Permits, coders and a cowboy town

TIM: Who gets the AI boom? Whoever says yes first. I say yes to every AI app the day it launches, so I’m basically a sovereign wealth fund. Three yeses today. The chips stuck in warehouses are waiting on some town’s permit, not on buyers. AI does to coders what the tractor did to farmhands: more software from fewer hands, and the people it moves land somewhere better. And the town that said yes to a data center won.

DEV: My chips are in a warehouse too. A storage unit in Daly City, between my kayak and a box marked “crypto, do not open.”

ZURI: A padlocked box of crypto. Dev, that’s not storage. That’s a grave with a combination lock.

MARGO: Is the unit powered?

DEV: One outlet. The mini-fridge is on it.

MARGO: Then congratulations, Dev. You’re Amazon.

TIM: Story one. Eugene Kim, Business Insider’s Amazon reporter, got Amazon’s own emails. It’s buying billions in Nvidia server racks it can’t turn on yet.

DEV: It’s an Amazon process, Early Rack Receipt. Amazon used to own a rack at the data center. Now it owns it in a warehouse.

TIM: About five billion dollars of racks early, and three billion more a month planned, per Amazon’s August emails.

ZURI: And they’re in a warehouse because…

DEV: Power. Some sites had room for the racks, but not enough power to turn them on. A Ferrari in a town with no gas.

MARGO: Five billion dollars of furniture. I want the storage contract.

TIM: Ed Zitron, the tech critic who writes the newsletter Where’s Your Ed At, thinks it’s worse. He said so on Prof G Markets.

CLIP: Ed Zitron: “It’s a direct result of the high bandwidth memory going into NVIDIA GPUs that are sitting in warehouses. I think hundreds of millions, at least $200 billion worth of them are sitting in warehouses.”

MARGO: His own post. “Approximately fifty percent warehoused,” right above “assuming a fifty-fifty split.” Run his numbers, it’s about two in five.

ZURI: Fifty percent, assuming fifty-fifty. Margo, he’s doing your job with a coin.

TIM: Fine, not half. He also calls it channel stuffing, Nvidia pushing racks on buyers. I say they’re waiting on permits.

HOLLIS: Says who?

TIM: David Sacks. Venture investor, co-hosts All-In.

CLIP: David Sacks: “And then we have all the regulatory headwinds, right? Local communities are not racing to give out new entitlements around this.”

ZURI: “Entitlements.” In my world that’s a guy who thinks dinner means dessert.

TIM: And Sundar Pichai, Google’s CEO, says nobody has enough.

CLIP: Sundar Pichai: “everyone is short, not just us, other companies, and everyone wishes you had 2x of what you had planned for.”

MARGO: Tim, Google rents out computing. Its cloud sales just grew eighty-two percent. That’s the umbrella salesman telling you it’s raining.

TIM: He also said the computing he has today comes from decisions he made in twenty twenty-four. Buildings take years. That’s a jam.

DEV: And the rent says shortage. Silicon Data, which tracks what chips rent for, has an old Nvidia H100 at under three bucks an hour.

MARGO: Up more than a third since December. Still can’t settle it. A glut doesn’t lower the rent until somebody plugs it in. Follow the cash.

ZURI: Like Dev’s kayak. Very expensive, never once been wet.

HOLLIS: Cash is my favorite part. It’s where the bodies are.

MARGO: Our math. Alphabet, Google’s parent, books everything it bought and hasn’t switched on yet. Chips, servers, half-built buildings.

ZURI: A waiting room for robots.

TIM: How fast is it filling?

MARGO: First half of this year, up fifty-six percent.

HOLLIS: And the buildings?

MARGO: US data-center construction, by the Census Bureau’s monthly count: up thirty-one percent, same six months. The buying is outrunning the building.

DEV: Unfair. Her pile has half-built buildings in it, and it’s Google worldwide. Census is just data centers in America.

MARGO: Then the cleaner test, same company. This year, for every dollar Google switched on, another dollar went into the waiting room.

ZURI: Somebody’s ordering ahead of the walls.

