Data Centers, AI and Innovation: Part 2 – Ep. 305

Welcome to the Accumulating Wealth podcast. I’m Hunter Satterfield. And I’m Judson Crawford. We’re CPAs, wealth advisors, and partners at Cain Watters and Associates, a financial services firm here to help you navigate the decisions you face every day. Today, we’re continuing our data center series with part two.  

Yeah, and data centers are a major market story right now, especially as AI drives demand for computing power, electricity, real estate, and infrastructure. But the bigger question is, how does that show up in our portfolios, planning decisions, and business costs? We will talk through the opportunities, the risks, and what you should be watching as this build-out continues. Let’s do it.  

Okay, Hunter, before you get into data centers, I do have a little joke for you, okay? What do you call a one-armed man who can’t stop telling dad jokes? Hunter. A little short-handed. But your answer was actually also correct. Okay. Terrible joke, but yes, we do need to address the elephant in the room. If you’re watching us on YouTube, I have one arm. It’s very sad. I couldn’t even put on my headphones. Producer Erin had to help. No, you did have assistance. So yeah, you’re a little hobbled, but – A little down for the count, but I can still talk about data centers, which we need to discuss. 

You’re saying data, I’m saying data. We’ve talked about this. Goonies says it’s data. Well, I was just across the pond, so I’m a little bit more sophisticated in my speech. Well, perhaps beyond talking about my torn rotator cuff that is repaired and The Goonies, we would start with a survey that just came out last week, which is just insane. 

But we … It makes both of us giggle. So, the question was, please indicate whether you would support or oppose each of the following being built in your community, okay? So, an Amazon distribution center, Judson. This is a great question. 26% would strongly support an Amazon distribution center. That’s lower than I thought, honestly. 

I mean, sometimes it takes me until the afternoon to get something I order in the morning, so if it was in my neighborhood, it’d be like instantaneous? All right. 35% would support, strongly support a solar farm, 32% a wind farm in your neighborhood. I would… I’m hardcore out on all those. 

I mean, I guess a solar farm doesn’t bother me that much. The wind farms are just unsightly. They’re just ugly and thin. Well, and they kill the birds. Well, at least solar’s lower. Yeah. It kills the birds. So, we’re all strongly support. We’re, like, in the 30%. Unfortunately, nuclear power plant’s at 14%, which is… I’m wondering, you 14 out of 100, what are you thinking? 

As we were discussing this, Judson just said, ” have they seen The Simpsons?” Yeah. I mean, if you want to know what life is like in a nuclear power plant town, that is as far as you have to go. Is to watch 30 seasons of The Simpsons. 

So, the reason we’re talking about this, listeners, 26% Amazon distribution, in the 30%s for solar and wind, despite killing birds. 14% on a nuclear power plant. 9% of people strongly support a data center in their community. This is insane. So nuclear power over data center. Yeah. You’re, yeah, it’s good. Yeah. Yeah. Almost four times as many would kill the birds over a data center. Okay, so let’s briefly discuss. 

I think we all probably know it, but let’s briefly discuss why. Why is that the case that so few people would be in support of that? And I think that we talked about it a little bit on our last one. It’s a hot button topic and just like many other things, has probably become a little bit political. 

But I think that there’s thought out there that these data centers are killing the environment. Yes. Yeah. Well, yeah, I mean, I think it’s the usage of water, which we basically… we busted that myth on our last episode. The whole power fear, again, busted that myth as well, and there’s a lot out there now about them all using recycled water. All the new ones are standing up their own power. 

In fact, there’s a couple towns where the power’s actually been put back into the system, and so people’s costs are going down. And so, I think those are the reasons. I think, unfortunately, folks are not thinking about the broader things like jobs, right? Which we’re going to talk about today because they are creating jobs for these communities. They’re creating economic growth both in jobs and other areas. And I think the reality is that love them, hate them, have education on them or don’t, they’re not going away, and just the fact that we live in the world that we live in means we need them. 

