The $1.7 Trillion Data Center Bet, and Why Apple is Getting Into the Subscription Game
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What is the main topic discussed in this episode?
Picture it. Summer, you and your girls at your favorite patio bar, the sun's out, the breeze is perfect, and you're looking stunning in that new sundress. And what are we drinking? A Kampari Spritz. It's just Kampari, Prosecco, and soda water. Bold, iconic, and perfectly bitter, just like you. Check out official cocktail recipes at Kampari.com. Kampari Spritz, stay bitter. Kampari Liqueur, 24% alcohol by voting. Volume forty eight proof. Twenty twenty six Campari America, New York, New York. Please enjoy responsibly.
Welcome to Office Hours with Prop G. This is the part of the show where we answer questions about business, big tech, entrepreneurship, and whatever else is on your mind. If you'd like to submit a question for next time, you can send a voice recording to office hours of property media dot com. Again, that's office hoursproperty media dot com or Post your question on the Scott Galloway subreddit and we just might feature in our next episode. Question number one comes from a listener who emailed us. Hi Scott. I'm an ex UK Army Engineer Officer working on grid upgrades in the Scottish Highlands. Your No Mercy No Malice episode, 1999.ai, has led me to believe that the push on data center construction is ill-advised and will end up with data center developers holding the crying baby with incomplete sites and sunk cost.
There's also the question of realistic capacity in the grid and the demand from new building housing in other sectors. Is the model of speculative build of data centers for hyperscalers destined to fall down? Thanks as always for speaking out, swearing and drinking. Well, I won't stop that. Your ancestral home is proud to call you a jock. Hmm. Uh well well y ya oatmeal savage, that's what my father used to call me when he was joking. Um Some data. Most announced data centers were never real. To build a data center develop applies to plug into the power grid and operators get five to ten times more applications than real buildings because They file a whole pile uh to p to hedge. Most have no financing, no power deal and no equipment ordered, and some.
Most Or our most planned data centers are press releases. Bloomberg expects a third to half of all US data centers plan for twenty twenty six to be delayed or cancelled. Um, why people seem to the the latest scare around AI is the debt. Wall Street's mood has flipped uh fast. And Bank of America's investor survey, forty five percent, now call the AI bubble the biggest risk, up from twenty-eight percent a month earlier. The build-out runs on borrowed money right now. One estimate puts the Giants hidden debt at one point seven trillion. That's up eightfold in four years. The scary part is the is what's not in plain sight here, and that is eight hundred plus billion is pushed off the books into shell companies.
So it's hard to see who's gonna eat the losses. Plus this debt is backed by chips that can lose value overnight if a better one uh emerges. A lot of people are equating this to nineteen ninety nine and there's real parallels here. Ordinary people um in my view will be the ones left holding the bat. I think there's gonna be a an AI slash data center bailout from Trump who's bet the entire economy on AI's uh or the valuations of AI to continue to be out over their skis. In many states, utilities are guaranteed a profit for building power plants, so if the demand never shows. It lands on everyone's power bell. The financing is circular. NVIDIA sells the chips and lends its customers the money to buy them.
And so the same dollars keep flowing in between a handful of companies, making demand look bigger, artificially bigger than it is. In some the end here or the slowdown isn't likely one dramatic um bang. It's it's kind of a slow rolling thud similar to two thousand or two and to two thousand and two, where the weakest, most borrowed players fall first. Well, big tech survives. So this listener You're you're right about the crying baby and who'll end up holding sort of the over leveraged developers and the ratepayers, not the hyperscalers.
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Chapters
7 chapters
1
What is the main topic discussed in this episode?
0:01–9:00
2
What is the borrowed $1.7 trillion debt behind the AI data‑center build‑out?
9:00–10:59
3
Why do most announced data‑center projects never become real builds?
10:59–12:04
4
How is the AI‑driven data‑center debt being hidden in shell companies?
12:04–13:23
5
What are the risks of a slow‑rolling data‑center “thud” for hyperscalers?
13:23–21:14
6
How is Apple turning iPhone upgrades into a subscription service?
21:14–23:21
7
Why is Apple’s subscription model more valuable than a one‑time iPhone sale?
23:21–24:31
Speakers
1 identifiedMore from The Prof G Pod with Scott Galloway
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