00:00Cyrus one the data center backed by KKR and BlackRock's G.I.P. is among the companies racing to expand
00:06capacity to meet that demand. Joining us now is CEO Eric Schwartz.
00:10Eric you only need to look a quarter of a century ago when winning the Internet build out. You didn't
00:16need capital for it. Now things have massively changed.
00:19As you compete against your peers can you lay out just the immense scale that you need the chips the
00:25energy the capital that is necessary to win in this era.
00:30Danny you're absolutely right. Scale has grown tremendously over the past 20 30 years and that's driven as much by
00:39the fact that this infrastructure is integral to every sector of the economy whether it's finance health care media the
00:47list goes on.
00:48And so as all those categories grow the capital required has risen substantially the investment in the infrastructure the equipment
00:58you know we have a very sophisticated supply chain operation that brings all these components together to allow us to
01:06deliver that type of capacity to our customers.
01:09And it just keeps moving at a very high rate. And our goal and challenge at Cyrus one is to
01:16make sure that we're executing and delivering to support our customers grow.
01:20You have so many data centers Eric under development. Just walk us through that process like how long does it
01:28take. Have you completed any. Are there some up and running. And what are the big bottlenecks.
01:35So Matt we've got more than 50 data centers operating around the world and will pass 60 here shortly. So
01:42those are all live in operation and then we have.
01:44We have a substantial number that are a substantial number that are also under development and the development process starts
01:51as early as identifying potential sites and ensuring that we have the resources there to operate a data center that's
01:59access to power it's access to the expertise that it takes to run one of these sites takes a supply
02:07chain to support it.
02:09And so we can be in that process for a year two years or longer. And then at some point
02:15we start construction and construction can take us anywhere from a year to two years and in some cases longer.
02:23But everything that we focus on in Cyrus one is very oriented towards having a standardized construction model that lets
02:32us deliver capacity as quickly as possible because that is the number one objective from our customers is time to
02:40market and getting the capacity in place to support their business.
02:44I mean I imagine you identify very early on sites where you can get land obviously where you can get
02:52power importantly.
02:54And I would guess that labor is the hardest part of putting one of these things up. Right. I mean
03:00everybody wants those workers.
03:04Labor has definitely become a constraint over the past couple of years. And the these the skilled trades that are
03:12involved whether it's electrical mechanical plumbing etc.
03:18Those are fundamental and you can't build data center without those skilled trades and so you know as much as
03:24our focus has been on making sure that we have the equipment that goes into these data centers.
03:30We also maintain extremely close relationships with the various contractors and subcontractors who actually do the work on site to
03:41ensure that those skilled labor people are there that they're trained that they're safe and that we can build as
03:50quickly as is as is feasible.
03:53But it's definitely become a constraint here that we and the rest of the industry are dealing with.
03:58You also have some involvement with this government. You were selected conditionally by the U.S. Army earlier this year
04:03to for a hyperscale data center project.
04:07I spoke with Peter Orszag last week the Lazard CEO who has been describing the involvement of industry and of
04:16the government around data centers as discretionary state capitalism where they play a more active role in directing capital and
04:23industrial policy.
04:25Eric is there a level to which that this goes too far or is this the right involvement from this
04:31U.S. government.
04:34The particular project that we've been tentatively awarded is correctly described is in Utah on land that the government has
04:44decided that they don't necessarily require for its historic use which was tied into the military.
04:52And so with that land available I think the government is looking for what is the next highest and best
05:00use.
05:00And if they can find an opportunity that both supports various government policies but also generates a financial return to
05:09the government then that's an attractive proposition for the government.
05:13And it also becomes a win win for the industry. As to how far this goes and the comments that
05:21you mentioned that that's going to be a long running debate.
05:25But so far the number of instances like this while they're quite high profile are fairly limited and so I
05:32think the opportunities are worth pursuing but it has not become pervasive in my opinion.
05:39Eric how much longer do you think we're going to see demand for compute increasing.
05:46I mean is it something where you see it going out 10 or 20 years because at some point you
05:51have to imagine we're going to be able to generate a lot more compute with far less in terms of
05:59hard assets.
06:00You know we're already talking about folding space right now with Huawei chips. But is it generational you think that
06:07we're going to see this demand on the uptick.
06:10I think the demand will continue to grow at the moment. Most of the technology companies who are deploying this
06:18infrastructure see themselves as supply constraint meaning that they have more demand from their customers than they can currently meet.
06:26And that's driving the investment in the growth in the industry. And we expect that to continue for a number
06:33of years.
06:33Whether how long and how far is difficult to predict. We have very clear line of sight on capacity and
06:43requirements over the next three to five years and then reasonable visibility on out towards the 10 year horizon.
06:51How it goes from there will depend very much on the evolution of the technology both in the physical technology
06:59for chips servers storage and networking and then beyond that how the applications take off.
07:08And so you know the data center industry has become and the technology industry in general have become much more
07:17efficient in how they use compute resources and yet the demand for those resources continues to outstrip the productivity which
07:26drives the growth.
07:27And you know my experience in the industry is that's going to continue for easily the next five years and
07:34probably well past that.
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