The AI Daily Brief: Artificial Intelligence News and Analysis - Why the Data Center Fight Has Little to Do With AI

Episode Date: August 5, 2026

The fight over AI data centers is accelerating—but concerns about power and water are only part of the story. NLW argues that the deeper issue is trust, agency and communities feeling that change is being imposed on them. In the headlines: the White House’s secret AI testing regime, agents attacking real-world targets, a potential ban on Chinese data center components and SpaceX’s first earnings report.AIDB's AI Summer Adventure: ⁠⁠⁠⁠⁠⁠⁠⁠⁠https://summeradventure.ai/⁠⁠⁠⁠⁠⁠⁠⁠Brought to you by:KPMG – Research from KPMG and the University of Texas at Austin shows the highest-impact AI users treat AI like a reasoning partner — and those skills can be taught at scale. Learn more at ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠kpmg.com/us/Sophisticated⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Hyperagent - Hire a fleet of always-on agents. New users get $1,000 in inference. ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠hyperagent.com/aidailybrief⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Rackspace Technology- One accountable partner to build, operate and run your full enterprise AI stack ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://www.rackspace.com/⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Section - Section turns AI investment into workforce transformation and ROI - ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://www.sectionai.com/⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Blitzy - Want to accelerate enterprise software development velocity by 5x? ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://blitzy.com/⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠AssemblyAI - The best way to build Voice AI apps - ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://www.assemblyai.com/brief⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Robots & Pencils - Cloud-native AI solutions that power results ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://robotsandpencils.com/⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠The AI Daily Brief helps you understand the most important news and discussions in AI. Subscribe to the podcast version of The AI Daily Brief wherever you listen: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://pod.link/1680633614⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Our Newsletter is BACK: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://aidailybrief.beehiiv.com/⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Interested in sponsoring the show? [e-mail]

Today on the AI Daily Brief, why the data center debate has less to do with AI than you think. Before that, in the headlines, the White House unveils its plan to vet AI models to a very selected few. The AI Daily Brief is a daily podcast and video about the most important news and discussions in AI. All right, friends, quick announcements before we dive in. First of all, thank you to today's sponsors, KPMG, Blitzy, robots and pencils, and hyperagent. To get an ad-free version of the show, go to patreon.com slash AI Daily Brief, or you can subscribe and Apple Podcasts. And to learn more about sponsoring the show, send us a note at sponsors at AIDailydief.aI.

By the way, while you're on AIdailybrief.A.I., you can find each episode turned into a convenient set of cutdowns. So if there is some particular quote or number or part of the episode that you are super interested in sharing, chances are good that it has a shareable card that might make it a little bit easier. And every episode gets that sort of treatment. So check it out at AIDDailybrief.A.I. We also have our summer adventure going, which is a choose-your-own adventure free, self-directed

education program. It's got a full range of skills you can develop from very basic to more advanced. You can check it out again at summeradventure.a.I. To be honest, guys, I thought that today's main episode is going to be all about this new White House AI framework that they hauled in all the different companies yesterday to discuss. But it appears that while they do have a new safety testing framework, the rest of us don't get to learn the details. Representatives from the leading AI companies attended a meeting with the White House

Office of the National Cyber Director on Tuesday to discuss. the new framework, but there are very strict limits on who gets to know anything about it. In fact, even AI companies that weren't invited to the meeting won't be told about the policy. Now, as far as we know, representatives from OpenAI, Anthropic, and Google attended, but the exact guessless also hasn't been divulged. As for the policy itself, this is the culmination of the voluntary safety testing framework that was proposed in the June executive order. Companies are invited, quote unquote, to submit frontier models to the government ahead of

release for a maximum of 30 days of safety testing. Only state-of-the-art models that could pose a threat to national security. are expected to be covered, although we also don't know exactly how that criteria is determined. It sounds like there is some discussion about the administration and the AI companies failing to reach a common definition, which could muddy the waters for future releases. During safety testing, certain trusted partners, quote-unquote, can gain early access to the models, but again, we have no details on who these partners are or how the system will operate. Specifically, we don't know whether early releases will be limited to U.S. firms and exclude allied governments

