Elon and “the Pitchfork Level”

Elon Is Watching “the Pitchfork Level”

Hmmm… What was it we said here last summer amid the swelling controversy over data centers? 

Oh yeah: “Elon Musk’s data centers in space can’t come soon enough.” 

Put ‘em in a place where they won’t be intrusive neighbors competing for scarce electricity and water. Solar panels supply 24/7 power and external radiators release the heat into space.

By then it was already our third extensive write-up on the topic in three months. It was evident that they’d be an issue in the midterm elections.

And as we mentioned last Wednesday, they seemed to have a role in the ousting of Texas’ three-term Republican Gov. Greg Abbott. In addition, there were three U.S. House seats held by Republicans where Democrats made data centers a major issue — and it appears the Democrats have flipped all three. (Well, to be precise, Lauren Boebert’s seat in Colorado is still too close to call.)

A new analysis confirms what we suspected going into the election: The closer you live to a data center, the more likely your vote would be swayed by data centers.

A conservative group that’s been critical of data centers called Humans First did some serious number crunching — examining both election returns and records from data center projects across nearly half of the nation’s 3,100 counties.

As Fox News summarizes: “Across all counties examined, those hosting large data centers shifted an additional 2.2 percentage points toward Democrats compared with non-host counties in the same states. The pattern appeared in 14 of the 16 states and 25 of the 27 governor and Senate races examined.

“Restricting the analysis to deep-red counties — those President Donald Trump won by at least 20 points in 2024 — produced a 2.1-point raw gap between counties hosting large data centers and comparable counties without projects.”

All of this wrangling goes away if Elon’s vision of data centers in space comes to fruition — and he’s got a target of next year.

That’s what he said three months ago during SpaceX’s inaugural earnings release. He can read the tea leaves as well as we can: Data centers in space may be the only way to feed industry’s insatiable demand for “compute” without compromising the power grid and the water table.

On Oct. 1, Musk and crew took an essential first step: At Vandenberg Space Force Base in California, SpaceX launched a satellite loaded with sophisticated Google chips. 

At a conference last Friday, Musk said the project has expanded and is proceeding smoothly: “So there's a satellite with an Nvidia GPU up there that we launched, and there's a satellite we recently launched with a Google TPU. And these are operating to the best of my knowledge — they're working fine in space.”

Looking ahead, “We expect to start launching the first Starmind computers, which we've co-designed with Nvidia, probably — I'm just guessing here — but in the third quarter of next year.”

And not a moment too soon, he said pointedly in light of the election results: “The pitchfork level for data centers is pretty high.”

Hump Day Rebound

The on-again, off-again AI spending scare is off again.

Overnight, CoreWeave Inc. reported its quarterly numbers. As you’ll recall, this is the firm at the center of the AI spending scare. It’s a “neocloud” company that builds and operates AI data centers. 

Last month CoreWeave’s lenders started getting cold feet about continuing to shovel money at the company; whereas they once charged 9% interest, they were starting to charge 16%. So CRWV’s earnings release was, as the saying goes, highly anticipated.

Turns out the numbers were fine. And the CEO expressed confidence that strong demand would continue into at least early next year. CRWV shares are up 26% on the day — although we hasten to add they’re still less than half their nosebleed levels of last spring.

That glow is extending to the rest of the AI space and the rest of the stock market: The S&P 500 is up 1.5%, back over 7,600. The Nasdaq is up 2.2%, cresting the 25,600 level. 

Social-media cynics say the Trump administration and the financial media will stop at nothing to prop up the market ahead of Anthropic’s IPO a week from tomorrow. They might have a point.

Still, Trading Desk editor Greg Guenthner is taking nothing for granted: “Remember what we don’t know,” he advised his readers this morning. “We don’t know if this is the end of this corrective action, or simply a relief rally. We don’t know where ‘the bottom’ will be… or when it will happen.”

The bond market is closed for the holiday. Gold is clinging barely to the $4,000 level while silver has clambered its way back over $52. U.S. oil futures are up about 1% at $86.89.

Bitcoin is back over $74,000 while Ethereum is approaching $2,100.

