A Google-Elon Handshake?
A Google-Elon Handshake?
“Yes, resistance is real and warranted,” a reader writes from Minnesota about the backlash against AI data centers.
We got a lot of responses to Friday’s edition exploring that backlash. We’ll share several — including on-the-ground observations near prospective data center sites — later in Bullet No. 5.
But for the moment, we want to spotlight something we first tackled last fall — data centers in space.
As a reminder, orbiting data centers solve the problems of Earth-bound data centers — the power consumption, the noise and so on. They could be powered by 24/7 solar power that doesn’t compete with homeowners and businesses for scarce electricity on our pale blue dot.
Pie in the sky, you say? There are engineering challenges for sure. But Elon Musk thinks they can be overcome.
In fact, he thinks the next generation of SpaceX’s Starlink satellites will be ideally suited for the task.
Orbiting data centers are central to SpaceX’s investor pitch ahead of what’s likely to be the biggest IPO in history. (And by the way, according to several media outlets the IPO date is now set — Friday June 12. That’s 25 days from now. The ticker will be SPCX.)
Google doesn’t think it’s pie in the sky either.
Last week The Wall Street Journal reported that Google and SpaceX are in talks: SpaceX would launch the rockets taking Google data center satellites into orbit.
What makes that interesting is that last fall, Google announced its own launch initiative called Project Suncatcher — working with the firm Planet Labs (PL) to build prototype satellites for data centers.
Clearly, Google is covering its bases. Also, the new arrangement is to Google’s advantage given its 6.1% ownership of SpaceX.
The news comes on the heels of Anthropic’s own partnership with SpaceX — in which Anthropic gets access to all the “compute” within SpaceX’s giant data center complex in Memphis. As part of that announcement, Anthropic expressed interest in having SpaceX launch its own orbiting data centers.
Now… step back for a moment to think about what this Google-SpaceX tie-up means…
“The largest information infrastructure company in the world is negotiating with the largest space company in the world to deploy AI compute in space,” says Paradigm tech investing pro Ray Blanco.
“That single piece of news is the loudest validation yet of what’s to come. Power-hungry, polluting industries — starting with AI data centers — are moving off Earth and into orbit.
“This isn't a future event, although its full expression will be. It’s starting to happen right now, in contracts and capital expenditure decisions being made.”
The announcement lit a fire last week under several of the space-oriented names in Ray’s Catalyst Trader portfolio.
“This isn't a momentum trade riding the SpaceX IPO,” says Ray. “This is the market repricing space as a real industrial sector — defense, commercial and infrastructure.”
Stay tuned in the days ahead. Now that the date for the IPO has been set, we’re on the lookout for ways to piggyback the event for profits between now and June 12.
Data Center Energy Merger
Back on Earth, the data center phenomenon is one of the big market stories today.
NextEra Energy (NEE) is merging with Dominion Energy (D) in a $67 billion deal.
It’s interesting in that NextEra is one of those “independent power producers” that aren’t regulated utilities. They’ve been on our radar at Paradigm since early 2025. (A year ago at this time we did a rare free pick in 5 Bullets of Constellation Energy — which rose 34% by year-end.)
Dominion, on the other hand, owns regulated utilities in North Carolina and Virginia — the latter state being home to “Data Center Alley.”
For the moment, the Street is down big-time on NEE’s effort to diversify, sending shares down 5.2% at last check. Dominion, on the other hand, has rallied 10%.
Elsewhere, the Iran war looms over markets now that the ceasefire has lasted nearly as long as the hot phase of the war.
Early this morning, Donald Trump said the “clock is ticking” for Tehran — and with that, U.S. oil futures have leapt over 1.3%. They’re approaching $107 for the first time since April 30.
As was the case Friday, rising oil prices are translating to rising inflation fears and thus rising bond yields: The 10-year Treasury note is over 4.6% for the first time in a year. (That won’t do any favors for mortgage rates.) The 30-year T-bond is up to 5.13%, another high last seen in 2007.