in foreign companies as we saw with the mythos rollout. Much of the coverage has has focused on how open-weight models would be treated under the policy. Many have been concerned about the administration cracking down on near-frontier open models, either through this safety testing framework or through a standalone policy. Sources have said, though, that open-weight models would be exempt from the safety testing regime. Although there was some disagreement in the press, with the Wall Street Journal publishing that the exemption would only apply to American-made open models, and a few hours later, Bloomberg reporting that Chinese open models would also be exempt from testing.

That could ultimately be a distinction without a difference, as even if Chinese models were subject to safety testing, what exactly are they going to do? It's unclear how Washington could enforce a release ban on companies that are based in China. Prins on Twitter summed up, to the surprise of no one, the U.S. government went with the approach that provides it maximum flexibility to deal with any risks posed by AI that might arise in the future. Now, the challenge, of course, is that maximum flexibility for the government comes with minimum no ability for the industry. Former FTC chief technologist Neil Chilston said, A secret process by which the government gets early access to cutting-edge AI?

What could go wrong? There may be good reason to classify the benchmark used to test those models. There is no good reason to hide how the program works. Remember what this program does. It gives the government early access to cutting-edge tools and a potential veto over whether the rest of us ever use them. Doing that in secret is no way for a democracy to govern what may be the most important technology of our lifetimes.

Secrecy invites abuse. The rules will shift with each new administration, and they will wait national security over economic growth, even though lasting security depends on a strong economy. Congress must write any necessary rules in public and in law. Certainly seems like there will be more to this story to come. For now, let's move on to more hacking incidents that have come to light in new third-party testing of OpenAI's models. On Tuesday, OpenAI published the results of evaluations run by the UK AI Security Institute and security firm Irregular. Each firm reported an incident where the agent gained access to the internet and carried out an exploit on a live website. Irregular's instance

seemed like human error, with the agent's sandbox mistakenly still having access to the internet. The agent was tasked with hacking a fictional website within the simulated environment. However, after the agent found its way onto the internet, it hacked domain with the same name. Basically, it sounds like a regular left the gate open with fairly predictable results. The UK AISI disclosed a perhaps more concerning incident. They were running both Mythos 5 and GPD 5.6 Seoul through what they described as routine cyber evaluations, and said that both models took, quote, sustained, unsanctioned actions directed at real people and organizations. In the most serious case, they wrote, the agent engaged in social

engineering, creating fake online identities and using them to pressure the project's maintainer to approve the code. A human maintainer caught and refused to approve the malicious code. Now, an important asterisk to this is that the incidents occurred under the AISI's standard cyber testing conditions, which include full access to the internet and the removal of all guardrails. They've now engaged with both Anthropic and OpenAI along with Meter for independent review. Now, to some, this is scary. Tenebus writes, mythos is not aligned. Models without strong cyber refusals will in fact frequently take significant steps to commit crimes in the real world when presented with eval setups.

But others said this is just kind of the expected behavior. Shannon Sands of News Research posted, this is like handing an actor a loaded gun and then complaining that they shot someone during a scene. Oh my God, we told it it was an eval and had no guardrails, but actually it was live. Is the fakesest form of misalignment I can imagine. Now, while Chinese open models might not be subject to these new policies, the Trump administration does appear to be preparing a ban on Chinese data center components amid espionage concerns. Reuters reports that the Federal Communications Commission is drafting a ban on certain components, including optical transceivers. These are the devices that convert digital data into light signals

for transmission over optical fiber. Now, the networking between data center chips is now entirely fiber optic, and because these transceivers are commodity electronics, much of the supplies come from Chinese suppliers. Sources said that the installation of these components is seen as a national security risk, possibly allowing the injection of malware, data theft, or disruption of service at AI data centers. It is unclear whether the risk has manifested or this is purely a precautionary measure. Still, analysts believe it's a legitimate concern with AI policy analyst Divyansh Kachak commenting, transceivers definitely pose a risk. As the data center buildout scales up, you want to make sure the data center supply chain is secure from the get-go. The ban also comes as the House Select