Yeah, absolutely. I mean, I think that if you think about, like, all the positives, especially if we can actually, again, bust the myths on the water and the power and things like that, and you think about the positives about increasing jobs in a lot of communities that are not necessarily normally susceptible to high jobs, right? Because some of these things are outside the city centers. The taxes, right? So, a lot of these data centers are pouring taxes back into the community, and we’re seeing property taxes in those communities that have sort of rallied around them go down. So that’s a huge one as well. 

The growth of the economy in those towns. There was an article that dropped on Quincy, Washington, how poverty fell from 29% to 6% with the data center providing a new high school, a hospital, a library, police, and fire station. So I think there’s a lot of really good things in there. To your point, though, love them or hate them, we have to have them. 

And it made me think, like, I actually went in and I just did some quick research on this because I think this gives us some perspective on how important it is, not just for the, the global economy, but for the U.S. in particular, because we’ve talked, Judson, for two years now on the industrial renaissance, right? 

I think our listeners are probably sick and tired of hearing that. But you can kind of think about data centers, power generation, continued e-commerce or whatever else. That’s kind of the new industrial renaissance that’s happening across the world and data centers are a big part of that because they’re creating computing power that feeds AI, that feeds what we can do online, our streaming and whatever else it is. 

So, I went and looked and at peak 1945, right after the World War II, the U.S. contributed 50% of industrial and manufacturing output. It contributed 50% of it worldwide. I mean, that’s just a bonkers number, right? Now, granted, war-torn Europe is completely torn apart. Japan’s torn apart, so it would make sense that we would. 

You had some communist countries over in the East as well, but 50%. 1990, before we started to move everything over to China, was about 24%, so it had been cut in half. You did have some growth of some various countries. Right now, y’all, it is only 16%. And so, if we don’t embrace these, Judson, as you said, we are going to see a United States that is worse off compared to other places in the world, and that’s a big negative overall. 

 Well, and again if your major concern is environmental damage, I think that we also have to look at… Again, we debunked this a little bit on our last episode. Go back and listen to it. But we also have to think about just like in every other facet of our world, the technological advances that we see now in such a rapid pace, it’s going to be completely- It’s, it’s completely different today than it was three years ago, and it will be completely different in three years than it is today, right? 

100%. And I think a lot of those things are going to create the abundance that we’re going to talk about later in the episode which is super important. Now, I do think again, as we’re reframing, we’re going to go through, listeners, like, what does this mean? How should I think about it in the markets? What are the broader macro implications? And then also how should I think about in my personal and business financial plan? 

But before we do that, Judson, I’d love for you to just sort of talk through a little bit on the job side, right? Because again, I referenced that very quickly, but that’s a really helpful way to frame, hey, it’s not just the jobs that are used to actually construct a data center. It’s not just the jobs that are used to also then work at the data center. There’s more to it, right? There are electricians and plumbers. You want to go through some of those stats? Yeah. 

So, for a 100-megawatt data center… All right, I went back. It’s okay. I regressed. Yeah. During the construction phase, they will employ somewhere between 800 and 1,200 construction workers at the peak during that, what is typically like an 18 to 36-month construction period. That’s a huge number of construction workers, right? Obviously, that’s going to go down. Once the data center is complete, they estimate that full-time employees, you’re going to be between 100 and 200 full-time jobs at the data center, okay? Now, that doesn’t include indirect jobs, right? So, like you said, from local supply chains, services, support industries to all of those. Those are just the workers at the data center. 

When we look at the impact this has on our economy, in 2026, they’re estimating that by the end of the year, there will be 650,000 direct jobs at data centers, which is up 30% since three years ago, right? And obviously, that’s not stopping, so we’re going to keep that growing and growing, right? And those, again, are just direct employment at the data centers. Absolutely. So, we’re talking a ton of jobs. 

