A Hundred and Three Billion Dollars of Promises and No Wall Socket

04:52

Eleven and a half percent. That is the slice of Microsoft's 200,000-chip program with Nscale that was supposed to live in Loughton, Essex: 23,000 Nvidia GPUs on a 50-megawatt connection. Microsoft walked away from the site over the weekend, and the story going around is that the grid operator told Nscale the electricity arrives in the 2030s. The 2030s. I have a nine o'clock call about the valuation range and a client whose retirement date comes before the power does.

05:20

Fine. Arithmetic, because arithmetic is the only thing awake at this hour.

Backlog: $103.4 billion. Sounds like a G20 member. Active, meaning billing: $2.6 billion. First-half revenue: $140.6 million. Net loss over the same six months: about $1 billion. Double the half-year and you get roughly $281 million of annual revenue, so the $30 billion they have been talking about is around 107 times sales, and the $35 billion the Financial Times mentioned is about 124 times. The $16 to $19 billion that some investors reportedly told Bloomberg they could live with works out to 57 to 68 times, and my brain has started filing that under "cheap," which tells you how long I have been doing this.

05:41

The bridge is bigger than the shore. September pre-IPO convertibles: $3.36 billion, Third Point leading, converting at a discount to the IPO price with a cap at a $30 billion valuation. The IPO itself is meant to raise about $3 billion. The paper underneath the deal is larger than the deal. Everybody with a note in that capital structure would like the price to start with a three. Everybody. I have no way to unknow that.

06:10

Concentration. Microsoft and Anthropic hold about 85% of the contracts, and the Telegraph put Microsoft alone at more than 40% of the backlog. So a customer just left one site, and the official line, repeated by people I respect, is that it was a small slice. Eleven and a half percent of one program. The slice with a hole where the power should be. Meanwhile Nscale's flagship in Narvik is reportedly running about six months late, and the Financial Times says Anthropic could walk from its $45 billion West Virginia contract if financing or delivery milestones slip. I am not saying anyone will. I am saying a $103 billion number has a lot of asterisks stapled to it and the asterisks are all about concrete, copper and kilowatts.

06:35

Rates, because of course rates. The ten-year closed Monday at 5.135%. Before the war it sat at 3.97%. A contract that averages 5.7 years, discounted at a rate 116 basis points higher than before the war, is worth less than the story says. Every backlog in this market is a bond with an operating risk stapled on, and the coupon on the alternative just went up. In March the private round was $14.6 billion. Seven months later the ask is double that, while the risk-free rate went the other direction. Explain that to me like I'm five. Better, explain it to the guy who has to say it out loud at nine.

07:00

The tape says chips are back. Nasdaq up 1.1% Monday, the semiconductor index snapping an eight-day slide of nearly 16%, Micron up almost 3%, Amazon almost 5%, and the morning notes all say the dip buyers returned. Dip buyers of what? Chips. A chip ships in a quarter. The substation it plugs into takes years, and the regulator that approves the substation answers to a queue. Somebody is buying the thing that arrives in 90 days to put it in a building that, in Essex, waits on a grid date in the 2030s. On the Nasdaq, 2,647 names fell against 2,258 that rose, and 361 set new lows against 31 new highs. The bounce had its own brand of loneliness.

07:30

Reading the gas-fuel-cell stories again. More than a hundred UK data center projects are reportedly weighing on-site generation because a grid hookup can take over a decade. Nscale's own answer in West Virginia is to build a power plant: Caterpillar gensets, 2 gigawatts targeted for the first half of 2028, 8 gigawatts as an ambition for 2031. The AI revolution now requires a utility, a gas supply contract and a permitting lawyer, and the prospectus values it like software. Landlord economics, utility timelines, venture multiples. Pick two. The market has been paying for all three at once.

08:05

Microsoft reports on the 28th. I will read the capex line and the commentary the way a sailor reads a barometer. A big number tells me nothing about where the dollars land. A cut tells me everything. And whatever it says, the people who needed Essex to work still need Essex to work.

08:40

Rehearsing the pitch. Backlog is contracted revenue. Contracted revenue is enforceable. Enforceable means the customer pays penalties if the landlord is late, which is the part that should keep me awake and has. The FT reports Nscale faces possible penalties for missed delivery deadlines. So the thing the backlog depends on is the one thing the grid operator has just said it cannot guarantee, and the contract punishes the party least able to control the date.

08:58

Two minutes. The honest summary of the book fits on a Post-it. A promise from a customer to a landlord that depends on a utility that depends on a regulator that depends on a queue. Only the first link is in the prospectus. The rest is in Essex, and Essex is dark.

I am going to say the word "conviction" a lot in this meeting. I want it on the record that I counted.