But unlike Friday, the fear isn’t being transmitted through the stock market — not too much anyway.
The Nasdaq is down about three-quarters of a percent, sinking back toward 26,000 — dragged down largely by another 2.6% drop in the Philadelphia Semiconductor index.
The S&P 500 is down a little over a third of a percent at 7,381. The Dow is flat at 49,511.
Pullbacks are healthy, and that’s how Zach Scheidt — strategist for both Altucher’s True Alpha and Rickards’ Insider Intel — sees it right now.
“A short-term reset in semis paired with a broadening into the less-loved parts of the tape would be the best possible setup for this market.
“It calms the nerves around the chip mania. It gives the equal-weight S&P 500 a chance to start participating. It pulls in money that's been sitting on the sidelines because everything looked too extended.
“We've been calling for this kind of broadening for a couple weeks now. If we get it, the rally has a lot more room to run. If we don't — if money pulls out of semis and just sits in cash — that’s a different conversation.
“But the fact that many of the daily lows are getting bought tells me that the market bulls aren’t out of gas just yet.”
Meanwhile, precious metals are relatively quiet too — gold flat after Friday’s beatdown at $4,541 and silver up less than a buck to $76.55.
No joy in crypto — Bitcoin sinking toward $76,000 and Ethereum very close to breaking below $2,100.
Oh, and in case you need a reminder…
Was There a Deal?
It appears the feds are about to drop their very strange “fraud” case against India’s second-richest man.
During the final weeks of the Biden administration, the Justice Department charged the billionaire Gautam Adani with bribing Indian government officials to snag juicy solar-energy contracts.
Yes, Washington prosecuted someone overseas for bribing his own government officials — on the theory that it somehow amounted to “misrepresenting” his firm’s anti-bribery and anti-corruption practices to its American investors and lenders.
(Did any of Adani’s American investors complain? No, they did not.)
None of it made any sense. As I wrote at the time of the indictment, if you’re in Washington, D.C.... and if your status as “the world’s sole superpower” is hanging by a thread… and if the nation-state that’s home to one out of six humans on Earth is deftly playing off Washington against Beijing and Moscow…
… then it’s probably a dumb idea to prosecute the second-richest guy in that country on a flimsy pretext, especially when he’s besties with the guy who’s been prime minister for over a decade now.
Shortly after taking office last year, Donald Trump signed an executive order directing the Justice Department to revise the guidelines for how it enforces the 1977 law under which Adani was prosecuted. India’s business media speculated about what it might mean for the Adani case.
Well, we’re starting to learn.
Last week, The Washington Post reported the Justice Department is on the verge of dropping the case. Also last week the SEC settled a related civil complaint with Adani and his nephew for $18 million.
The timing of these developments is… interesting.
Lost in the pomp and circumstance of Trump’s visit to China last week was a meeting of the BRICS foreign ministers in India.
As you’ll recall, BRICS is a grouping of the world’s biggest developing economies — Brazil, Russia, India, China and South Africa. Since 2023, those five countries have been joined by Ethiopia, Egypt, Iran, Indonesia and the United Arab Emirates.
Iranian foreign minister Abbas Araghchi urged his counterparts to condemn what he called “violations of international law by the United States and Israel.”
No condemnation was forthcoming.
In fact, there was no joint statement at the conclusion of the conference — not even something vague and vanilla about safe passage through international waters.
As host of the summit, India was on the hook to find consensus. Maybe that wasn’t possible; depending on what media outlet you want to believe, the United Arab Emirates nixed any joint statement. And that makes sense given that among the Arab sheikdoms, the UAE is the most hostile to Tehran.
But on the other hand, maybe New Delhi found it advantageous to avoid consensus. As noted above, Indian leaders have spent years skillfully playing off Washington against Beijing and Moscow — their charter membership in BRICS notwithstanding.