Yeah, and I think we mentioned this earlier, you and I both, we love Colorado. We drive up U.S. Route 287. For all our Texans, Oklahomans, New Mexicans on the pod, you know this 287 drive up to Colorado, and it’s some of my favorite part of Texas, Judson and I know it’s the same for you as well. It’s beautiful in its starkness and just how flat but sunset-y it is out there. And there’s a town out there that actually, a brand-new data center’s being built, and this last time when Carrie and I were driving up there it had gone from, like, zero to 95% completion. 

And of course, they’ve got all the trailers of those temporary workers that are building it. But what blew our minds is that since the last time we had driven up there a little over a year ago, there was a brand-new Tractor Supply. America. There was a brand-new hotel. There was a brand-new grocery store in a place that doesn’t have grocery stores, full stop. Like, they don’t, right? Well, before you even said that what it really means for us Texans is that stop went from just a Town & Country gas station to they’re probably going to get a Whataburger. Oh, hell yeah. Let’s go. And that’s real, guys. That’s real achievement. It is. But I think the point is that those jobs lead to GDP growth for that little town and what are the implications for that, and I think that’s broadly very, very good overall. 

So again, hopefully the last episode plus some of these sort of anecdotes and numbers maybe point you, listeners, toward that. Now, let’s talk about, like, what does it actually mean in my life, okay? So, Judson, when we think about the markets, right, so there’s the easy ones, right? There’s the big mega cap companies and things like that. But how should our clients be thinking about, like where do I get exposure or do I have exposure? Am I overexposed in the markets? 

Okay. Well, I think let’s knock out the big ones to begin with, right? We know, and we’ve talked about on this podcast before, that the large tech companies like the Mag 7 are the leaders in who’s investing in this actual space, right? 

So, when you think about it, projected numbers for 2026 are CapEx for Google– I’m sorry, for Alphabet and for Amazon of about $200 billion each, $150 billion for Microsoft, Meta somewhere between $100 and $150 billion. Bottom line is, they’re projecting that the Mag 7 is going to have about $700 billion of investment in 2026, okay? 

So, we know that if you have exposure to these big technology companies, you’re getting direct exposure to these data centers, okay? Which every single person listening to this has. Yes. Because they’re the core part of the S&P 500. We have them in our portfolios, right? And I think that’s to your point, Judson, like, if you have those, you have some exposure and pretty much everybody on here has it. 

Now, I do think there’s concern because those are going to be the ones that are probably most susceptible to if anything goes wrong in AI growth, that we will see negative earnings as a result and, of course, big impacts to stock prices. And we saw that last week on the reverse. Nvidia, Salesforce is a major software name. Both of those posted well above average numbers on revenues. Nvidia set an all-time record for revenues for a given quarter. Man, stocks — they flew higher. And what goes up that fast can also come down that fast. But again, they all have exposure there, but it goes beyond that, right, Judson? 

Yeah, absolutely. And I think really the way we want our clients to think about this is that if you’re invested in our portfolios, we are not going to be ever overallocated to those seven companies. We’re just not. We’re going to have exposure to them, but we’re not going to be over-allocated to them. 

But you are getting exposure to these investments in a myriad of different ways. And the way that that looks, and we talked about this a little bit on our last podcast, is that you’re getting that significantly through companies that are benefiting from the construction, right? You think about concrete companies, you think about HVAC companies, you think about power, right? You think about electric companies that we have. 

All of those companies, which are in your portfolios are benefiting directly from these data centers. Those are what, where you’re going to see the exposure within, like, your small and mid-cap sector as opposed to your large cap growth sector. 

Yeah, agreed. And that’s why we’ve seen small-caps and mid-caps rip so hard because that’s a lot of what makes up those indices, industrials, manufacturing, utilities. I thought it was interesting because just last week, Peter Thiel, the famous venture capitalist, started PayPal with Elon. Also, he’s in that PayPal mafia, also Palantir, very well-known investor, and his most recent portfolio, they have to report their portfolio exposure, was posted. And just read this off. His largest position is Amazon at 28%, followed by Vistra VST, and then basically a litany of different utility and power companies. So, 28% of his portfolio right now is in Amazon. 72%, literally the remaining amount, is all power, energy, and infrastructure. This guy’s not a dummy, y’all. No. 

