Speaker 1: Welcome back to the Net Worth Podcast.
This week we are diving into the concrete cloud and the physical infrastructure of the AI century.
It’s good to be back.
And yeah, you know, this is a really important topic if you’ve been watching the AI space, the the easy money in the headlines that’s been made.
Now it gets real.
Speaker 2: He really does.
We have to look at the plumbing.
And before we jump in, I want to make sure everyone knows where these insights are coming from.
Speaker 1: Yeah, the source material is key on this one.
Check out the full edition on our website, wearenoyack.com.
You’re really going to want to see the charts for this.
We really are covering a lot of ground today and it’s.
Speaker 2: Those people are just yeah, they’re completely ignoring it.
I love that.
So let’s set the stage for the last what, 2 years, the entire conversation has been about software, right?
Speaker 1: Absolutely.
It’s ChatGPT, it’s Gemini, it’s which Elm is winning and the stock tickers, of course, right?
It’s been a gold rush for the chip makers and the software companies, but that’s a very.
Speaker 2: It’s a 2 dimensional view of the market.
It misses the literal floor everyone is standing on.
And that’s what this deep dive argues that we’re ignoring the invisible landlord.
We’re moving past the code to look at the physical assets that actually, you know, run this whole revolution.
That is the core idea we have to shift our thinking AI.
Speaker 1: Doesn’t live in the ether.
It lives in huge windowless buildings.
It eats gigawatts of power.
It’s a physical beast.
So the goal today is to give you a toolkit how to evaluate these infrastructure funds, how to spot the real risks, and to really understand this difference between owning the race car and owning the race track.
Speaker 2: That analogy is everything.
It’s the key.
The whole strategy.
So let’s start with that mental model, the cloud.
It’s got to be the most successful marketing term of the century.
It’s brilliant.
It’s absolutely brilliant.
When you hear cloud, what do you picture?
Something fluffy, white, floating, weightless.
It feels infinite.
Speaker 1: Exactly.
And for an investor, that is a dangerous mental model.
To have because the cloud is not vapor, right?
This edition of your Wealth Blueprint puts it so clearly.
The cloud is concrete, copper power contracts, cooling fiber.
It’s heavy, it’s hot, and it is hungry.
Speaker 2: Heavy, hot and hungry.
That does sound like a cloud.
It sounds like a blast furnace, and in many ways it is.
The industrial revolution had smokestacks.
The AI revolution has data centers with cooling towers, its industrial infrastructure.
OK, so to make this tangible, the research introduces A persona, Sarah.
She’s a Henry, a high earner, not rich yet profile a lot of our listeners can probably relate to for sure.
So Sarah is smart back in 2020.
3 She saw the AI wave coming.
She bought the race car, in this analogy, the big tech stocks, and she did well.
She did very well, wrote the NVIDIA waves, the Microsoft wave, but now.
Speaker 1: Now she’s looking at the valuations and she’s getting nervous.
Speaker 2: Yeah, the trade feels crowded.
Everyone is in that race car.
The valuations are sky high, and the volatility is, uh, it’s a lot.
She’s wondering if the easy growth is over.
And this is the classic dilemma.
The race car, the tech itself, it’s exciting.
It’s fast, but race cars break down or they crash.
Speaker 1: Where they crashed, Sarahs, realizing the smart money, the institutional capital, it’s quietly moving to the race track.
The physical layer underneath all the cars.
Speaker 2: Precisely.
The race track owner doesn’t care who wins the race.
They just charge a toll for every single lap.
And that toll is paid in what rent and power fees.
That’s it.
Speaker 1: So Sarah wants to own the concrete.
Not just the code.
Speaker 2: OK, so I’m sold.
I want to buy the race track.
But if I look at a fund, an AI infrastructure fund, it could be anything.
How do we define what actually counts?
This is where you have to be really rigorous.
The research outlines for physical inputs.
If a fund can’t explain how it solves for these four things, it’s not.
And infrastructure play.
It’s a story.
Speaker 1: OK, Walk us through them.
What’s number one power?
Speaker 2: Power is the absolute gatekeeper.
We’re not talking about a wall socket.
We’re talking about substation capacity.
Can you get 100 megawatts from the grid?
If you don’t have that, you have nothing.
Power is the fuel.
Speaker 1: Got it #2 is cooling.
This is the big constraint.
These new AI chips run so high.
Speaker 2: That traditional air conditioning, it’s physically incapable of cooling them.
So my office AC unit wouldn’t cut it.
Speaker 1: Not even close.
Yeah, the chips would just they’d melt.
We can get into that.
