Einstein and Ives. We're here with Ives. Ladies and gentlemen, this man has got his whole world customized. Like we can all... We are just... This is Dan's world. We're just living here.
We're just renting. We're just renting space. We all... We all... We all just living. You're just paying the rent to be in the Einstein and Wall Street life. Anyway, this is this man. He has customized his life.
Well, look, we're here to break all the barriers, to break down the market to you in a way that completely... we're going to unpack it and serve it to you on a silver platter like they used to do back at Peter Luger's back in the day. Remember that? Pouring a little butter on top of that steak.
It's a beautiful thing. Creamed spinach for everybody out on Wall Street. Dan, welcome home. You are looking so F1. I don't even know what to say about it. You look amazing. Anyway, let's talk about it. Market is up today. We did have a little bit of a scare late afternoon, market sold off. It was definitely in the Middle East, right? I mean, the United States government put out a report saying everybody who's in the Middle East should come on home. Whatever that means, you know, we don't know what that's about, but that was definitely the market. However, you know, we know when that happens, that sort of... for the sort of the... I don't know. You know what? That's why we have humans trading this market because you know the... you know the bots will react to stuff like that, sell the market off when at the end of the day we know it's nothing that's really going to happen. Anyway, give me a breakdown. What are you seeing in the market? You just came back from Korea.
Okay. We're talking about neo... neo... what's the word? Neo...
Neocloud. Please explain to me. These are... look, we have Mag 7, we've got tech, and then we've got the new neote. We've got neocloud, we've got hyperscalers, we've got software, we've got chips, we've got memory, we've got so many different things that fall under this new breakdown of what it's like. It's a new... it's a new sector. It's a sector inside of a sector.
No doubt. And remember, Neoclouds...
They... what do they actually do? What do those companies...?
What they basically do is think about them renting, leasing space from a data center perspective. So...
So those companies that ultimately need to build out data centers, you go to hyperscalers, and hyperscalers could also go to neoclouds. They're essentially no different than... they rent...
Data warehouse space in these data centers.
Okay, so let's break this down. Then we've got tech, then we've got GPUs. GPUs is the meat and potatoes of what's going on. Okay. In order to have ChatGPT and in order to have AI, you need to build data centers. Data centers are the ones that produce the GPU.
Okay. And then so then you've got hyperscalers. Or what role do they play?
Yeah. Think about hyperscalers: Microsoft, Amazon, Google.
Those are tech names, but what do they do?
Those hyperscalers are basically the foundation for all companies' infrastructure. So when they're moving to the cloud, when they're going down the AI path, they do it one way or another with a hyperscaler.
With a hyper... So in order for them to... I need you to break it a little more down to me. So in order for... explain that part of it because I'm not clear. What is a... what does hyperscale...?
Those are big cloud players. So think about them like they're the core foundation of...
For every company in terms of where they build their tech infrastructure.
Okay. So those are companies like Micron, like Google, like Meta...
Microsoft and Meta being really a consumer play that's really turning into a quasi-hyperscale.
SpaceX being a space company that's more or less turning into a hyperscale...
So it's just... it's hard for me to understand. I don't know if the mainstream people are going to be understanding what does that actually mean. So a Neocloud is renting. Give it to me one more time.
Yeah. Neoclouds are basically... they're all part of capacity. When you think about GPU capacity, data center...
For companies that need to get space in the data center, right?
That need to ultimately have their...
Sort of workflows that they build out in AI.
Okay, they could go to hyperscalers or neoclouds, names like...
So they're serving a similar purpose.
They're basically serving a similar purpose...
Okay.
Now the thing is, if you look at this past week, the big... sort of the big issue is that Core... because these companies also take on a good amount of debt...
To build out the data centers.
Okay. Oh, so Core is participating in building out data centers...
And that's why, if you look at Core, to borrow money to build out the data centers, you're taking on debt right now. Debt is more expensive than we anticipated, and that's why it was under a lot of pressure.
100%. And then... and then it's the whole view. But why did they get singled out? Because they came out with bad earnings?
No, because CoreWeave and Nebius are... those are your two bigger... two of the bigger Neocloud plays.
Okay. So there's a view where, okay, if they have a hundred billion of backlog...
For GPUs, and if they take on 5 billion, 10 billion, 15 billion, it's investors basically being like, look, they're taking on the debt now...
That revenue they're getting here...
Investors basically saying for the risk...
I don't feel... I don't feel comfortable.
So it's back to that capex versus monetization. It's a capex versus monetization story once again.
No doubt.
Right. So, okay. So the investors are going, 'Wait a minute, guys. You haven't...'
Those are bond... those are really bond and credit investors.
Okay. Bond and credit investors...
Because of the debt. Because of the debt, when they raise debt, they're not talking to stockholders.
Are they issuing bonds...?
Okay. So those companies are issuing bonds to raise money, right? And they're... they're okay. But so... but why is it that the... why is it the shareholders of the company are being so impatient about that capex?
It's actually less the... it's actually less the shareholders. It's more the bond market or the bond vigilantes or whatever you want to call it, almost making shareholders nervous, right? Because of what's happening with CDS spreads and yields on the bonds. That's... that's essentially what's happened with CoreWeave and Oracle.