And so again, we’re not saying you do that, but it’s not just, “Hey, I’m going to go grab MAG7 to get exposure.” It’s, “Hey, I believe that data centers are going to lead to abundance, and if we have abundance, it’s going to be everywhere. It’s all over the market.” And I think we see that where we have him betting particularly in the energy space, which we’ll talk about more here when we talk about broader macro implications. 

Well, and I think, again, going back to– and that’s a great example of being diversified in this particular area and getting your exposure to this particular area in different ways is, you don’t want to put all of your eggs in one basket. And these large companies, as we said, I mean, $700 billion is a huge number, right?  

And everything we see right now says that the demand is so high that that is not too big of an investment. At some point, because of technological advances, because of over-investment, at some point that’s probably going to teeter to where it’s like we don’t need that much, and there may be an, a point of over-investment, which is a good reason why, again, you want to spread that out between different sectors.  

Yeah, I think in my most recent investment newsletter, the one that dropped for September, you should have it in your inbox already, folks. I just talk very briefly about how we have a concept of risk and we have a concept of uncertainty. And I think too often investors conflate those two, right? They think they’re the exact same. 

But the reality is that risk is recognition that, hey, there are unknowns, but we also have this history, the past events that allow us to have some probabilistic outcomes of what we think is going to happen, okay? Uncertainty is unknowns with, by the way, no history and so as a result, we don’t know what’s going to happen. 

And so, think about uncertainties, folks. It would be like October 1987. It would be like COVID. It would be like dot-com, whatever else it is. But on this one in particular, all we’re talking about is risk. We don’t have uncertainty on what data centers are going to do, okay? We have tons of historical examples that show us what happens when you have an industrial renaissance, a technological revolution. We’ve talked about it at length, right? 

And so, this is not an uncertainty. It is purely risk. And what do we talk about all the time on how you mitigate risk, which we’re going to do a whole series on risk this fall. It’s all about diversification. So, I think that lends itself to how do I get exposure to these names? It’s yes, you should be in the mega cap companies, but you should also be in a whole lot of other things as well. 

So, I mean, I think if we wrap this and we think about how our clients or even our non-clients should frame this conversation, because again, it’s been a hot button topic. We’re going to keep talking about data centers just because it’s such a big part of the investment in our economy. I think let’s wrap up how we frame this for our clients, right? And I think that starts with this is part of your portfolio, right? This is driving part of the reason why your portfolio has been doing as well as it has been, right? And we are going to continue to diversify your investments as much as we can so that you participate in these areas of the economy. 

Yeah. And if it goes sideways for a while, you’re going to feel some pain in your portfolios. I mean, that’s just the reality of it. But if we go against data centers in any way because we think they’re evil, again, hopefully we bust those myths, that portfolio isn’t going up because we’re not going to have GDP growth or abundance. 

And, and I think that’s an awesome segue to sort of the broader macro implications, which we won’t spend a ton of time here. I mean, I think there’s a couple of really, really big ones that we have to talk about. One is inflation, right? And we talked with Brad, Story Time with Brad a few episodes ago. I told a story about taking Ronnie off for sophomore year, and we bought him a TV, and it was, like, $200 for, like, a really nice Samsung Smart TV mounted on his wall. And again, that was a $2,000 TV for you and I back in college. And we’ve talked about the number one disinflationary thing that exists in humanity is technology. 

And data centers are going to be so massively disinflationary in what they can create from an AI perspective and in an efficiency perspective and whatnot. The work that used to take 50 people can now be done by two or three because they’ve got this machine working behind the scenes. 

So, I think a couple things when we talk about macro. Number one, massively disinflationary, which leads to, again, because oftentimes you see inflation and interest rates tied, lower interest rates. It allows us to carry lower interest rates, which leads to ability to finance things like homes, business loans, et cetera, at lower costs. And that is super positive overall. And you don’t think about how something like that in technology can actually impact everything else, but that’s kind of the flow of how it goes. 