(Also, don’t forget India and China have an intractable border dispute.)
We’ll never know if there was a quid pro quo here: India deep-sixes a BRICS condemnation of the United States, while Washington drops the case against Adani.
But stranger things have happened…
[Just in: As we’re about to hit “send,” Reuters reports the Trump administration is dropping the criminal case.
“The resolution of outstanding cases against one of the world's richest people came after Adani's attorney, who is also a personal attorney of U.S. President Donald Trump, said last month his client wanted to invest $10 billion in the United States but could not do so while the cases proceeded, according to a source familiar with the matter.”]
Comic Relief
Here’s a meme we just ran across that kinda tees up today’s mailbag…
Mailbag: Data Center Backlash
“The average American does not want a data center installed anywhere near where they live,” a reader writes as we resume the responses to Friday’s edition.
“There is no ‘plus’ for them to risk it. Declining property values, risks to their water, noise pollution, risks to the air they breathe, increased utility costs, potential blackouts and traffic.
“And for what? So Zuck and Gates and Bezos and O'Leary and the rest of the Killbillies can get even richer. Perhaps they will be willing to tempt communities into supporting them with a bit of a sweetener — a tax-free payoff to each property owner within a certain distance of the data center. Let's start the bidding at $1 million each. That's only $10 billion for 10,000 residents.
“Chicken feed next to the data center capital expenditures. And tax deductible for them.”
“Indiana residents are resisting,” says our next entry. “Who would agree to rolling blackouts? It’s insane.
“I’m not a tech person, but it is my understanding a large number of data centers are needed to create a network of autonomous vehicles, drones, robots and other ‘intelligent machines’ operating over large geographical areas that run on cloud computing infrastructure. But why?
“Can these machines not operate independently within specific use cases? Drones for farming. Robots for resource extraction. Can factories not run on in-house programming to make a toaster? Can a supercomputer not scrape data and find a cure for cancer with one small local server farm?”
“I live in Cathedral City, California — next door to Palm Springs. Down valley is the town of Coachella… primarily on agriculture economy in a desert locale.
“Residents of Coachella are currently opposing the approval of the construction of a Data Center Complex, based on concerns of air pollution, electric supply consumption and consumption of an already depleting supply of water in a desert environment.”
“I think the backlash is warranted! It's going to get worse.
“AI centers will have complete control over your privacy. As soon as they get hacked into, the whole economy will be turned upside down.
“Even now you can't trust Big Tech. It's all about control and taking your money in the name of progress. China and Russia are going to experience the same thing. The biggest difference is they will kill their own people to get their way.”
We also heard from a longtime reader with very specific subject-area knowledge.
“I have read ‘the 5’ since its inception, but can count on one finger the times I have provided feedback. I have a MS (with Distinction) in Computer Science specializing in artificial intelligence.
“Unlike all the ‘experts’ that come out of the woodwork, I actually have some first-hand
knowledge of AI. I always hesitate to say ‘it's different this time…’ but this time it actually may be different.
“The potential for AI to be used for ‘bad’ things is ‘off the charts.’ If the potential is there,
then someone, somewhere, at some time will use it for nefarious purposes.
“Personally, I agree with Anonymous Conservative, but I refer to ‘data centers’ as ‘human control centers.’ I pray I am wrong, but believe I will still be among the living when the SHTAIF (my own acronym — sh** hits the AI fan!).
“Dave, I always enjoy reading your thoughts… and there will be no ‘buts’ here.”
Dave responds: Thanks to all who wrote in.
Tellingly, no one wrote in to say the issue is overblown or that the opposition is stirred up by activists with a hidden agenda.
And there’s a significant slice of the Paradigm readership — mostly James Altucher subscribers — who presumably have high awareness about and enthusiasm for AI. Make of that what you will.
In any event, the issue isn’t going away. It is not yet a risk factor in AI-related investments… but we’d be remiss not to keep the issue on our radar as the year goes on…