TIM: Or the walls are late. That’s still my jam.

MARGO: Exhibit two. Nvidia used to get paid in forty-five to fifty-five days. Last quarter, sixty.

DEV: Nvidia says why: it gave some big, investment-grade customers longer to pay on multi-quarter deals.

MARGO: So the seller is bankrolling the buyers’ head start. Nobody’s stuffing a channel, Ed. Nvidia’s a sugar daddy with sixty-day terms.

HOLLIS: You know Nvidia’s done this twice before?

TIM: Done what, Hollis?

HOLLIS: A shortage, then a pile. Twenty eighteen: crypto miners bought every graphics card, crypto crashed, and Nvidia’s CEO blamed “excess channel inventory.”

ZURI: Crypto crashed. Dev, go check the grave.

HOLLIS: Twenty twenty-two: after the pandemic shortage, Nvidia’s gaming sales fell forty-four percent in one quarter. Two shortages, two piles.

DEV: Those buyers were gamers in basements. These are Amazon and Microsoft, and Microsoft has hundreds of billions in signed contracts.

HOLLIS: Dylan Patel, who runs the chip research firm SemiAnalysis, said it two years ago. If the wait is a year, people order two years’ worth.

ZURI: That’s every sample sale I’ve ever been to. Two of everything, in case they run out of me.

DEV: The chips are real, Hollis. I’ve touched them.

HOLLIS: The chips are. Not every order is.

ZURI: It’s toilet paper. Erik Bernhardsson, who runs Modal, a startup that rents out chips, said it first.

CLIP: Erik Bernhardsson: “to me, that’s a little bit sort of almost like the great toilet paper shortage of, you know, the pandemic or whatever.”

TIM: I still have forty rolls from that.

MARGO: We know, Tim. The only thing you’ve ever stockpiled besides app subscriptions.

ZURI: March twenty twenty: US toilet paper sales went up eight hundred and forty-five percent in two days, by NCSolutions, a sales-data firm.

DEV: And then?

ZURI: Three weeks later, down sixty-two percent from the panic. It was never missing: half was office paper, and everyone was home. Wrong building.

TIM: Okay. Half right. It is a jam, and the builders say it’s power, not permits.

HOLLIS: Half right. I ran the odds this morning. I had you at a third.

MARGO: And the buyers?

TIM: They’re ordering ahead of the buildings, partly on Nvidia’s tab. It’s a jam they’re making worse.

ZURI: So everybody’s hoarding toilet paper, and Nvidia’s paying for the Costco run.

TIM: Story two is the one I’d put on my headstone. AI will do to office work what the tractor did to farm work.

ZURI: He means it. It’s framed. He salutes it.

TIM: More software from fewer hands, and the people it moves end up somewhere better. And Sacks says the demand’s already here.

CLIP: David Sacks: “Now we’re seeing that actually demand for coders is increasing, even though 95% of the code’s written by coding assistance.”

DEV: Ninety-five percent is his number, unsourced. But I buy the shape. The model writes it. A human reviews it and owns it at three a.m.

ZURI: What else do you do at three a.m., Dev?

DEV: Code review. It’s the only thing I do at three a.m. I’d tell my mother about.

MARGO: Now the other side. Tenex, a consulting firm that sells big companies AI makeovers. One of its people, on Latent Space, the AI engineers’ podcast.

CLIP: a Tenex founder or staffer: “when people say that AI is going to replace all of the work that people don’t enjoy doing, I think that’s a little bit of cope for the reality of just people are going to be put out of jobs because a lot of people don’t have the luxury of liking or not liking a job. They do a job to make money.”

TIM: Cope? I paid a framer for that.

MARGO: He’s right, Tim. Nobody’s job is to be fulfilled. It’s to get paid.

ZURI: Says the woman who sold naming rights to her own engagement.

TIM: Then let’s test it. Hollis.

HOLLIS: Pick your start date, pick your verdict. Jobs at the firms that write software for other companies: since twenty nineteen, up seven percent.

TIM: Up. Sacks wins.

HOLLIS: Since their peak, March twenty twenty-three: down five.

