Microsoft to Buy AI Computing Power From IREN for $9.7 Billion

Bloomberg

Watch Microsoft to Buy AI Computing Power From IREN for $9.7 Billion - Bloomberg on Dailymotion

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00:00Because there's Microsoft as well today inking a deal with another cloud provider and bringing Dell into that deal as well.

00:07Yeah, and NVIDIA.

00:08And of course, and NVIDIA too.

00:09All paths lead back to NVIDIA, which is supply the GPUs for all of this sort of cloud computing.

00:13But what's interesting here is IREN is an Australian company, but actually has significant compute.

00:17IREN, that's how we're going to say it, IREN.

00:19And that's how we're going to, amongst your friends going to call it.

00:21That's fair, that's fair.

00:22Send in notes if you know any different.

00:24But IREN is saying that it's going to be offering its actual Texan-based compute.

00:28Remember, this is another example of a neocloud that used to be a Bitcoin miner.

00:32You've seen that with CoreWeave, seen it with some of the other players, NABIA is over in Europe.

00:36And Australia has been doing the same thing.

00:38They've got big offerings here in America, and they're able to offer that out to Microsoft,

00:43which we know is not able to capitalize on the amount of demand because they've got a supply issue.

00:48We heard that from Amy Hood, the CFO, on their earnings as well.

00:51This is a company that's having to allocate more capital expenditure.

00:54They're building out their own, but they're also going to neoclouds more broadly.

00:58We've seen Nebius as one, we've seen N-Scale as another, and now they turn to more access in America.

01:03So it's interesting that we're seeing Microsoft still having to double down.

01:05Neoclouds are what we call, what, just businesses that don't have any other business besides cloud?

01:11They just know how to run a data center efficiently.

01:13And then they go to a Dell and buy all of the equipment, whether it be the servers, the chips that go inside the servers.

01:19And we've got some real detail on the numbers here.

01:21They're saying, look, I'm paying $5.8 billion, this is IREN, to Dell for the equipment.

01:25But then longer term, this is a more than $9 billion deal with Microsoft.

01:29You're starting to understand some of the margins, some of the operating costs more broadly.

01:32Elsewhere, more debt.

01:33That seems to be the theme, right?

01:34Have a deal with someone and take on more debt.

01:37This time, it's Alphabet.

01:38It seems like it's both European markets and U.S. markets that it's tapping.

01:41But this is a completely different model for these tech giants, isn't it, to do so much of the growth in CapEx through debt?

01:47Because usually it would have been their own money.

01:49And actually, there's that $3 trillion figure out there coming from Morgan Stanley.

01:53And look, we're awash with numbers, so it can be hard to really understand.

01:56But $3 trillion is what Morgan Stanley thinks is going to be needed to roll out the AI data center spend to 2028.

02:02They think about half of that's going to come from these companies' cash flows.

02:04But the other half is going to come from interesting financing, whether it's Blue Owl that we see Meta turn to,

02:09or whether it's the debt markets, which Meta tapped $30 billion worth of last week.

02:13But now we see Alphabet go for €3 billion over in Europe.

02:16They already did their first European sale at the beginning of the year.

02:19And then they're tapping the U.S. markets as well.

02:21And look, interest rates have been coming down a bit.

02:24This is an interesting way to continue to show your commitment to growing.

02:27And of course, remember, Alphabet, we rewarded for spending more on their compute last week.

02:32We're seeing the growth trajectory for Alphabet and for their Google offering.

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