That is kind of the most unifying issue in politics right now. Not because people agree on data centers, but because there's something for everybody to hate. There's a Kevin O'Leary component to all of this where he came out, he was very loud, he was the face of it. He almost didn't believe that there would be a grassroots backlash to him to build a data center.
On another political issue, maybe he could have gained some support. He's trying to play this race with China nationalist card. It just didn't work here and it only kind of mobilized more people against him. If the AI bubble pops, maybe none of these companies have any cash left to pay off these enormous bills. Is anybody taking that into account?
I mean, no. [laughter]
Hello and welcome to Decoder. I'm Nilay Patel, editor-in-chief of The Verge, and Decoder is my show about big ideas and other problems. Today I'm talking with Josh Jezza, a longtime features writer here at The Verge, about Kevin O'Leary's plans to build a massive data center in Utah. The idea was to build the largest data center in the world, a 40,000-acre AI campus with more than 9 gigawatts of power, more than double the average power usage of the entire state of Utah. [music] The project is technically called Stratos, but it's more prominently known as Wonder Valley, a reference to O'Leary's nickname on Shark Tank. Josh has spent months reporting on this project, and it's fair to say Wonder Valley has completely upended Utah's politics. What Josh found throughout the course of his reporting was that the way this data center came together, how it was planned, how it was announced and improved, and how local residents were kept in the dark ultimately created a political firestorm so severe it stopped Stratos and its trucks. Now, the details of what happened with Wonder Valley are obviously fascinating, [music] but the story itself is also a larger look at the AI industry's infrastructure boom, the bipartisan backlash to that buildout, and how the tech industry is running into the one obstacle it can't seem to buy its way out of: local democracy. Okay, The Verge's Josh Jezza on the Utah data center disaster. Here we go. Josh Jezza here, a features writer here at The Verge. Welcome to Decoder.
I'm very excited to talk to you. Uh, for people who don't know, Josh has one of the hardest jobs at the entire Verge. You just disappear for long periods of time and then you come back with like 15,000-word home runs, which is an enormous amount of pressure, but you keep hitting them.
It's a great job. Someone, Kevin, may say that editing those 15,000 words is the hardest job, but um [laughter] down to something manageable, but
Kevin, uh, Kevin Win is our features editor who works very closely with Josh. The home run we sent you out to get this time was the story of what happened with Kevin O'Leary in Utah, where he promised to build what was going to be the biggest data center in the world. He was all over the news talking about building the biggest data center in the world. It was called Stratos. He was calling the entire development Wonder Valley. This thing fell apart in a bunch of anger from the local community. There's a defamation lawsuit because O'Leary referred to all of his critics as Chinese spies on Fox News. Fox News had to apologize on the air. When you started reporting on this story, it struck me that there would be some similarities to the huge feature you wrote about the Foxconn project in Mount Pleasant, Wisconsin, my hometown, where President Trump announced that Foxconn was going to build a massive LCD factory in the middle of Wisconsin. There would be 13,000 jobs, and none of that happened. And actually what's funny about that is it's now that land is being used for a Microsoft data center [snorts] which is just maybe the natural end state of all things. Walk me through those just at a high level. What did this feel like to report?
I did not expect this to feel so similar to Foxconn initially because unlike the Foxconn project, the data center buildout is real and at least theoretically can make sense in many cases like these things are actually getting built on like an LCD in the middle of Wisconsin. Um, it turned out that there are more parallels than I thought in, I mean, one just sort of the actors that you have. You have it sort of takes place mostly with local officials and planning meetings and things like that and angry residents. But um also there's a lot more kind of data centers on paper, speculation, uh, things that are maybe real, maybe not, that are difficult to sus out, um, than I was fully aware of going into data center reporting.
Let's start at the very start of this project. There's an enormous cast of characters involved. There's a whole bunch of government agencies. But this starts with people in Utah looking at what is it, 40,000 acres of empty space and realizing that something is about to happen. Most people in Utah, except for a handful of people who own property in this remote valley, some people in the state government at this one agency that becomes involved, a few real estate developers, everyone except that maybe like dozen people or so found out about this project when Kevin O'Leary starts talking about it uh as an enormous data center that he's building in Utah called Wonder Valley or sometimes Stratos depending on what program where they're using at the moment. But he comes out in late April and says, you know, we're building this giant thing. And that's the first most people in the county and the state heard about it.
How did he get the approvals to even begin saying he was going to start building this data center so publicly if no one knew about it?
