00:11:44 · Gavin Baker, Jordi Hays
[00:11:44] S2: On the weekends. Mhmm. Yeah. [00:11:49] S1: So... How... So I think, like, you know, rewind. This week is, you know, Anthropic s one week, and so there's there's a lot of focus there. Last week, it felt like the focus was... Like, the general attention was towards how much supply is coming online next year, how many gigawatts SpaceX is gonna bring online. How are you... What's your what's your, you know, generally, you've maintained a sort of bullishness that that some other people on the timeline have lost here and there. But how are you processing, like, how the how the how the industry can sort of absorb all of that supply if we hit the higher end of some of the ranges being discussed? And and and is it just Jevan's paradox, you know, again and again and again Mhmm. And again until we finally... Every everyone says like, you know, everyone likes to say it, but it's hard to fully internalize.
00:12:49 · Gavin Baker
[00:12:49] S2: Yeah. I think that's I think that's right. It's it's easy to say. It's it's hard to internalize and believe. And October has kind of been a strange month because the price to rent, essentially any kind of a GPU, has gone up every day. So the spot market for compute is getting tighter. And it's not just the spot market, you know, it is... I do love reading these primers on x from, you know, commodity and macro investors about these super complicated concepts called backwardation and contango Yeah. And what they might mean for the forward curve of compute and the future price of compute. You know, these are contango backwardation. But, you know, Silicon Data, which I do think is, you know, we're... My firm is an investor in them, but I I do think they're the most authoritative data source. Carmen Lee, the founder, stood up at GTC and said that the compute market is now in contango. Mhmm. The, you know, the forward... It's not just that the spot market is tight. If you want a cluster a year from now, you have to pay a lot of money. Yeah. And then this is and this is maybe another, you know, discontinuity between public and private markets. But just the number of companies we have in our portfolio who are like, okay, we got a cluster of 4,000 Blackwells and, you know, and we got it in May or June '26, and we wanna bring on another cluster of 4,000 in September 2027. Yeah. And they're shocked by how much more they have to pay in the future. And it's not like they're... Everybody is unaware of this... Everybody's aware of the supply that's coming on. But even with all of that supply coming on, it is hard for the companies in our portfolio to find compute even well into '27. Mhmm. So for, you know, all the commodity experts who are focused on backwardation and what that implied, I got news for you. We're not in backwardation anymore.
00:14:58 · John Coogan, Gavin Baker, Jordi Hays
[00:14:58] S0: Mhmm. [00:14:59] S2: And then I do think as far as how much capacity is going to come online, one thing that I think is actually healthy about what's happened in these financing markets is I hope it concentrates capacity and supply in the competent operators where they can finance it through prepayments. You know, you can kind of finance these GP purchases two ways. By the way, CoreWeave is great. CoreWeave runs GPUs well. They bring a lot... They they are very very good. They just sadly locked in a vast amount of compute and long term contracts that are now way way under market. You know? And I should [00:15:39] S0: be doing So they sold their they sold their GPUs for fixed prices, and that's why they're getting hammered right now. It's not that they don't have compute. They're not bringing it on. They have the semi analysis diamond tier. Everyone knows that clusters Yeah. Work. They're good. They are reliable, but they just sold for too cheap, and they should have hold... Held on or had variable pricing. [00:16:00] S1: Is is you think Elon studied that and said, like, we're not gonna make that same mistake, and that's why they're adopting this more short term contract... [00:16:08] S2: I don't... Elon is a first principles thinker. I don't think he was probably studying CoreWeave or Nebius or anyone Yeah. He was probably reasoning from first principles. But the conclusion he came to is prices are going up. We... If we are willing to sell into the spot market, we can have paybacks well under a year Yeah. Get big prepayments [00:16:31] S0: Yep.
00:16:32 · Gavin Baker
[00:16:32] S2: And that's, I think, that's a better probably financing model for the market we're in. And what I also like about it... And by the way, CoreWeave, I think, is very aware of this. They're trying to get more spot exposure. They're trying to, you know, do less of these big long term off take agreements. Mhmm. But standing up a big GPU cloud... I I should say, bringing on the power, standing up the cluster, it's like running a Formula One team. Yeah. And a bunch of people who have no real relevant experience, you know, whenever they acquire some land and some power, and then, you know, they get a zero down payment off take agreement from someone. And a lot of that is being cleaned up and I think, you know, supply is being what... This is a forcing function to allocate GPUs to people who can actually bring on a cluster, energize the GPUs, run it well. Like, you know, running a Formula One team, it's like really hard. You gotta like pack everything up, put it on a plane, go to a new city, unpack it, set it up, set the car up. You need all the people, you know, to, like, you you know, whatever. Change the tires, to change the rear wing if you get in a collision, to, you know, do whatever needs to be done during the race, to do the strategy, to communicate with the driver. It's really, really hard if... And it's not like, you know, some of these people, they don't have the relevant experience. You know, Corwee, Crusoe, Nevis, SpaceX, the big hyperscalers, you know, these are companies that could bring on GPUs and energize them and and run them. But... And I do think something that was announced at GTC Berlin is actually pretty important for this, and that's that DSX pod, which is gonna make it a lot easier, you know?
00:18:30 · John Coogan, Gavin Baker
[00:18:30] S0: Oh, sure. [00:18:31] S2: Seven racks. It comes preassembled. Yeah. You know, you just kind of literally plug it in and it works. Yeah. And right now, when you get the GPUs, you know, maybe if you're if you're SpaceX and you're really really exceptional at execution in the physical world, you can get them energized quickly. But a lot of people, it takes them six months, you know, three months, six months to get them energized, really get them working. And if we can, through, you know, this new product from Jensen, get that time down, I think that's that's also healthy because that effectively takes a lot of working capital out of the market. You know, you have as these numbers are getting bigger, if it takes six months to energize them, you know, that could be hundreds of billions of dollars of assets that are not generating revenue. So I think that's another... That's a product innovation that's gonna help with this. But I think this is, you know, we we will see who who energizes GPUs in in in in '27. I'm I'm confident that the, you know, the companies I named, I think they're gonna, I mean, the future is always uncertain, but these are companies with a proven track record of execution. Yeah. And we'll see about others.
00:19:42 · John Coogan, Gavin Baker
[00:19:42] S0: So I have a follow-up on that. One is just one click higher from the Neo Clouds or the Neo Labs, and there's been this speculation that Neo Clouds might NeoLabs might sort of pivot into NeoClouds. Is that dynamic gonna look like they signed a multiyear offtake agreement with a NeoCloud, and then they want us to just sell into the spot market? That's what's gonna happen? [00:20:02] S2: Yes. I mean, what Sarah Fryer said Yeah. And Sarah Fryer is an exceptional CFO. Yeah. Said, you know, everybody made fun of us for signing all these compute commitments and we could sell them all at a three, four, five x premium. [00:20:15] S0: Today. [00:20:15] S2: Yeah. And she was being literal. [00:20:17] S0: Yep. Yep. [00:20:18] S2: And so if you if you signed a long term compute contract [00:20:23] S0: Yep. [00:20:23] S2: Really at any point prior to May 2026 Mhmm. You were way in the money. Yep. You're buying compute for, you know, maybe Yeah. 10 or fifth... 10 or $15 a watt. Yeah. [00:20:37] S0: And you [00:20:38] S2: could sell it at a massive premium to that today. [00:20:42] S0: Yep.