TIM: Down. Sacks loses. Never trusted him.

HOLLIS: And that peak wasn’t a pandemic bulge. It sat right on the pre-pandemic trend. That’s where the line broke.

MARGO: Right when the Fed was hiking and a tax change made coders pricier. Boring reasons. The only kind that turn me on.

HOLLIS: So I need a control. Everyone else in an office: lawyers, accountants, architects, consultants. Same economy.

DEV: Lawyers, accountants, consultants. Hollis’s group chat finally did something useful.

HOLLIS: Since twenty nineteen, they’re up sixteen percent. Coder shops, seven. Since the peak, they’re up three. Coder shops, down five.

TIM: And rates came down from late twenty twenty-four. The coders kept falling anyway.

MARGO: Or the tax. Section 174: from twenty twenty-two, a dollar of a coder’s pay got about ten cents of deduction in year one.

DEV: Honestly, I’d have stopped hiring me too.

MARGO: Congress gave it back in July twenty twenty-five. The jobs kept falling. So the tax isn’t what’s holding them down now.

ZURI: Margo just solved a murder, and the victim was a tax code.

TIM: So it’s my tractor, at the shops that write code for hire. More software, fewer hands there.

HOLLIS: That half shows up. Business spending on software, by the Commerce Department’s count: up thirty-seven percent since early twenty twenty-three. Coder shops, down five.

DEV: Careful. Part of that is companies paying their own coders to build in-house. It’s spending, not lines of code.

TIM: Still a tractor. The frame stays up.

ZURI: “Vibe coding” was Collins Dictionary’s word of the year last year. My agents flagged it first, Dev. Yours were reading the paper.

DEV: Vibe coding: describe the app you want, and the AI writes it.

ZURI: So the boring jobs go first. Testing, maintenance, all the beige stuff.

DEV: Backwards. The junior work went. The beige senior stuff stayed: review, maintenance, me at three a.m.

HOLLIS: And here’s who’s being moved. Stanford economists, with ADP’s payroll records: workers twenty-two to twenty-five in AI-exposed jobs are nineteen percent behind their peers.

MARGO: Laid off?

HOLLIS: Not hired. Older workers show no gap. The young just aren’t being let in. Where they land instead, nobody’s measured.

DEV: So I’m safe.

ZURI: You’re twenty-eight with the back of a retiree, Dev. You’re senior.

TIM: The tractor took a generation too. And the farmhands landed somewhere better.

HOLLIS: The output did, and so did the ones who left. Farm output’s up about two hundred percent since nineteen forty-eight.

ZURI: With nearly seventy percent fewer farmworkers by two thousand. Where’d they go, a daily show?

HOLLIS: Economists tracked Southern men from nineteen-ten to nineteen thirty. The ones who moved north came out well ahead.

MARGO: Because they were the go-getters?

HOLLIS: Even counting that. But they had to leave home to get it.

DEV: So the tractor’s success story is “leave home.” That’s a country song where the dog dies.

MARGO: So say it, Tim. All of it.

TIM: Tested on air: the tractor half is showing up at the code shops. The “somewhere better” half isn’t proven either way yet.

DEV: So the tractor works. It just runs over the interns.

TIM: I still believe it. It isn’t proven.

ZURI: That frame needs an asterisk.

TIM: Story three. Prineville, Oregon. About ten thousand people, an old sawmill town in the high desert.

DEV: Meta built its first company-owned data center there in twenty eleven. Then Apple came.

ZURI: Marketplace, the public-radio business show, found a Main Street guy mourning the vibe. A vibe is a brand. Prineville went from Marlboro ad to screensaver.

TIM: My take: Prineville said yes, gave up fifteen years of property tax, and got its comeback.

HOLLIS: Comeback from what?

TIM: The city’s economic development chief says unemployment was near twenty percent in two thousand nine. Now it’s about six.

MARGO: Read the term sheet. Oregon’s rural enterprise zone: up to fifteen years with no property tax on the buildings or servers. Land still taxed.

ZURI: So a fifteen-year free trial.