Well, we’ve talked on this podcast before about how the small reduction in interest rates that we have seen over the last couple of years has really helped spur on the growth in small and midcap areas of our investments, right? We don’t want to see that go significantly in the opposite direction because it really tightens their ability, just like you said, to borrow, right? So, this disinflationary effect that we talked about on our Story Time with Brad is super important to watch. 

Absolutely, because I mean, at the end of the day, we have to have this, and we have to have it in the most capitalistic way possible. And what I mean when I say that is, is it’s got to be cheap. It’s got to be competitive because that will actually allow us to see the abundance there. So, I think the second big macro thing has to be energy, right? 

So interesting study. Folks, right now, we’re using somewhere around 175,000 terawatts per hour of energy worldwide right now, okay? I can’t even, Judson, I can’t even, like, figure out how… Tera is a big number. Yeah. And there’s 175,000 of them. 

Back just in 1980, it was about 80,000. So just in the technological growth that we’ve seen, we’ve doubled since 1980. It’s anticipated to be well over 260,000 in the next 15 years, okay? That’s a massive number, and the key thing to think about is okay, well, how do we even get to those energy sources? And hopefully we see less coal globally. 

We have less and less here in the United States, thankfully. And hopefully we see continued oil and gas and LNG because those are relatively clean in the grand scheme of things. But even as we see, like, things like renewables grow, which are — I’m supportive of fully, the overall need for energy, for electrons, you have to have electrons to do all of this, is going to continue to rise. 

And so, we almost need to pull on every energy source, nuclear, renewables, all of it, which is what we’ve talked about at length here on the podcast. But without that… So, I think, again, from a macro perspective, we have to lean into energy. And it has to be all sources because otherwise we’re not getting there. 

Well, and just like you said, we need to lean into all of those areas. We will continue to lean into all of those areas. We will see. We talked about this, I can’t even remember, a year or two ago on our predictions. We are going to see nuclear at some point. Probably won’t be in your neighborhood, but we are going to see that as a bigger percentage of it. 

All of that is going to become more efficient so that we can meet this demand. The chart you were just looking at that showed the growth in the need of those electrons looked a lot like our 1:1, 2:1, 3:1 growth chart because of the advancements in technology, and it’s not slowing down. 

Not at all. And to your point about efficiency, I think that’s a really great sort of thing just to double-click on very quickly. There was a great study that just came out that talked about how efficient are we getting in energy? And the easiest way to think about this is like, what could the average blue-collar job in the United States buy from a kilowatt hour perspective compared to today? 

So, in 1980, which is the number I referenced earlier when we’re using about half of the global consumption of energy, in 1980, an hour of U.S. blue-collar labor could buy about 152 kilowatts an hour, okay? So, 152 for an hour of work. Today, it buys 207. So, it’s not just that we’re using more energy, but we’ve actually increased about 36% the efficiency of how we’re actually getting there. 

That’s incredibly important. And a lot of it is because of the advancements in fracking and LNG and renewables and things like that. But man, if we can get online with some of those others, it’s a huge win as well. I think from an investment lens though, it can be very difficult for folks to go out and try to bet on those things because you never know the winners or the losers there. So, I would be very cautious on that. 

But broadly macro– We may not even know what the winner looks like five years from now. Amen. That’s the wild thing. Yeah. We may not even know what it looks like. Yeah. All right. So, with that, folks, the last thing I think we need to cover, Judson, is what does this look like for folks and their personal and business financial plan? 

And I think the easy answer is we’ve said it time and again, you have to get in the game. You have to engage. And I think most of our clients, they are engaging in the process. But how do you think about, like, what does a data center mean for my client’s plan, Judson? 

I think in a way, I’m going to take a step back here, and I think that when you think about people and the way they think about data centers, it’s probably either they think about it very little or they think about it way too much, right? 