It is partly because it ran through an agency called MIDA. It's like a state development agency that deals with projects that have some military purpose. I think the military purpose can be fairly tangential. They have a luxury ski resort that gives veterans discounts, but it began as a way to create projects on military property that was unused or could be put to more economic use. Um and then the taxes go back to the state, some of which can fund military uh developments. It also has a lot of power to override local land use. It basically becomes this the municipal government in whatever project area uh it establishes. So if it establishes a project area, in theory it would really speed up all the sort of permitting and zoning and other regulations that can be a huge problem for data center projects. In order to establish a project area, the board has to ratify it. All the landowners in the area have to give their consent and then the local government, in this case the county, has to give its consent. The issue with this is by the time Kevin O'Leary is talking about it on Fox in late April, MIDA has approved it. The county has not. The county didn't even know about it until about a month before this happened.
So, did Kevin O'Leary just go to this obscure military agency and say, "I need a bunch of land in Utah" and get it?
According to the documents we have, he starts asking around at the state level with the governor in January, in early January. It then the project gets passed from the governor's office to MIDA. [snorts] Um so January, February, he's basically going around, which is not uncommon with these developers, state to state, being like, I want to build a data center. What do you got? Uh and whoever kind of gives the best pitch, the best, you know, you can have this property, we're going to make permitting easy, we have these tax breaks, uh wins. And this is also quite similar to what we saw with Foxconn, right? Like and a lot of big development projects, people do this sort of beauty pageant like we're auditioning this state, we're auditioning this state, it's a race, it's a competition, who's going to win? Um and so there's some of that going on there.
O'Leary has been very publicly out in front. His big defense of the project is, well, states compete with these tax breaks and Utah gave me these tax breaks. Somewhere in there is a big disconnect from the actual people living in the area and the process, right? I mean, that's the conflict here. That's the real heart of the story is eventually the people in the area find out this is happening and they don't want it to happen and they mount furious pushback. What happened there?
Yeah, it's a really interesting case with Stratos where all of the conversations until very late are happening at the developer and state level. And in this case, they literally forgot or failed or for some reason did not tell the county government that this was happening until very late, whose consent they needed. And so that happens in late March. The county commissioners start hearing rumors that like apparently there's a data center coming. They have no idea. They ask around. The state says uh we're sorry, I forgot to tell you essentially. Um but we really need your approval fast. The county commissioners then have a meeting in late April and that's when word starts to trickle out kind of and then MIDA votes to approve it two days later and then kind of over that weekend in late April you've now had two public meetings. There's local coverage. People start talking about it, saying, "Oh, did you hear about the data center?" You know, several people found out about it, you know, at the coffee shop, at the grocery store. They just hear about, they see on Facebook, they're like, "Oh, there's a big data center coming." Uh, for some reason, the Shark Tank guy is involved. And that starts to kind of trickle out late April. Uh, when you start to see that conversation happen, no one was happy about it. Everyone. You know, one of the interesting things about data centers right now is social media is so full of data center backlash stories. People hear data center, they like know broadly what's coming. Some of which is exaggerated, some of which isn't, but like you don't need to get people up to speed that they realize, oh my god, there's this huge project. It's supposed to be, you know, they're saying it's 9 gigawatt um and it's coming to your, you know, metaphorical backyard.
This is the big difference in my mind between the Foxconn reporting and the Stratos reporting you did. So many people in Wisconsin were excited about the promise of a giant LCD manufacturing plant that they ignored the very obvious fakery. And in the course of that reporting, you would literally go to empty buildings and point out that they were empty. And Foxconn would issue statements saying they were not empty. And it was all just built on people's hope, right? It was an inkblot test about whether manufacturing could come back to the Midwest and so many people wanted to believe that that they ignored the obvious realities. In this case, if they had let Kevin O'Leary build a data center, it seems very likely that he would have built a data center. But the people there did not want that. It was the very opposite. All of the hopes and dreams were replaced by people's anger and fear about AI and maybe what they'd heard on social media. How did that play out in this story? Because that feels like a massive point of departure.
And Stratos is a really interesting case because it is kind of what you've seen played across the country, but times 100 because Kevin O'Leary is involved and his sort of knack for attention. But the response was immediate. I mean, people found out about it, you know, through local coverage. They start organizing to attend the next meeting. It's already contentious. People are calling out questions. They're not happy about it and Kevin O'Leary starts talking up how huge it's going to be and it really just escalates. You have the weird political alignments start to form. Kind of everyone is against it. So an activist, something interesting that is kind of the most unifying issue in politics right now because not because people agree on data centers but because there's something for everybody to hate. And so you have people who are upset for environmental reasons. You have people who are upset about the tax breaks. You have people who are upset about just kind of like surveillance fears with AI. You have just kind of everything in there. And people start protesting right away. Uh and saying, you know, we don't want this is something that you hear all the time at these protests. It's just really different from any kind of other big development project because not only are people acutely aware of the cost, but there's no pros. It's not like people are excited for jobs. And Utah is not, unlike Wisconsin, not a de-industrialized area. It's an agricultural community for the most part. Like people are not nostalgic for the golden age of manufacturing. And they don't believe any of the jobs numbers anyone tosses out with data centers, I think rightly for the most part, and there's just not a lot of upside. You know, your county taxes might go down in 10 years, it's just not that exciting compared to where you're going to have a giant industrial project uh on the horizon.