“Here is a chart showing the forward valuation (price-earnings or P/E) on Nvidia stock,” says Paradigm trading pro Enrique Abeyta…

“History tells us that either the forward earnings are CORRECT and the stock goes HIGHER — OR the earnings are WRONG and the stock is pricing this in.”

Enrique is betting on the latter: “I think the stock still gets CUT IN HALF from here!”

More about Nvidia in Bullet No. 3…

The NVDA Scandal, Continued

“The central question will be what Nvidia knew, when it knew it and whether anything material should have been disclosed earlier,” says Davis Wilson at our sister e-letter The Million Mission.

NVDA shares are finally enjoying an oversold bounce today — on the heels of a two-day pounding brought on by the revelation that CEO Jensen Huang was having an affair with an executive from a Singapore-based firm named Alice Huang (no relation), whom the media is casually labeling a Chinese spy.

Cue the manufactured outrage from Washington: “Senate Democratic Leader Chuck Schumer demanded answers from the administration and tighter curbs on chip exports to China,” says Reuters. “Republican U.S. Senator Kevin Cramer from the Senate Banking Committee called on Huang to step down as CEO.”

“The affair won't hurt Nvidia's earnings,” writes Davis. “But further restricting Nvidia's access across key Asian markets could.”

NVDA’s share price is down 19% from this time 90 days ago. But Wall Street’s earnings expectations are up 38% in the same time frame. Unless and until those expectations change, Davis is hanging onto his NVDA shares.

“Was the woman Jensen cheated with a spy? I’m skeptical,” says Adam Sharp at The Daily Reckoning. 

“He’s too smart for that, and even if she was, he’d never reveal secret info to a potential competitor.”

Three days into the scandal, the only evidence we have that Huang’s lover was a Chinese spy is the claims of U.S. intelligence officials speaking anonymously to mainstream media outlets, whose agendas are known only to themselves.

“I think she was probably just a middleman, out to make money,” Adam elaborates. “Her company, Megaspeed, bought Nvidia GPUs supposedly for use outside China, and made them available to Chinese companies.

“Black markets are highly profitable, after all. 

“Everybody knew GPUs were being smuggled into China, or bought by Chinese companies and operated overseas. But officials looked the other way, because it was great for Nvidia and the broader U.S. stock market.”

From the beginning in August 2022, Huang bristled at Washington’s limits on Chinese purchases of Nvidia’s GPUs. He lobbied hard for exemptions and carve-outs.

“He can no longer do that,” says Adam. “They’ll accuse him of being a Chinese plant, a spy, contaminated by exposure.

“So it looks like somebody wanted to stop Jensen’s advocacy for tech trade with China. And they probably have, for now at least.”

And in the meantime, those export curbs have backfired spectacularly — prodding Chinese firms to develop their own GPUs that might not be as good as Nvidia’s, but are a hell of a lot cheaper. 

If you missed it, Adam’s full write-up is worth a look.

Mailbag: Hegseth

Not surprisingly, reader reactions to Emily Clancy’s guest edition on Saturday — first published by The Rundown in September — are all over the map.

“Perfect deep state/MSM shill. I expect better from Paradigm Press,” says one brickbat

“Thank you for a refreshing and fact-based article,” says a bouquet — “as compared to the Jim Richards tone-deaf, debunked conspiracy theories at the Paradigm Shift Summit. (Overall, I enjoyed the event.)”

A handful of readers sought to make a similar point…

“I’m not a Hegseth proponent, necessarily, but I think that Emily Clancy should be very careful about assuming that time in service ever equates with useful experience or operational competence.”

Another: “After having spent two and a half decades in the military I can think of only a handful of more senior people that I would trust to run anything in the armed services. 

“Almost all the senior officers with whom I connected (including several three and four stars) were politicians. Period. Very, very few were skilled operational commanders. Most of those that were had been shown the door during the Obama purge.”

A third: “There are more generals in the armed forces today than there were during World War Two! I think they did a better job then than they do today. Hegseth is doing what’s necessary to whittle down the excessive overhead from the military.”

“I served on active duty in the Army and flew AH-64 Apaches during the post-9/11 ‘global war on terror’ years. I have some useless opinions to share.

