Artificial intelligence has become a big subject of debate in North Dakota, and it's a little bit different than the national debate we're having over AI, right? I mean, there's, you know, people are worried how does it fit into an academic setting? You know, what's the ethical way to use this? What does it mean for our politics when, you know, maybe the zone of public debate can be flooded with AI-generated content that may not be entirely accurate? But for North Dakota specifically, we're having a debate about infrastructure that supports AI because AI does a lot of positive things, too. It's a lot of great — I've said before, we use AI to help produce this show in some small ways. It's a great tool, and like it or not, it's coming. And people who provide the infrastructure for AI, which is specifically the data centers where a lot of the computing behind that service is done, they see North Dakota as a good place to invest. Applied Digital specifically has a facility already built in Ellendale, and by all reports, obviously that was an arduous process, as you would expect a large facility like that to be. But by all reports, the locals seem happy. There were some growing pains, but they're happy it happened. Now in Harwood, just north of Fargo, Applied Digital is working on building another data center. It's about a $3 billion investment, and it's received some pushback. There's people who are concerned that it could drive up utility prices. People are concerned about things like sound. People concerned about things like traffic during construction. And so to talk about some of that is Wes Cummins. He is the CEO of Applied Digital. He agreed to come on the Plane Talk podcast and take some of our questions about this. Wes, first of all, thank you. And second of all, I want to get right to something that did bother me a little bit. I guess as a member of the news media, was some non-disclosure agreements that your company had local officials in Fargo and Harwood sign. And I'm assuming, I'm pretty sure you also had officials in Ellendale sign these as well. In some ways, I know that these NDAs are not untypical, especially when we're talking about industrial or business development. But I mean, it raised a lot of eyebrows and it raised a lot of concern when we hear our public officials who serve us, the public, are signing these NDAs. So talk to us a little bit about them. Why were they necessary? What did they cover?
Yeah. So, excuse me. On the NDAs, you know, for us, it's common practice. But there's two primary purposes for the NDAs. And what I will say is there is no purpose to keep information away from the public that, you know, they need to have to be informed, to know what's going on. These are typically things that we do prior to us launching a project or doing a project. And there's the first purpose, Rob, is we are a publicly traded company. We need to have people understand that, you know, some of this information could be deemed material non-public information from an SEC purpose, and we don't want someone getting in trouble trading in our shares in front of what may be a big, you know, stock-moving announcement. And our stock did actually move when we announced the deal in Harwood. So this is for protection primarily for the people that we give this information to. So, and they don't tell — you know, if you just walk through this, like, so we have the mayor, and he's not steeped in public company rules and regulations, and he tells a couple of, you know, his friends or people that work around it or people that he's close with that, you know, this big new project could be coming, and then they go and find our company and they say, you know what, this is interesting, maybe I'll buy their stock. And then you have this issue of potentially violations in insider trading laws. So that's one, is to protect the people that we're giving this information to. And then two, from a company perspective, one of the big parts is protecting ourselves and our competitive information. Not in the instance that we go forward with a project. It's really in the instance we don't go forward with a project, because there's projects where we have talked to people about that we have not moved forward with. But if we give them a lot of information, we let them tour our facilities, see how it is that we build our buildings, what we do. You know, some of that information might be competitively sensitive to us. And it's important that it isn't shared if we decide to not go through with a project, right? And in the instance of Harwood, this came together pretty quickly. You know, we've been speaking to Minnkota for a long time about it on the utility side, because we spend a lot of time around the country working on the power utility side, because there's a few kind of key ingredients to determine where we locate these, and power being the most important one. So that was going on for quite a while, and then it started to come together. As it came together, and as we looked at where it would work, you know, we looked at a couple of locations, a couple of pieces of property. And so we asked, you know, a few people to sign NDAs and have a discussion about it and see what it is that we do and see if it was even a possibility. Because if we're just, you know, if it's just kind of a no out of the gate, you know, we — and we've had those, we just move on. But at least we can, you know, doesn't mean that they won't share that information that we gave them, but at least we have, you know, some legal recourse on sharing that information. But our policy, and I think you've seen it with us in the state in the past, is we like to be as transparent as possible. But there's certain things that we need to protect, and some of those things are, you know, people from getting in trouble from laws that maybe they're not familiar with. But that's why we do that. But once we had decided to move forward, it was very, you know, shortly thereafter, we, you know, we held that town hall. A lot of these deals, if you look around the country, you know, the first time residents hear about it is it shows up on the docket for their local zoning commission, and then they're trying to figure out what it is. Instead, we went out, we gave the information publicly once we had decided to go forward with it. And then we held a town hall, and you know, we took all questions, whether they were positive or people that don't like the project. But we really work hard in the state and just all overall as a company to do this transparently, because these projects, you know, we think have a really positive impact, but they're definitely impactful. We want people to understand what's going on.