You talked to a lot of the protesters, the people who succeeded in having this project scaled down pretty dramatically. Who are these characters? What are they like?
There's a wide range of people. I got some one of the records that I thought was really fascinating that I got came from kind of a state intelligence fusion center thing talking to the sheriff saying, you know, just heads up, it's in theory a very combustible group of people who's going to be attending one of these rallies. You have, you know, conservative groups with names like Utah Patriot Alliance or something like that and the sort of water preservation like Salt Lake activists. Normally these groups just counterprotest each other, but here they've all come together for the same purpose that they hate this data center. Um, and so you have this like a very wide spread of people even within one of the key activist groups. It's a lot of people who weren't activists before. Uh, just local people, some conservative, some progressive people with environmental concerns. People who are just upset about it. A lot of people upset about the process, feeling cut out like this is something that has really is really offensive to them that this happened in their county with their county government. Um, and that they weren't told, they weren't brought into it. Um, they had no say. I think that galvanized a lot of people. The people I spoke to, they're mostly residents of the county uh or sometimes nearby counties, but everyone who was kind of most involved was a resident of the immediate area in Box Elder, not necessarily Hansel Valley, the remote region where the center would be based.
When we first started talking about the story and you went off to report it, my assumption was that all of those folks would get steamrolled because we've seen that play out in so many of these other projects around the country. People mount some opposition. The local city council says it's already done. We have an NDA. We can't even talk about it. They scoot the meetings to the next one. There's protests. We've seen people get arrested for trying to talk about data centers at their local city council meetings. And there was just something about this one in particular because it was Kevin O'Leary, this outsized personality, because it was so big, because the state officials could trumpet the size of the development that it felt to me like there was a foregone conclusion that this project was going to happen over the objections of a handful of people in a very remote part of Utah. And yet they succeeded. Tell us about how they pushed the project back where it is now and how they succeeded because that seems like the important part.
I think the project has definitely been wounded. I don't know whether it will happen or not, but it doesn't have the momentum that it had initially. I think there's a couple reasons for that. One is just the scale of the backlash was so extreme um that it took local officials back. Um I don't think anyone anticipated that it was going to be so severe the way it was announced. Sort of Kevin O'Leary's 40,000 acres, 9 gigawatt, biggest thing in the world. Its proximity to Great Salt Lake, which is shrinking and Utah's in a drought, so extremely sensitive. Uh the developers say it won't diminish the water going to the lake, but no one believes that. Uh the residents don't believe that. It was just such a perfect combination of ingredients that it became and it exploded right at the beginning of the Republican primary in the state. So officials are getting asked about it constantly. They're getting people are calling their office, they're showing up at debates. It becomes the biggest issue in the state. There were a lot of casualties of the project. You know, you had two local commissioners who lost their seats. You had Stuart Adams who was the Senate President. You know, multiple sources referred to him as the king of Utah politics. It really sent shock waves through the state that he lost his seat over this. Um I mean there were other issues but he was the might chair and so he was very much at the center of this project. It really I think was a wakeup call for politicians. It is not the project is not dead. Basically, what's happened is uh activists, local activists filed a referendum trying to repeal the county's consent and everything uh it was thrown out by the county court and now it's being litigated and everyone has kind of hit pause on it for now until that case gets resolved. But the data center race is all about speed and now this is looking like it doesn't have that momentum it had earlier. You know, you're going to have lawmakers. Even if the referendum gets struck down, you have an extremely activated activist organization of network that is formed around opposing this data center and it's going to not have a very easy road ahead of it. Uh just you're going to have lawmakers scrutinizing it. You're going to have regulators scrutinizing it. There will be other lawsuits. It's just so unpopular and it's so infamous. Like why would you want to be associated with that project when you have so many other projects out there that you [laughter] could choose from?
There's a Kevin O'Leary component to all of this where he came out, he was very loud. He was the face of it. He almost didn't believe that there would be a grassroots backlash to him to build a data center. He did call all of these folks Chinese spies. He had to apologize for that. Fox News where he said those remarks, they had to apologize on air for it. He posted an Instagram apology. You sent him a list of questions. This is real inside baseball. But, you know, to make a story like this, we do an email called the no surprises email where we just say all the things we're going to say and people are allowed to respond to them. And his response to us was to have his lawyers like lightly threaten us like make sure everything's accurate. We're not responding to you. Make sure everything's accurate or you know something bad will happen. He went from being the face to being so not wanting to be a part of the story that his lawyers spoke for him. Why do you think that happened?