Speaker 2: Yeah.
Melting chips sounds expensive.
What’s 3 connectivity?
Speaker 1: That’s the fiber optic cable.
It’s all about latency, the speed of data and #4 is space.
Speaker 2: But not just any warehouse, specialized buildings.
Speaker 1: OK, so power, cooling, connectivity and space, those are the ingredients.
This addition then packages them into 3 pillars, right?
This is the map.
Pillar 1 is what we call the AI factory, which is what I think of when I hear data center.
But you’re saying that image is probably wrong.
Speaker 2: It’s completely outdated.
The old model data center 1.0 was basically a warehouse with some servers and a big AC unit.
It was fine for storing photos or running a website.
Low density, very low density, low heat, and AI factory is maybe 10 times the power density per square foot.
And critically, it requires liquid cooling.
Speaker 1: OK explain that.
Are we literally running water?
Pipes to the computer chips?
Speaker 2: Essentially, yes.
Yeah, air is a terrible conductor of heat.
When you pack these chips so tightly, air just can’t move the heat away fast enough, so you have to pipe coolant directly to the hardware, which sounds like a nightmare.
If you own an old building, it’s often impossible.
The floors aren’t strong enough, the ceilings aren’t high enough, the power lines coming in are too small.
Speaker 1: So there’s a huge risk here.
A massive risk.
Umm, the research calls it the digital Rust Belt.
Billions of dollars of legacy data centers could become obsolete because they physically cannot host modern AI hardware.
Speaker 2: Wow.
So not all data centers are created equal.
That’s a key take away.
Let’s move to pillar 2 powered land this one.
Speaker 1: So interesting because it flips traditional real estate on its head.
Usually it’s location, location location.
Right near the highway and near the city.
Here that matters less than the grid connection.
Powered land is just land.
Could be anywhere that has a signed credible contract for large scale power access.
So the value isn’t the dirt, it’s the permit.
Speaker 2: To draw power, it’s the queue position.
Utility hues for power are 57, sometimes 10 years long.
If you own land that skips that line, you own the toll booth.
You own gold because the bottleneck isn’t silicon anymore, it’s electricity.
Speaker 1: Exactly.
You could ship ships around the world.
You can’t ship a GW of power.
Speaker 2: OK, and pillar 3 is the edge.
What’s the practical?
Definition here.
Speaker 1: To get the edge, you have to split AI into two jobs.
Training and inference.
Speaker 2: Break those down.
Speaker 1: Training is the learning.
It’s when the AI model reads the whole Internet.
That takes months.
It takes massive supercomputers.
It happens in those huge AI factories out in the desert where power is cheap because.
Speaker 2: Speed isn’t the priority there, just raw power.
Right?
Speaker 1: But inference is the doing.
That’s when you ask it a question and it answers.
Or when a self driving car needs to hit the brakes.
That has to happen instantly.
Speaker 2: Instantly.
Latency is the enemy.
The decision has to happen locally.
That’s the edge.
It’s bringing smaller compute facilities back into the cities.
Close to you.
Speaker 1: So we had the factory for training, powered land to build the factory on and the edge to deliver the service.
That’s the ecosystem.
Speaker 2: OK, so we know the landscape.
Now the hard part.
I’m an investor.
I get a 50 page white paper.
How do I know if it’s any good?
You know, most of those are designed to confuse you into confidence.
They throw jargon at you until you just give up and assume they’re smart.
Speaker 1: Here’s a chart that goes up and to the right.
Don’t ask questions exactly.
Speaker 2: So this edition gives you a 5 step decoder to cut through that noise.
That’s one.
Find the return engine.
Find the one plain English sentence that says we generate returns by is a development rent land speculation.
What is the actual business model?
And if you can’t find that.
Speaker 1: Sentence you stop reading.
It’s that simple.
If they can’t explain it clearly, they’re either hiding risk or they don’t know themselves.
Speaker 2: OK, Step 2.
Identify the assets, right?
What are they actually buying?
Is it a stabilized leased up building or is it a patch of dirt where they hope to build something?
That’s development risk, which is a whole different ball game.
Speaker 1: Step 3.
Insulate the real risks.
Ignore the boilerplate legal stuff.
Look for the operational risks.
Do they talk about power timelines?
Water access for cooling?
If they gloss over the fact that the utility company is 2 years behind schedule, that’s a red flag.
Speaker 2: Step 4 is fees and liquidity.
This is where your performance disappears.
Management.
These profit sharing and lockup periods, how long is your money in jail in this space?
Five to seven years is normal.
You have to be OK with that.
Speaker 1: And the last one, Step 5, execution.