So Wes, thanks for coming on. And I think we live at a time where any sort of change, people are automatically often opposed to. I mean, we've seen it with pipelines. We've seen it with the tribal casinos up in Grand Forks County. And so I appreciate the transparency you're providing, but I think sometimes what gets lost is what you're actually trying to accomplish, right? I mean, sometimes it's just like the public comment period just, you know, the mayor is corrupt or whatever. But can you just talk through what will this facility do? How many jobs will it mean to the community? And sort of, you know, from your perspective, what is the upside to Cass County, to Fargo, to Harwood if this thing gets built?
Absolutely. So, as Rob started with, you know, AI, controversial topic. I boil AI down fairly simply. There's a piece here where it's probably — and I'll say probably, but I think very strongly — it's by far the most important race we've been in in the world. And there's, in my opinion, there's two countries that are racing forward to advance AI, to reach superintelligence, to reach AGI, and it's the United States and it's China. And this is going forward one way, you know, or another, and we're in a race in the US. And for Applied Digital, we want to provide that infrastructure inside of the United States for this purpose and for the, you know, the US to really advance their AI initiatives and be the leader. And then, you know, AI overall, you know, my opinion is that it's the most equalizing technology, the most equalizing thing, period, in the history of the human race. And you know, when I was a kid, I used to watch the Reading Rainbow, and you know, the thing was always that knowledge is power, right? And you hear that jingle and the mantra, but this is — if you've used any of the tools, like you use ChatGPT right now, it provides you with PhD-level expertise in any field you want, anything you want. Everyone has true knowledge at their fingertips. And so it's a very equalizing technology in the fact that, you know, you have all of the knowledge you need on almost any subject. And so in general, I think there's a lot of benefits. Of course, there's a lot of pitfalls. But when we think about us building our infrastructure, we think about North Dakota specifically. So these facilities are different than any other data center. North Dakota has not been a place for data centers. Applied Digital actually has brought that to North Dakota because we had a vision back actually in '22. I sat in front of the Bank of North Dakota and PSC and talked about how I think North Dakota can be an epicenter for AI. And why is that? These facilities require a significant amount of power and they require a lot of cooling. North Dakota has both of those in spades. They have not been a data center location because they're not close to population centers, right? And all the data centers we build for TikTok and, you know, video streaming and every video application we have, Netflix, that's mostly been in population centers. So those population centers have seen data centers. But when I look at North Dakota, this workload can move to places where latency is not — it's not as latency-sensitive. So it can move to places like North Dakota. And then this opportunity — okay, so North Dakota has power. North Dakota produces six times the amount of energy that they use inside of the state, and that includes all energy. But also, North Dakota produces over double the amount of electricity that they use in the state. So North Dakota is a huge energy exporter. And what that means is neighboring states create industry based on North Dakota power. So what's going on in Minnesota? What's going on in Des Moines, Iowa, where Microsoft has a big location? What's going on in Omaha, Nebraska, where Microsoft or Google has a big data center location? Exporting power out of the state of North Dakota for other places to build data centers. And these data centers, they create jobs. They don't create, you know, necessarily a huge amount versus the amount of power they use. But like our facility in Harwood will create two to three hundred full-time jobs. What we've done in Ellendale is what we plan to do in Harwood. We train a lot of local people the skill set to go and work in these facilities. And they pay — you know, our wage is significantly higher than the standard wage, the average wage in North Dakota. So these have a lot of, you know, high double-digit, low single-digit — even, or sorry, high double-digit, low triple-digit paying jobs in some cases. You know, jobs that go well into the two and three hundred thousand dollar range. And we work really hard to hire that locally. We spend a lot — you know, this is a three billion dollar building, and then the customer that we expect to have in this building will spend about two and a half to three times that on equipment that goes inside of the building, the GPUs and the servers that work to produce the generative AI. And so what that means is, you know, more high-paying jobs, skilled labor, being on the leading edge of technology, and then of course property tax. So you get all of these economic benefits. And when you have a, you know, a town like Harwood and like Ellendale, you know, these towns struggle to maintain their sewer systems, you know, to maintain their water, to maintain basic infrastructure. You know, you're dealing in a town of eight hundred people in Ellendale, it's eleven hundred people. You know, I had a chance to speak with the mayor there last night, and you know, everything that they did in that town, they have to fix a road, guess what, special assessment. They need to do something for the sewer, guess what, special assessment. And so a project like this is going to create a very large amount of tax revenue for the town and then for the school district and for everything involved. And so it provides that benefit on top of the job, which is skilled labor benefits or skilled labor positions that are high-paying. And you know what I say to a lot of people who agree with me in North Dakota is, why would you export your energy produced inside of your state to neighboring states for their economic benefit when you can just use it right here for your own economic benefit? And that's really the opportunity that we're creating in North Dakota.