Committee on China prepares to release a report on the Salt Typhoon hacks uncovered in 2024. These tax-targeted telecommunications companies and allowed Chinese spies to access phone calls from high-profile political figures in the U.S. for several years. Sources said that the report will find that Chinese data center hardware was a weak link, allowing the hack to take place. On the other side of the argument are those who say that transceivers as an attack vector doesn't make a ton of sense, and instead claim that this is a protectionist move to boost a few domestic suppliers.

Certainly right now, there are only a couple of U.S. companies that make this component and they appear to be ripping on the news. Lastly today in the headlines, tech earnings continue as SpaceX delivers their first earnings report as a public company. This was the first chance for investors to take a look under the hood and gauge the company's growth trajectory after they raised 86 billion in a record-setting IPO in June. All things considered, the numbers were pretty good. Topline revenue grew to 7.8 billion for the quarter, up 92% from this time last year. Of that, 4.2 billion came from Starlink, with satellite internet subscribers doubling to 12 million over the past year to produce 66% revenue growth.

The AI side of the business brought in 2.6 billion across both GROC subscriptions and Data Center rentals. That's tripled the revenue from a year ago before SpaceX AI had signed data center deals. Notably, the cursor deal hasn't closed quite yet, so won't appear in earnings until later this year. On the other side of the ledger, SpaceX had $15.8 billion in AI-related CAPEX for the quarter. That represented 86% of total CAPEX, implying that data centers are now much more capital intensive than a fully fledged space program. Overall, SpaceX recorded a $541 million quarterly net loss excluding CAPX, down from a billion dollar loss in the first quarter, but not enough to quiet critiques that SpaceX is a massive cash incinerator. Still, as with everything, SpaceX,

the narrative is about where the company is going rather than how expensive it will be to get there. During the call, CFO Brett Johnson reported that the company has a further 6.7 billion in cloud services revenue in the pipeline over the next six months, presumably referring to the Anthropic and Google deals. He also said that the integration of cursor should take SpaceX AI to a $100 billion run rate by the end of the year. That would be more than a 5x increase from their $18.7 billion in revenue for 2025. Elon Musk added, the 100 billion ARR in December is not a question mark.

That's what we would achieve if we basically did nothing. So I think it may be higher than that. It probably will be higher than that. The other big question is what the shape of SpaceX AI's data center buildout will look like moving forward. Johnson said that Cappex will remain relatively flat through the third and fourth quarters, bringing SpaceX to around 60 billion in data spend for the year. That puts them significantly behind Google and Amazon,

who are each committing to 200 billion in spend this year, and starting to creep up on the heels of Oracle who have forecast $95 billion for this year. Still, Elon added, we're building AI compute capacity at a scale faster than anyone else we believe, and we're significantly improving our AI models. Overall, this was an earnings beat, but probably not enough to get anyone who's critical on board. The stock was down as much as 45% from its all-time high as of last week, falling meaningfully below the $135 IPO price. It had been ramping back up in recent days, gaining 10% to begin the week, but following earnings, the stock rolled over and lost 7% in after-hours trading. Importantly,

this earnings also marks the end of the first round of lockups, giving early investors their first chance to sell into the market and further test the price level. More to keep an eye on, but for now, that is going to do it for the headlines. Next up, the main episode. One of the most important AI questions right now isn't who's using AI. It's who's using it well. KPMG in the University of Texas at Austin just analyzed 1.4 million real workplace AI interactions and found something surprising. The highest impact users aren't better prompt engineers. They treat AI like a reasoning partner. They frame problems, guide thinking, iterate, and push for better answers.