TIM: Here’s our math. Marketplace aired just over thirty million a year, waived. By the assessor’s own report, that’s just the county government’s slice.

DEV: And the rest?

TIM: Add the schools, the city, fire, parks: more than a hundred million a year, waived. Nearly three times what every district here collects.

MARGO: And Meta and Apple paid under four hundred grand. Dev’s dated people who asked for more up front.

DEV: Once. And she was a CPA, so it was deductible.

MARGO: Maybe the deal’s still fine. In twenty ten, the region’s economic development guy said without the zone, “this project would not be moving forward.”

DEV: So the hundred million was never on the table. You can’t waive money you were never getting.

TIM: Exactly. Meta saved Prineville.

HOLLIS: Did it? Bend is thirty-five miles away, in Deschutes County, with no Meta.

ZURI: Bend. Where Hollis goes to buy his fleece wholesale.

HOLLIS: Residents with a job since two thousand seven: Crook County, Prineville’s, up thirty-five percent. Deschutes, up thirty-seven.

TIM: So Prineville just kept pace.

HOLLIS: It ran a step behind Bend before the crash, and it’s the same step behind now. Bend’s boom lifted both.

MARGO: So Meta saved Prineville the way Tim’s agents save him time. It showed up and took the credit.

HOLLIS: Count from the two thousand nine bottom and Crook grew faster, fifty-eight to fifty-two. It had further to climb.

TIM: Then I’ll say it. The yes didn’t buy the comeback. Since before the crash, Crook grew at Bend’s rate.

MARGO: So what did the yes buy?

TIM: A tax base. The data centers are worth more than twice everything else on the county’s roll, combined.

DEV: Two Crook Counties and change, in buildings with almost nobody inside. About eighteen million dollars of investment per job.

ZURI: Almost nobody inside. So, Hollis’s birthday party.

TIM: Why so few people?

DEV: It’s servers and desert air. Meta’s own Prineville design skipped the chillers: outside air does the cooling. You can’t hire a breeze.

TIM: And it starts paying next year. The assessor expects Meta’s bill to go from under two hundred grand to about four million.

HOLLIS: It’s happened before. The Dalles, a river town in Oregon. Google’s first data center there came off its break in twenty twenty-two.

ZURI: The Dalles. A town with a “the” in front is either a band or a cult.

HOLLIS: A bill over five million, from one building. About ten percent of the whole county’s roll.

DEV: And Pichai, the Google CEO, says what a town should actually ask for.

CLIP: Sundar Pichai: “communities early, doing it transparently. We are committed to making sure we are bringing incremental power and we cover 100% the cost of our power needs for these projects.”

MARGO: Prineville already asked. The city says its electric franchise fees, its cut of the power bill, are bigger than its whole property tax.

ZURI: So the cowboys left, and the town started taxing the outlet. Dev, your mini-fridge owes Prineville money.

MARGO: Here’s the catch. Once every break ends, by twenty thirty-five, about seventy percent of the county government’s levy comes from two companies.

ZURI: A one-industry town again. Prineville keeps going home with whoever has the biggest machine.

HOLLIS: I know how a town that bets on one industry ends.

HOLLIS: It ends as Prineville, looking for a data center.

TIM: Scorecard. The chips are a jam the buyers are making worse. My tractor is half proven.

HOLLIS: Half proven. That’s your best average since I started tracking you.

MARGO: And Prineville?

TIM: I said the town that said yes won. It didn’t win the comeback. Bend did. That one fell.

HOLLIS: So the yes was a mistake.

TIM: Pick your start date, Hollis. Count jobs since two thousand seven: Bend’s rate.

DEV: And taxes? Asking for my kayak.

TIM: Count them once the breaks run out, by twenty thirty-five: a tax base more than twice the rest of the county.

MARGO: Two companies paying seventy percent of the county’s levy. Prineville finally has my business model.

ZURI: Your business model is an OnlyFans with a forty percent margin.

DEV: And those Amazon racks are still waiting on a power line. Prineville, call me. One storage unit, one outlet, fifteen years tax-free.