I mean, one, now he is in a defamation lawsuit, but I found his arc to be really fascinating as a window into the politics of data centers because he came out kind of in a maximum conflict partisan posture. There's these protests. He immediately starts attacking the protesters. He reads names on Fox, says that they are being paid by China. Like he goes on the offensive against them. And it just doesn't work. I mean, more than it doesn't work, it backfires. Like, it really like many people I spoke to in Utah came out because they were additionally insulted by the idea that they were being accused of being Chinese agents, uh, you know, when they've lived there for generations. On another political issue, maybe he could have turned gained some support. He's trying to play this race with China nationalist card. Um, but it just didn't work here and it only kind of mobilized more people against him. He went on Tucker Carlson. Tucker for the most part was skeptical of the China argument and kept pressing him on, you know, why would anyone want a data center? Like why should anyone support this project? It's just really interesting to see the degree to which he failed to get any kind of partisan traction on this with that strategy.
You know, there's an interesting parallel here to the CEO of Flock, whose initial defense of Flock was to try to use MAGA talking points, and it also didn't work. And there's something about the political realignment here that is utterly fascinating to me. And it's coming right up against the speed that you mentioned, right? There's an entire industry that is built around trying to acquire money from hyperscalers as fast as possible by getting these deals done, by getting the permits, by going through the process as quickly as possible. And it feels like our politics in that process are in absolute conflict. Talk about that process a little bit. You would think that they would understand that they're up against the actual people in these communities not wanting this to happen.
The Stratos project is interesting. It's emblematic of a certain type of data center at this moment in kind of I don't want to say late stage but very well-developed speculative boom um let's say where [laughter] you have kind of random people from tangentially related industries who are being sucked into the boom and kind of trying to find an angle, trying to find a way into it. The data center race, if you want to zoom out, it's all about speed. You have a handful of hyperscalers who are locked in what they believe to be an existential race to AGI with each other and will spend whatever it takes to win. That means they will spend right now whatever it takes not just to build a data center, but to build a data center faster than their rivals. And that means you have billions, hundreds of billions, trillions of dollars flowing into anyone who will get them what they need as fast as possible. And so you kind of watch over the last two years or so these different aspects of data center development get totally jammed up. Like initially it was all these giant data centers need to get connected to the grid. That's a slow process. It can take a year. It can take two years. It can take more even in normal times. So everyone starts, speculative developers start making requests with various utilities and saying I've got a giant data center. I want to connect it, start the study process. It jams up the queues. Utilities stop taking new applications. They charge money for them. Wait times get even longer. So then data center developers go off-grid, behind the meter what they call, but we're going to build our own power plants. It's always natural gas because that is a faster way to get 24-hour power than all the, you know, permitting and logistics involved with the nuclear plant or solar and batteries or something like that. Now, turbines are backordered for years. So, you have all of these other players who are kind of like trying to find ways to get the hyperscalers what they need. This cohered into something called powered land assembly. And what these developers do is they look for a bunch of property at a secure access to power and then turn around and sell it to a developer to build a data center. And it can be very lucrative. You know, these packages can go for 20 times or more what the raw land would cost. And basically what the developer is paying for is speed. Your pitch is basically like I've got land. It's already permitted. All you need to do is build the data center, put chips in it, and you're ready to go. A lot of announcements for developers say, you know, I've got a 10 gigawatt facility here. Uh, we're building this gigantic, it's going to be the biggest data center in the world. This happens not just with Kevin O'Leary, but basically what they're saying is Meta, if you wanted to get involved with this, you could have the biggest data center in the world. You could have a 10 gigawatt facility here. It has that power capacity. Maybe it has permitting for that. It has a physical footprint for it. It doesn't mean, you know, we have funding to build a 10 gigawatt facility or anything like that and so you have these kind of paper data centers out there. It is a symptom of the race dynamic here like everyone is moving as fast as they can. The hyperscalers want to move as fast as they can. So you have developers who are trying to move as fast as they can. They are pressuring states to move as fast as they can to put an enticing package together for the developers that they can then turn around and give to the hyperscalers. At no part in this chain are local residents a player. They're just not there. Like they're not part of this system. And so you have something like Stratos where just no one bothered to tell anyone in Box Elder County that anything was coming. They're all racing. Their concern is can we get this deal together as fast as possible? It just doesn't come up. And so I think only now that you have projects hitting, you know, real roadblocks with, you know, people screaming at their commissioners until they don't rezone area like they you have like now the people are an obstacle to speed. Now people are like now developers and hyperscalers are thinking about well how do we make people more okay with these projects.