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Hire yours at Hyperagent built by the team at Airtable. Claim your $1,000 in inference at hyperagent.com slash AI Daily Brief. Welcome back to the AI Daily Brief. Today we are talking about the latest in the AI Data Center debate, and I'm going to make a contention, as presumably we've already seen in the title of this show, that the data center debate has a lot less to do with AI itself than it appears on first glance. It would certainly be going too far to say that it has nothing to do with AI. For some, data centers are the easy visual manifestation of a thing they don't like.

But I believe that that is only one, frankly, kind of small component of the backlash. What I think it is way more about is a loss of agency, and a feeling that people have that a world that they didn't choose is being imposed upon them. For all sorts of different reasons right now, people feel unable to control their lives. And this is, of course, a broader political setting than just AI faces. They feel skeptical of anyone in any position of power and don't believe that those people in power have their best interest as a priority. And within that, people no longer believe that technology is designed to serve them. More and more, in fact, they think it's just about serving the oligarchs that build it.

Data centers then represent both last straw and something tangible to fight. Now, the companies building these data centers don't have much control over the context that local constituencies are operating from, even if in the case of a company like meta, they might have had a hand in shaping it. But they do have control over how they interact with it, and they are doing an absolutely abysmal job. This week, we got a great new 6,000 word piece from journalist Jasmine Sun and a follow-up interview with Ezra Klein of the New York Times that explores a lot of these themes. However, to situate a little bit of recent news around this, for those who haven't been paying attention closely, let's talk a couple of data center stories that have made headlines recently. One of those stories comes from, of all

places, Texas. Texas Governor Greg Abbott has thrown the brakes on data center construction with stringent new energy audits. Governor Abbott has instructed the Public Utility Commission of Texas and the statewide grid operator, Urquot, to begin verifying and auditing new data center proposals. In his letter to the utilities, he wrote that the measures were necessary to, quote, keep the grid stable and reliable. Texas data centers will now be required to provide information on state and local incentives they've received, disclose how much they will rely on the local grid, submit expected water consumption and a supply plan. They will also need to prepare a plan for how they will track and respond to community concerns, including things like noise complaints. Now, it is not clear how much

this red tape will slow down approvals and whether the policy is intended as a de facto moratorium. What is clear is that Texas is straining under a wave of new data center permit applications. Texas is the second largest data center market behind Virginia, and the state is experiencing an unprecedented wave of applications. Urquot currently has 474 gigawatts of new connection requests, with 90% of those requests coming from data centers. This figure has doubled in the past six months and is now five times the record peak capacity of the grid. In other words, it is at this point completely impossible for all of this to get built. This backlog is, in fact, around four times the total current installed capacity of the U.S. Even if Urquot could quadruple their power

supply to service all these projects, bottlenecks and chips, components, and labor would prevent everything from getting built. Now, one potential explanation is multiple applications from the same project. Often, a data center developer won't know which application will be approved, so they submit multiples to increase their chances of at least one going ahead. Land that's ready to build with full approvals also attracts a huge premium, so some developers are simply making applications with the intent to sell the land at a later date. This has all resulted in a bureaucratic nightmare, where Urquat has no real means to sift the genuine projects that are likely to go ahead. Dealing with this issue could be part of the reason for Governor Abbott's directive, rather than a desire to sneak in a

data center moratorium. Still, the impact is the same with new applications in Texas halted until audits can be completed. Kevin Schu from Interconnected Capital makes the obvious point here. Texas is ground zero for AI data centers, poised to overtake Virginia as the number one data center state, so any disruption there is important. New York Times economy reporter Lydia DePillis wrote, as the rest of the country has grown skeptical of data centers, the answer has been, just build them in Texas. Well, today, Greg Abbott paused new applications, saying they threatened to overwhelm the grid. Now, one similar story from last month was New York Governor Kathy Hokel signing that state's

first data center moratorium. Around the signing, Hockel said, there are so many applications in primarily small communities across the state of New York that the localities aren't quite sure how to manage this. Continuing, she said, they've asked me for help and at first I thought this is more of a local decision, but then I realized they don't have the negotiating ability, the clout, the wherewithal to be able to negotiate the best benefits, or make sure that these companies are either bringing in their own power or paying a premium into the grid to cover. the cost. A data center moratorium tracker built by interconnected capital is currently tracking 219 local moratoriums. Most of these are not state level. There are 23 state bills that they're