And I think that generally for our clients, the way they should think about it is again, I think it’s good to gain knowledge. I think it’s good to understand, and that’s why we’re talking about these things. But we’re trusting in our money managers and our advisors to get you into these areas not only at the right time, but in a diversified way.  

I think it’s important for our clients out there that maybe don’t use our investment portfolio. I think they need to understand this maybe even a little bit more to understand whether they are diversified enough in their portfolio in this. Whether that could be under-diversified because you don’t have a lot of exposure at all to the technology sector that is probably fewer than the people that, and we’ve seen this time and time again, that just even if they don’t know it, they’re way over-allocated to big cap technology.  

And I think that this conversation that we’re talking about and the ways that you can be in this type of investment but do so in a really diversified way is important for people to understand when they look at their portfolio. Because again, like you said, it could go sideways at some point. It very well likely at some point will go sideways. That’s the way that the market works, and you want to understand how you’re invested in these things and how over-allocated or under-allocated you are. 

Yeah, I love those. I would add maybe two more in maybe a different direction. The first would be all the things we talked about with job growth, right? And the Tractor Supply that was built, and the opportunities for not just your town, but all of the United States. I mean, think about what the implications are to a dental practice, to a small business in a community. Now there’s more people that have more jobs that have more money to spend, right? 

So, I mean, I think that’s, like, broadly good. Yeah. I mean, and that’s what we’ve seen in small businesses over the last 30 or 40 years is we’ve seen a growth in technology. So, I think that’s number one. That’s a good thing, and you should embrace that job growth and try to go grab those patients. 

The second thing I would say is probably a little bit more personal, because I think there are going to be maybe three types of people and you kind of went through this. But I think the first is going to be the person that says, ” I’m going to avoid everything related to AI technology and data centers because I think they’re bad or they’re evil,” or whatever else it is. 

I think the second person is going to like, “I’m going to completely go all in and let an AI bot do everything for me and just sit and chill and veg out.” What’s the movie? WALL-E? WALL-E. Yeah, WALL-E. I think the third person’s going to be the one that wins, and I read this interesting article about obviously the last time we had a major renaissance well, not the last time, but the most well-known renaissance, the Renaissance. 

If you think back then, it was talking about three big types of people. It was talking about artisans, it was talking about farmers, and it was talking about pirates. And I love that idea, like three just very generic. But if you think about it, all three of those people were not single-skilled in any way. 

Artisans are like– they’re total polymaths. They can do anything, everything, right? They understand how to not just paint the art, but procure different pieces to sell them, to develop a network, whatever else it is. Farmers, same thing. Like, they can actually plow the field, but they also are running a business in how they actually distribute that, get it out to the masses, whatever else it is. 

And then pirates. Arrr. There comes the Red Raider. Pirates… we’ll come up with a good joke at the end for that. I think if you think about them, like not only are they sailing the ship, but man, it is just like all the things that they can do. And those three roles are three roles during that renaissance that truly like grew and blossomed. It was because they were multifaceted, right? 

And I think that’s what we have to be as learners, as thinkers, is we have to be people that engage with it but use it to help us with tasks and efficiencies, but then also use it to build businesses and to think creatively and to expand our own knowledge, et cetera, et cetera. So that’s how I kind of think about it, how I’m talking to my kids about the opportunity in data centers because I think that’s the true opportunity for each individual person listening. 

Well, it’s interesting, you bring your kids into it, and I was talking to a buddy of mine his daughter is in college, and I was asking him what she’s majoring in, and basically, she’s doing a double business major in finance and basically AI technology. And I just hadn’t thought about it. Of course, these business schools have specific MIS AI tracks. I mean, of course they do. I want to go back to college. I would totally nerd out on that stuff. You would. Yeah. You would. I’m going back. I’m going to get a history major. All right. 

Well, that’s data centers. Super interesting stuff, folks. Hopefully it was helpful. As always, if you’ve got questions about any of this stuff, shoot them over to us. We’re happy to address and answer them. And the best way to keep up with us is to subscribe to this podcast, that way you never have to miss an episode, and you can go back and listen to all the others. 

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