying you know, yay or nay to some of these companies. We know that there are you know some that will be able to deliver, and there'll be some that um are getting into this space because of the hype, and maybe they will struggle to uh to deliver. This is not Bitcoin mining, this is not about building uh you know a fabricated building there, sometimes a uh you know, a shipping container, putting in machines, plugging them in, and connecting them to the to the uh to the Wi-Fi and and letting them go. This is far more complex than that there, and you're gonna have to make sure that they are delivering the level of compute power um on a daily basis as laid down in the agreement. And if it's not, that's when these contracts start to hit back. So we'll start to see in these earnings now, it'll be interesting to see uh core scientific earnings in terms of the fact that they've already handed over more than half the contract to Core Weave. Remember, that's a 590 megawatt contract. The expectation by the middle of 2026 is they will get to closer to front between 400 and 450 megawatts handed over, with the remaining megawatts of the of the 590 to be handed over by the end of the year or very, very early in 2027. So we start seeing bigger amounts of revenues coming through, and we'll see bigger amounts of costs against those revenues because one thing for sure is the majority of these companies have been extremely transparent in what the net operating income looks like. Now, my concern is does that net operating income take account of anything um other than a service that is the expected service by what's in the uh what's in the agreement? And if there's any sort of downside to that, um how is that um how is that going to be judged by the market? That's going to be interesting. We're starting now, I think when we talk about this in a year's time, there'll be far more companies starting to get elements of revenues coming through, and the market will be guiding uh based on that there. Because when when they do analysis on valuations of companies and looking at the share price, they're looking at forward revenues, they're looking at how companies are expected to deliver over forward. At the moment, even with core scientific, it's a challenge because we haven't got enough information to determine the forward um to within a real uh element of accuracy because we we don't know how great that contract is. We're seeing some updates saying, you know, buildings are getting handed over, but we're not seeing about performance of the actual contracts, and we'll start definitely seeing that in this next 12 months with a number of companies like a TerraWolf, like Cypher Digital, more so like Core Science Series, they hand that 590 megawatts over in early 2027. You can believe you me, you know, the second quarter of next year, they're starting to get all the revenues for that contract, and then we'll start seeing you know how much of those revenues make up the 80% NOI that they expected in their original uh presentation.

SPEAKER_01

Yeah, the transparency can cut both ways. We've seen CEOs come out promising big deals like Ben Ganyon. We know mid-summer, mid to late summer, hopefully three deals. So that can obviously have a big impact on share price. And a great point you bring up. All of these companies have put out the fancy presentations highlighting the best case scenario or perfect performance. So again, that could cut both ways if you're not able to live up to that performance. HUD

Hut 8 Pipeline Earnings And Wrap

SPEAKER_01

8 is one of those companies that's come out with some great deals so far. They've signed a massive deal at Riverbend and Beacon Point. I think one of the most contracted megawatts of any of the companies we cover. And we're looking very forward to their next earnings, which has now been announced the day after ABTC on Tuesday, August 4th. So, case in point, Anthony, this is another one not delivering revenues yet, but very interested to see an update.

SPEAKER_00

Yeah, absolutely. Um, and yeah, having both companies announced, you know, within a day of each other there, uh be two different earnings updates. Um, and whether we get some news from Hote on anything uh potential more. They've got that massive pipeline of power. Um, they're going to be, you know, like other companies, they're looking to at least add one to two additional contracts per year. They've got this nine gigawatt pipeline of power, and they've only literally um in terms of compute power, I think it's 597 megawatts. So, you know, a fraction of the total power has been issued into HPC, a long way to go. And you know, with two of the best deals that we've seen at the moment as well, let's let's let's say they've got uh really strong deals there where literally most of the costs, if not all the costs, are passed through to the client uh with escalators, so really in a strong position. I'd expect uh the next deals to be you know as good off, even even better, depending on how that demand for power is is affecting price going forward.

SPEAKER_01

As would I. So you've got hyperscalers, the biggest companies in the world flooding into the sector, partnering with the AI infrastructure players. You've got huge demand, increasing costs, increasing GPU rates per hour. Yet the share price on these companies has taken a big drawback. So we'll leave you guys there. Thought to ponder overnight. Let us know in the comment section below if you're taking advantage of any of these pullbacks, what your thoughts are on iron and this expected handover of Horizon. We'd love to hear from you. Also, ensure you pop over to the website. I mentioned the Matt Siegel interview. We've had a number of high-profile guests over the past few weeks. A great resource for some of these more intricate discussions. Thanks so much for watching. We'll see you back here tomorrow.