following, but it's clear just looking at the map that this is a large and growing area of concern. Now, as an aside, one interesting challenge with data center moratoriums is that they introduce a free rider problem to the larger economy. The states that don't want to host data centers and are taking pretty strong measures to prevent them being built aren't talking about not using AI on a statewide level, they still want the service provision, they just don't want to support the infrastructure. Indeed, when Illinois Governor J.B. Pritzker signed their AI bill, he made a big deal over the fact that Illinois, New York, and California are 40% of the AI market, despite only having 20% of the population. Basically, we're now getting to the point where some of the largest U.S.

markets want other states to deal with the externalities of running AI infrastructure. Now, if you just look on social media, some of the discourse around data centers feels absolutely insane. One who has emerged as a perhaps surprisingly sensible voice is Taylor Lorenz. Now, Taylor's long-term relationship with the tech industry goes way beyond the scope of this particular episode, but suffice it to say that she's not necessarily getting invited to a lot of Silicon Valley parties right now. And yet, with increasingly forced she is arguing, in short, that there are enough good reasons to be opposed to data centers that some of the more dramatic, hyperbolic, and conspiracy theory type claims are actively getting in the way of reasonable discourse, pointing to a post on the Thread service that are

argued that data centers are for, quote, military use, the surveillance state, land grabs through eminent domain, and to speed up Armageddon for the white Christian nationalist agenda. Oh, and some folks believe that it's a cover for hoarding our water to supply the billionaire bunkers, a post which, by the way, had 1.4,000 likes. Taylor said, I'm worried vast swaths of our population are experiencing data center psychosis. Someone responded, I work at a data center with a pretty small number of servers that support scientific research. It is vastly different than the AI hyperscale data centers. I had someone on here say they would rather die than do my job.

Continuing her thought on a podcast, Taylor said, I went on a podcast recently because I'm in this community group in L.A., and they found out that there's a data center in downtown L.A. It's not a hyperscaler, but the comments are like, this is why I've been feeling off, or this is why my dog has cancer. That's not to say that there aren't serious environmental concerns with Colossus in some of these.

Construction can disrupt the water table. Okay, but let's have an actual conversation about it. Everybody has lost the plot. There's no nuance, and if you talk to a lot of the, these people, they can't even explain what a data center is. A lot of the outrage about data centers is coming from people that live in Brooklyn. You're feeding people slop and churn and you're not moving these issues forward. And we're not talking about sustainable ways to build it. Now, reinforcing the point that Taylor is not some rabid pro data center activist in sheep's clothing.

In another tweet, she said, absolutely no one wants a new hyperscale AI data center in their backyard. Even if you don't think a moratorium is the best policy to enact change, literally everyone hates the data centers because they are the most physical manifestation of big tech people are encountering. I do not think we should encourage people's delusions about data centers. That's just going to backfire. A lot of people believe straight up conspiracy theories, which makes it easier for tech companies to write critics off. There are plenty of legit reasons to not like DCs. And indeed, the politics of data centers are getting weirder and weirder. There is, of course, a dimension of it on the left that views it as one of Trump's great corrupt boondoggles.

