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Capital is abundant in AI, but bankable assets are not.
Read my thoughts on the American AI infrastructure buildout in @palladiummag
Wiring Capital to Compute
America possesses both more capital than any other nation in history and the highest AI compute demand in the world. It is still waiting for a market to wire them together.
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PALLADIUM is the first magazine of the third millennium. We are non-partisan, non-profit, and on a mission to discover what the future of governance and society will look like.
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AI has the capital intensity of the electrical grid, the depreciation clock of consumer electronics, and the strategic stakes of aerospace. This is not a challenge that America can afford to fail.
Read the full article by @NecessaryForm here:
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Without new instruments to coordinate the financing of the AI boom, America's AI progress will be slowed as concentrated financial risk skyrockets. America can beat China, but to do so, it needs to lean into its own institutional strengths.
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In contrast, China is embarking on a massive centrally planned compute buildout, taking advantage of cheap energy in its depopulated west.
However, without market price signals to guide investment, China suffers from significant underutilization and overinvestment.
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The massive valuations of tech giants, paired with the inability of public markets to effectively plug into datacenter buildouts, mean that ordinary Americans are exposed to the systemic risks of the AI buildout without directly reaping the benefits.
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Existing frameworks — joint ventures, long-term leases, private credit, offtake mixes, securitized lease cash flows, etc. — concentrate risk within the same handful of companies.
This level of high-risk circular financing raises the prospect of another 2008-level blowup.
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The next three years of AI buildout will require a massive $2.9 trillion dollars in capex, far more than the hyperscalers can afford themselves. Yet the financial instruments and institutions needed to engineer this expenditure don't yet exist.
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Existing structures for corporate finance and municipal project finance are both inadequate to price the heterogeneous basket of risks in AI data centers, which combine long-lived power and cooling systems with expensive but rapidly depreciating chips.
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America's industrial might has been built on sophisticated financial institutions capable of mobilizing capital, enabling coordination, and distributing risk; it was the massive 19th-century railroad buildout that forced this deepening of the American securities market.
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The Stargate Consortium, an OpenAI-Oracle-SoftBank joint venture, has managed to mobilize massive amounts of capital for datacenter buildouts. But the issues with the Abilene site are emblematic of a larger problem in this slapdash model of AI financing.
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The $9 billion "Stargate" datacenter in Abilene, TX, was supposed to come online in March with 1.2 gigawatts of compute. Now, it's slated to finish construction in mid-2027. What happened?
Read the full article by @NecessaryForm here:
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Wiring Capital to Compute
America possesses both more capital than any other nation in history and the highest AI compute demand in the world. It is still waiting for a market to wire them together.
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You can be sovereign over your own technology, and look good doing it!
Mesa-Optimization is Destroying Education
American educational institutions have lost the ability to rigorously teach and test their students. Does AI offer a way out?
War by Other Means
The Ukraine War created an explosion of automated warfighting, from kamikaze drones to remotely piloted mini-tanks. As machines fight the wars of the future, the longstanding terms of the social contract will be rewritten.
New article by @John_Severini.
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