Who is running this?
This isn’t just managing your apartment building.
This is mission critical engineering.
You need a team with a track record and technical operations.
Speaker 2: Return engine assets, real risks, fees, execution.
That’s the filter.
But you say there’s a gate.
Even before that there’s a hard pass fail test, the transparency gate.
Speaker 1: This sounds non negotiable.
Speaker 2: It is, especially for our audience.
The number one requirement is audited reporting.
Why is that the hard line?
Speaker 1: Because in private markets there’s no.
We see you looking over their shoulder every day.
You were trusting the manager’s math.
An audit means an independent third party verified the numbers are real.
O.
If a fund says we don’t do audits to save costs, you say good bye.
That’s not a cost you want them to save.
If they won’t pay for an audit, you shouldn’t pay them to manage your money.
Trust, but verify.
Speaker 2: And if you can’t verify, you don’t trust.
I like it.
That’s the rule.
So let’s talk portfolio construction.
Most of our listeners don’t have $50 million for their own data center.
How do they play this?
Speaker 1: We use what we call the barbell concept.
Picture a barbell with weights on both ends.
Speaker 2: OK, on one side you have your liquid exposure.
Speaker 1: Your public stocks, ETF’s, easy to buy, easy to sell, but volatile.
Speaker 2: Very volatile.
Speaker 1: On the other end of the barbell is your illiquid exposure.
Private funds, real assets.
Your money is locked up, but it’s shielded from the day-to-day market madness.
The goal isn’t just to get rich.
It’s about being resilient.
It’s about.
Getting stocks while still participating in these huge long term trends.
You keep optionality with liquid side and you capture structural growth with the illiquid side.
Speaker 2: And within that illiquid bucket, you talk about return shapes.
I love that term.
Speaker 1: Yeah, it’s not just high or low return.
It’s about the shape of the money.
You have growth, income and a blend.
Speaker 2: Break it down.
Speaker 1: Growth is pure net worth acceleration.
You put money in, you don’t expect cash flow for years.
You’re betting on appreciation.
Income is the opposite, all about stability.
You want that quarterly check to help with your lifestyle.
Less upside, but very consistent.
Speaker 2: And that’s the sweet spot for most Henrys.
It gives you some current income so you know the asset is performing, plus some modest.
Growth on top O let’s bring this home.
How do the noyack offerings like N rate, I and two fit into this concrete cloud narrative?
Speaker 1: It’s a great question and rate is focused on logistics and industrial real estate warehouses, which you might think sounds boring next to AI, but think about it.
Logistics is the physical.
Layer of the traditional economy.
It’s simpler to understand.
It’s an onramp.
Speaker 2: An onramp to private markets.
Speaker 1: Exactly.
Don’t jump straight into a liquid cooled Development Fund.
Start with something you can underwrite.
This is a building.
Trucks come in, tenants pay rent.
You build that muscle memory.
Speaker 2: That conservative income aware foundation, right?
And then you have N rate 2, which is more aligned with that edge concept.
We talked about urban infrastructure things closer to the end user, it’s more growth tilted.
So the lesson is start with the roads before you try to build the race track.
Speaker 1: That is the prudent path.
Don’t buy the complex asset until you understand.
The simple one works.
Speaker 2: That’s a crucial take away.
We get so seduced by the complexity of AI, we think the investment has to be just as complex.
But sometimes the boring stuff is where the real wealth is built.
Speaker 1: Boring is often very profitable.
Infrastructure is the definition of boring.
It just sits there humming and collecting rent on the future.
Speaker 2: Collecting.
Went on the future.
That line really stuck with me.
It’s a powerful way to think about it.
Let everyone else try to pick the winning race car.
You just own the track.
Speaker 1: So to recap, we’ve gone from the vapor of the cloud to the concrete.
We know it’s heavy, hot and hungry.
We’ve got the four inputs, power, cooling, connectivity, space, and the three pillars factory.
Powered land and the edge.
We gave you the five step white paper decoder and the one hard rule, the transparency gate.
No audit, no check.
And finally the barbell strategy.
Balanced, liquid and illiquid and pick the return shape that fits your life.
It really changes how you read the headlines.
Speaker 2: Next time you see news about a new AI model, you won’t.
Think about the chat bot, you’ll think about the power plant.
That’s the shift.
The question from the article is, do you own the cloud or just the vapor?
It’s a question every investor really needs to answer for themselves.
Speaker 1: Well, that wraps up our deep dive into the concrete cloud.
It was a pleasure unpacking this one.
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Thanks for listening, and we’ll see you next time.