I find all that very compelling, to be honest with you. And not least because, I mean, if we're being honest, a lot of the energy that North Dakota exports, you know, increasingly is becoming politically fraught. I mean, Minnesota's passed laws where they don't want some of our energy that we produce through coal power, for instance. So the idea of creating demand for North Dakota energy inside North Dakota, energy in my mind creates synergy with our existing industries. Like, I like the idea of diversifying from ag and energy. As important as those are, I like the idea of doing other things too. This is another thing we can do. But also there's symbiosis with the energy industry in that we're creating demand for it. So that's great. I think one — probably the most common thing when I talk about these data centers in North Dakota, the most common concern I hear from people is the impact on utility prices, because that's something that could be felt, you know, across the region, across the state potentially. I mean, most of the, you know, sound things like that, that's in Harwood. I don't live in Harwood. Why do I care about that? I sure care if my electricity bill goes up. These data centers use an enormous amount of electricity. I mean, multiples of what a given — it's like adding a whole another city or even multiple cities to our power grid. So I understand, you know, the argument has been made that this is — and we're hearing it from your partners in the utility space, we're hearing it from you — that this is not going to increase. In fact, we just had a regulator on last week, Sheri Hovind, who also said, you know, this isn't going to increase. I think people are just having a difficult time understanding how could we add so much power consumption to our grid with the laws of supply and demand. How can we add so much power consumption without prices going up?
Yeah, that's a great question. So let me hit a couple of these things. So if North Dakota was a power importer, then I think you should — you have cause for a lot more concern. So when you're a net power exporter and you start using power inside of your state, you just export less power, and so the power is already abundant. If you're a net power importer, you know, like I said, you should be a lot more concerned about it. But if you can utilize the infrastructure inside of the state, inside of your own utility, then that utility makes money from — because utilities are infrastructure-based businesses, right? They get a yield on their assets that they deploy. So if they have infrastructure that's not being used and it gets better utilization, you know, the best explanation is if you, you know, if you built a big water pipe somewhere and someone was only using a tiny trickle through that water pipe, it's not going to be a very economic pipe. But if you can fill it up completely with usage, then it's going to be a lot more economical. So let me just give the example of what we have seen in Ellendale. We've been running at two hundred megawatts in Ellendale for the last couple of years. We located next to power infrastructure. That's the most important thing for us. So a substation that went unutilized, you know, a significant amount of the time, a lot of surplus wind power fed into the substation, maybe couldn't be transported out. And so with us adding two hundred megawatts of load in Ellendale for the last two years, we have saved the MDU ratepayers three point five million in 2023 that was dispersed back to the ratepayers, and five point seven million, I believe, in 2024. So we have two years of record of, you know, utilizing the infrastructure that's there. The utility makes more money and then shares that money back with its customers. Not, you know, not completely, obviously, utilities are businesses that make money as well. But if you utilize the infrastructure again inside of your state where you already have an abundance of power, what we have seen is power prices actually go down for residents and not up. Again, if you're in a state that imports power and you have a power shortage already and you're trying to use more power, you're probably going to see your prices go up.
I just want to make sure I'm understanding what you're saying. So it's — you're saying we basically — we had the capacity in Ellendale specifically. We had the capacity, but it wasn't necessarily being used.
But yet the utility companies had to pay to maintain that capacity. So it's like if I own a big grocery store but I only have enough customers to open a couple of aisles. I still have to pay to keep that entire big store open. You're coming in and saying, hey, more customers, you can open up more aisles. Now that money you're spending anyway to maintain all this has a use that's producing something that's being used by a customer. Does that —
Okay, that makes a lot of sense.
That's specifically what we have seen in Ellendale, and there's — you can look —
And do you expect that to also be the case in Harwood?