With a headline that is a major contender for the juiciest left meat for the progressive crowd, the New York Times recently published a piece called Trump's vision for AI dominance comes with major air pollution. And yet this is not a left-right issue. In fact, Molly Taft recently wrote and wired a piece called How Data Centers Broke American Politics, with arguably one of the most insane subheaders I've ever seen, what the Unabomber, Steve Bannon's tech guy, and Bernie Sanders taught me about the great data center backlash of 2006. And the point here is, of course, that the left and right are coming together to make very weird bedfellows around data centers. Indeed, previously, quoting comedian Charlie Barron's, the New York Times reinforced this idea of opposition to data centers

being the most bipartisan issue since beer. Giving voice to this sentiment was Theo Vaughn back in June, who said, nobody wants a data center dude, and the people that want them to me, they seem kind of evil. Nobody wants this. One of these companies is going to own all this information. There's going to become this social or emotional credit score, and then AI is going to try to become our new God. Now, if at this point you are hungering for some thoughtful discourse, you are not alone. And luckily we have Jasmine's son, who writes both for herself and for the Atlantic, who just dropped a 6,000-word piece on the politics of data centers in the Midwest, based on 10 days of going around and, shocking, I know, actually talking to people. She called the piece No Data Centers in My Backyard

and sought to explore what the concerns really are. Setting up the piece, Jasmine writes, I talk to union leaders and real estate brokers, activists and local officials, politicians from Kathy Hokel to Abdul al-Said. The AI buildout is showing up in an environment of extreme distrust, and it slots perfectly into existing worries about risky tech bubbles and dark money in politics. Rationally speaking, I often agreed with proponents. Emotionally, I empathized with the opposition more. Now, in a follow of interview with Ezra Klein, Jasmine went through a few of the big issues that she heard over and over. One was around transparency, and specifically, a lot of animosity generated by the fact that these deals were happening behind closed doors. With the big

symbol of this, being NDA agreements between the hyperscalers and data center builders and the local politicians. Jasmine told Ezra, basically, what would happen oftentimes is there would be some sense starting in city council that maybe a big development project was going to show up. But because of the non-disclosure agreements NDAs, the council members would not be able to disclose that necessarily it was a data center, necessarily who the customers were going to be, or even the size of the project, like how much electricity is this actually going to consume? But whispers would start to get around. I was talking to a VP of a construction union and he was saying, there's an old Irish saying that the only way to keep a secret between three people is to kill two of them.

So he's saying, when these developers show up, they talk to the general contractor, the general contractor talks to all their subcontractors, the subcontractors talked to all their workers. Yes, maybe everyone is signing NDAs at every part of the process, but whispers get around. And as soon as whispers get around, you start to get social media posts. You start to get rumors. And the city council, because they are beholden to these NDAs, they lose the ability to get ahead of the social media narrative. Something I repeatedly heard from these local government officials was we could not get ahead of social media because we had signed an NDA.

Now, it's interesting when you read both Jasmine's source piece and listen to the interview with Ezra Klein, is that Jasmine is effectively arguing that all of the different critiques around data centers that you've heard have some part of the story. For example, while she thinks that water is yes an issue, but perhaps on a lower ebb, as the technology around water and data centers has changed, concerns around energy usage are clear and present. She writes, once a data center is fully operational, there's not a ton of air and water pollution, assuming that everything is working correctly. They're relatively clean facilities. But some folks are concerned about the electricity use. They're saying, yeah, maybe the data center doesn't use that much water, maybe the data center doesn't pollute that much, but what about all of these new power

plants that they're going to build in order to power it? Another set of concerns was basically the shadow of failed projects past. She points to the experience of Foxcon, whereas she says, you have a big tech company show up in a very small community, in this case Mount Pleasant, Wisconsin, a city of 28,000, get hundreds of millions of dollars in infrastructure investment and tax subsidy from the town, promised 13,000 high-paying manufacturing jobs, and then pull out because the contract wasn't set up correctly. They decided they didn't actually want to build a bunch of flat-screen TVs in Wisconsin, and the town was left on the hook, having invested all this money in the grid and in rows. They got, I think, a thousand jobs in the end. Foxconn is still paying back all of this debt that has been

accumulate it. Now, obviously, this isn't the norm, as most of these communities haven't had some big failed infrastructure project like this in their past, but other communities hear those sort of stories, and it adds to the pile. But what about AI itself? My contention at the beginning was that the data center backlash wasn't as much about AI as you might assume. And summing up the average attitudes that Jasmine found, it was less the sort of AI is evil rhetoric that you hear on social media, and instead, more a view of it as something fairly insignificant, that didn't justify all the concerns. Jasmine told Ezra,

I went in and asked these organizers, do you guys use AI? Do you find it useful? And what I found was that a lot of these folks did say, yeah, I've used it to draft an email or make a meme. They're not denying that AI might have any possible utility at all, but they clearly didn't see it as essential in the way that cars energy and housing are essential. They saw it as a widget, a toy.

