As someone with a portfolio of energized land assets here is what I am seeing:

1. Neoclouds are disorganized and poorly capitalized. Some are definitely better than others however.

2. Hyperscalers are intractable, bureaucratic organizations that take 3 months to do an NDA and want 18mo escrow periods. We built our portfolio by competing against these terms because of our speed and simplicity. The more future assets orgs like ours win, the bigger the problem for the hyperscalers downstream (see 3).

3. There are delays in the existing pipeline that will catch people off guard in 2027. Hyperacalers will (obviously) react by focusing on their own internal compute needs over any third party. If the third party is a model company, they will tell them to go through their model router where they will also take a non-trivial vig. Them telling Ant they have no compute for them (rumored in Ant’s S-1) if true is a huge tell that this is already happening.

All of this is to say that it does look like there will be a lot of partially stranded compute and compute sitting in inventory in 2027 than is currently forecasted. This is bought and paid for but effectively underearning (below total cost of capital) or collecting dust. We see this as true for everyone - model companies, hyperscalers, neoclouds except ONE (you can guess which one).

This dislocation will benefit two kinds of orgs: the non-bureaucratic big scalers who can build industrial scale quickly and the nimble, well capitalized players feeding them.

2027 will be a turbulent year because it will clear out a bunch of wrong/bad bets. It will also be a consolidation year for a few.

Some more thoughts:

1. In Texas, getting mineral rights waivers are harder and take longer than ever. Case law is useful but it’s even more critical than ever to have these in place especially in West Texas where there is lots of activity.

2. East Texas is not buildable unless you’re a neocloud and can take the legal risk. Hyperscalers or foundational model companies may capitulate and come here but it will be a last resort type of thing.

3. Power pipeline is clogged everywhere. Utilities are completely overwhelmed and will ratchet their pipelining process to flush out the squatters. This will mean higher capital commitments earlier in the process for those that are real.

4. Builders don’t have the economic authority to offer local incentives to get the utility to move them up in the queue. The ultimate offtaker isn’t as aggressive as they should be to accelerate grid connections. When the builder/offtaker is the same, these conditions get much better. This is a big benefit for being a well funded IG hyperscaler.

5. Consumer pushback is still ratcheting up. Data centers are an easy target against the oligarchy who, collectively, still haven’t done enough to win society to their side.

Last thought:

The liquidated damages clauses of the contracts between neoclouds and their offtakers will be the final boss battle.

If you don’t have experience building highly available compute, you will have outages that stress your uptime commitments. If you can’t remedy them, your offtaker will be extremely punitive.

Terms that look good on paper now starts to shrivel under the LD terms of offtaker contracts.

You’re already starting to see a few of these blow up - you lose your IG wrapper, a big hyperscaler dumps you etc etc.

So anyone in the data center game needs to ultimately be excellent at management/uptime/maintenance. If you’re not, you may wilt when you inevitably have to manage some moment of downtime.