So in Harwood, you can never guarantee that these things happen. It's the experience we've had, but we're using existing infrastructure. And the other thing, Rob, that it creates — so these are long-term deals that we're doing, right? So we're building thirty to fifty-year assets. We sign, you know, initial leases on these with very large companies for fifteen years. It not only utilizes the infrastructure, but it allows a lot of certainty in planning for growth. So if you have — if you're expecting population growth or industry growth in an area, to be able to have a certainty around a load that you can plan to, you know, for the future, that makes a big difference because utilities don't — it's really difficult. It's really impossible for them to build new generation, for example, on spec. And so to have these big, steady, long-term commitments in an area really help from a utility perspective to be able to plan for growth and plan for additional capacity. And so that's one of the other benefits that we bring besides just utilizing the current infrastructure more efficiently.
Wes, I think, you know, Rob's up in — I'm in Bismarck. We're hundreds of miles away from Harwood. To me, this is a no-brainer, right? I mean, we should absolutely do this, but I'm not really affected by it. It's all upside for me as a taxpayer in Bismarck, North Dakota. The aunt and uncle who live in Harwood, I have no idea how they feel about this thing, but obviously the decisions that are being made affect individual people. And it's often in these small towns, individual people who like the way things are. And so I mean, I guess my question for you, referenced earlier, you're a publicly traded company. You're the CEO. You know, it's easy for somebody living across the street from where this facility is being built to think Wes doesn't care about me at all. You know, this is just about what it means for the shareholders, that kind of thing. How do you alleviate some of those sort of NIMBY concerns from people? Because I guarantee the people in Harwood would love this thing if maybe it was a hundred miles away. But how do you alleviate those concerns?
Sure. So the way I think about these, and I do care about how it impacts, and we really try hard to go about this all the right way as far as, you know, impact on the people that are right there because they're the most impacted. And there's certain things that, you know, they're going to be a nuisance for a little while because large construction, you know, you're going to have trucks. We're going to do everything we can on routing these. We had this discussion actually last night at the meeting so that we can have the lowest impact we can have. But when I look at these facilities — and just my background, by the way, is I grew up in a town of two hundred people in Idaho. I grew up on a potato farm. And one of the biggest points of pride for me is, you know, either you were going to farm or a lot of, you know, family farms kind of went away in Idaho. And so, you know, your parents tell you, do good in school, go to college so that you can go do, you know, a job somewhere else. And for me, as I grew up, you know, tech was just starting and I wanted to do tech. And tech was done in Silicon Valley and that was it. And so for me to be able to bring the leading edge of technology back to towns like I grew up in, there would have never — and you know, even five years ago, but especially when I grew up, these opportunities for leading-edge tech were not even a thought. It was never a possibility. So that's one big point of pride. But also making these, from an impact perspective on the people, the lowest impact you can possibly make. So we build, you know, what looks like a warehouse building. Noise is — there is talk about noise. There is some noise, but it's very — it's really manageable, low-grade noise. The biggest noise creator on our site are chillers, which a chiller is a larger size version of your heat pump that sits outside your house. And so you have a fan on your heat pump. You know exactly what that sounds like when that turns on. And so that's the primary noise piece of our sites. But for the most part, you won't really even know, outside of you can see it, that these sites even exist. It's sitting inside of, you know, eight-inch concrete walls. You're not going to hear servers whirring or EMF or those types of items that people would be concerned about. But the goal is to have the absolute lowest, you know, visible and audio impact that we can have. And these projects bring that more than any other project I know. And you know, for Harwood, it does need to be a certain distance from the town for it to be in the town and for the town to get the benefits from a tax perspective and an economic perspective. So it's balancing those two things. But absolutely do care about, you know, who's next door. We try to figure out these sites so that we have the lowest impact on neighbors. When we do the sites, like we have a site in — a Bitcoin mining in Ellendale as well, which does create more noise than these facilities will, but we put a sound wall up so that we can protect the neighbors from it. But, you know, and the facilities, you know, my opinion, look pretty cool. I don't think they're an eyesore in any way. But we do try to make it as low impact as possible with the maximum economic benefit impact that these kind of facilities can have on these locations.
One, I think, last question is maybe about how your business works because that's something, you know, I think North Dakotans, we understand how agriculture works. We understand how energy works, familiar with these industries. Yours is new, and so maybe it's helpful for people to understand. I guess my understanding — you can correct me if I'm wrong — you guys build a data center and then you basically contract out that capacity to companies that want to do computing. And I mean, obviously all the big names come to mind, Google and whatnot, ChatGPT. I don't know — I don't know who your customers are. Maybe you can tell us them if you're allowed to. But is that how it works? Like you build this center, we have this capacity, and then you go about selling the capacity to people who want to use it?