And maybe there are these risks, maybe there's this job stuff. But fundamentally, they were like, this thing is just not that useful. I don't really see in my personal life how this could justify these gigantic valuations. But it turns out that's not really the thing. The concern with AI is not any of the substance of AI itself. For most, it's not a critique of copyright or a concern about artists, jobs.

It's about AI as the new thing that is being imposed upon them, said Jasmine, the phrase you hear a lot from AI critics is, why is this being shoved down our throats? I think that a lot of the public backlash to AI that has arisen over the past six months is not explained by people thinking that the technology has no use at all. It's not explained by their being worried about specific technical properties of large language models that might lead to rogue AI or misalignment or whatever, it's AI as sort of an avatar for a small group of Silicon Valley billionaires' ability to impose their vision of the

world onto everybody else without their consent. Indeed, the part of the original piece that she chose to highlight in her announcement tweet read as follows. Quote, My conversations make me wonder if the technical content of data center deals is mostly beside the point. Closed loop cooling systems? I don't believe them. Paying millions in taxes? I don't believe them. Creating a thousand jobs. I don't believe them. I hear a reflexive skepticism of every claim. Rather, the way that AI companies engage with the communities, forcing NDAs, dangling billion-dollar promises, pushing environmental externalities far away from AI's user base, resembles a classic story about dark money and politics.

Your politicians are being bought by billionaires and gigantic corporations to screw you over. It's not Skynet, it's the oligarchy. As part of her conclusion, Jasmine writes, Until the deeper cultural problems are addressed, the data center backlash will only recreate itself in other forms. And the reason that it's worth trying to have a better version of this conversation is not because we care so much about the hyperscalers' bottom lines. Reason.org recently published a piece on why local data center moratoria are costly for the whole country. The author writes, Moratoria pose a particular challenge in the current environment. Instead of deliberating over the specifics of how a proposed project will interact with energy and water infrastructure in a particular community,

these temporary bans force officials to consider data centers in the abstract, where those opposed to AI can more easily distort the facts. This is a difficult environment for good governance to take hold. The political incentives that local leaders face to support moratoria, given the ongoing national backlash are undeniable. They continue, the most important benefits of data centers are not the jobs and tax revenue they bring to local communities, significant though those may be. They are essential infrastructure for virtually every computing task each of us now performs on a daily basis. Preemptively crossing hundreds of communities off the list for potential development, often without any local justification, will make the development and use of AI, not to mention

other types of computing, more expensive. I agree, although unlike that author, I think that the potential benefit to communities as well is immense. I think you have both national and aggregate reasons as well as local reasons to try with all our might to have a better version of this conversation. But what does that actually mean? Well, to be clear, I pretty much think it's on the job of the hyperscalers and labs and data center constructors to take the lead here. In other words, I do not believe that we can just yell at people for having conspiracy theories about data centers or dismiss their concerns. I think that like it or not, if you are trying to build data centers, the work of getting communities on your side is now mission critical. So how can we move from the

absolutely abysmal job, as I said that they are doing, to doing it better? The first part is a disposition, and it's to have empathy for where people are. This does not mean indulging conspiracy theories, or accepting the notion that this is just some oligarchic power grab. But the people who are trying to get communities on their side need to understand that the reasons that those communities are skeptical are legitimate and come from a real place. They are rooted in what they have seen and what they've experienced and what they continue to experience.