“Yes, the flyby at Kid Rock’s house was dumb. But not exactly a huge ‘safety violation.’ I’m willing to bet some pilots who were already on their way to retirement pulled it off to — heaven forbid — have some fun. The Army also recently made huge cuts to its pilot ranks and reduced the number of training hours, which didn’t make the news and hasn’t helped morale.

“The Army is full of bootlicking, bureaucratic hall-monitor types at the senior levels, who enjoy enforcing pointless rules just to advance their own careers. That’s how we produce generals in the defense-contractor-revolving-door scheme with ‘40 years of service,’ always touting the number-of-years-in-my-career as if it's an actual measure of competency. These guys thrive on moving up the ranks at the expense of others. They’re lifelong bureaucrats in uniforms, not innovators. Our system clones them like robots out of an Optimus assembly line. Seeing them get the boot is long overdue. 

“As far as the Navy experiencing ‘food shortages, broken toilets, moldy showers, deteriorating morale, long meal lines, shortages of basic supplies such as soap and toothpaste’ yeah well, welcome to the Army on any given day! 

“Go to any base housing across the country and you’ll see the same thing. That stuff has been going on for decades in all branches of the military, and it’s been completely ignored by ‘senior leaders’ and the media because it makes them look bad and they really don’t care. Maybe starting dumb wars while systematically ignoring troops’ needs — but endlessly funding the ‘cool new toys’ — leads to bad outcomes.

“And people wonder why most people rotate out of the military after a few years and don’t stay. Total mystery! 

“As far as Hegseth, I’m no superfan. But it sounds like Susie Wiles and her neocon crew wanted to make him a scapegoat for their own blunders (she just got canned anyway). Hegseth was a National Guard infantry officer without a Ranger tab. We have PLENTY of other young, more competent veterans who would be way better for this role in reshaping the military. But they’re not Fox News hosts. 

“Rant complete…”

Dave responds: So a few things…

First, even some of Hegseth’s fiercest critics acknowledge that purging the ranks of the generals is one thing he’s done right. “Credit where credit is due,” tweeted the military analyst Will Schryver in September: “Greasy Pete has cut the number of four-star generals from 10 to five.”

Second, about the Navy’s meager rations and limited supplies in the theater of war this year: From every indication that’s because Iranian forces all but destroyed the giant Navy base in Bahrain during the opening days of the war. Supplies had to be routed through Diego Garcia, nearly 2,500 miles away. A logistical nightmare.

Those of us who relied on independent commentators like Will Schryver and Larry Johnson knew in early March that the Bahrain base was out of commission. If you relied on the corporate media, you didn’t have a clue until summer at the earliest.

Impeachment, Armistice Day

As perhaps you’ve heard, the articles of impeachment brought against Hegseth by Rep. Thomas Massie (R-Kentucky) failed last night by a vote of 204-211. 

They would have passed were it not for the fact that 11 Democrats did not vote, allegedly because they were caught in a traffic jam.

Not that anyone can ever prove it, but this outcome looks carefully orchestrated. 

Either the Democrats want to let Hegseth twist in the wind a while longer — or they want to take sole credit for impeachment proceedings next year when they’re in the majority. 

It has everything to do with partisan advantage, and nothing to do with the good of the country. This is exactly the slimy sort of thing Nancy Pelosi used to do when she was in charge of the House Democrats — and wouldn’t you know it, she was one of the absent 11.

Meanwhile on this Veterans Day, “Make Armistice Day Great Again” is the headline to a short article by Desert Storm veteran Thomas Knapp.

The holiday originally marked the moment the guns fell silent in Europe during World War I. The rebrand came in 1954. Knapp thinks it’s a travesty.

“Instead of mourning war,” he writes, “we now celebrate warriors. Parades. Air shows. Political speeches. Free meals, drinks, haircuts, etc. for veterans. A lot of ‘thank you for your service’ to everyone identifiable as a veteran of the U.S. armed forces; quite a bit of mutual back-slapping among those of us who ‘served.’

“To me, the best way to celebrate veterans would be stop making so many of us — especially, but not only, of the dead, maimed, traumatized and homeless varieties.”