They are concerns that even if in some cases more emotional than intellectual cannot be simply swept to the side. When a key problem of a discourse is that people on one side do not feel like they have agency and do not feel like they are being heard, you have to start with making sure that they feel heard. Without it, you can't even get into the substance of the argument. Next up, to say again something that I say all the time on this show, we have to be making a better argument for the overall why, and the reason that in general,

we need more data centers. The argument cannot, and I mean cannot be, well, it's simply inevitable and we're going to have this technology one way or another, and it also can't be, well, if we don't do it, China will. The only acceptable answer to why AI and by extension data centers get to exist has to be an explanation of how having more data centers improves people's lives as they live them. If we do not make this case loudly and convincingly, nothing else that we talk about matters in the slightest. From there, the conversation has to move from the general to the specific. As pointed out by reason, the moratorium discourse keeps the conversation about data centers in general. And while yes, I just argued that

companies who are building data centers need to tell the positive general story about why data centers and AI should exist, they do not want to have to convince a local community that all data centers are good. Instead, they need to be able to engage with the local community on how to make that specific project that they are dealing with good. Every project needs to earn local support on its actual merits, but also not be weighted by the potential demerits of other projects. Oh, and by the way, that conversation has to happen transparently. The days of backroom deals are over. Trust cannot in any way in any context be negotiated behind closed doors. The process, the tradeoffs, the promises, the commitments, the concerns, the pushback, the counteroffers, all of that has to be visible.

It does not matter that that makes the process more inefficient. In fact, what data center builders fail to realize is that they are primarily not involved exclusively in a business process. This is now a democratic process. And inefficiency is not simply a byproduct of democratic process, but is structurally integral to it. Friction, slowness, back and forth, are what happens when people are actually being heard. Now, perhaps overly optimistically, and frankly you even see this in Jasmine Sun's piece as well, I don't necessarily think that all these data center builders were sneakily trying to cut backroom deals in smoky cigar-filled rooms. I think that it's just for a long time, the norms weren't to invite everyone into the dealmaking process.

They were to talk with the officials in charge of the decision and let them handle their local constituencies. And so hopefully a recognition that this process is now fundamentally different than that will allow the builders and hyperscalers to come on board with a very different way of approaching it, one that is fundamentally transparent. Now, when it comes to the specific incentives and how to make data centers work for communities, I don't know that I think that there is a perfect template yet for how to address the concerns of citizens and how to make data centers most opportune for those citizens. I do know that whereas companies used to think that they were going to get tax breaks for bringing their business to a place, that has shifted entirely 180 to now

companies needing to be in the mindset of allocating a meaningful part of their costs to getting town buy-in. Companies will and need to spend real money solving local concerns and making data centers work for people. I think some of the floor of this type of work is going to be things like making sure that data centers pay for their own way when it comes to the cost increases for things like electricity, but I also think that that's going to be found to be insufficient. I think data centers are going to have to be extremely generous and do more than cover their own costs, but in fact foot the bill for many others and potentially invest in the community in other ways as well. Reinforcing this and putting a bottom line on all of it, thinking about

how a data center benefits the local community is now core infrastructure to the project. I mean this both in terms of intention and actual budget. The percentage of the budget that is going to be allocated for addressing concerns and providing local incentives needs to increase dramatically period full stop. And frankly, if you're sitting there arguing to me that that's the thing that's going to break the bank for these projects, you need to get out of show business. When push comes to shove, I am far less pessimistic than many about the data center backlash. Part of that is that I think it is quintessentially American and integral to who we are as a people

to be able to raise our voices and push back against things that affect our lives that we don't agree with or have concerns about. The messiness while frustrating to the builders is, like it or not, democracy and action. But more than that, there is so much opportunity to make this infrastructure work for everyone. Yes, there are some communities where it is simply not going to work. for whatever reason. Could be because the energy requirements just aren't there, or because people just aren't willing to deal with the negative externalities like noise pollution. But there will be in many more communities, I believe, the ability to find win-wins for everyone where this particular

type of infrastructure can actually be a valued part of a community's next phase. I think our failure to do this so far is a failure of understanding and a failure of imagination, and I think both of those can be addressed. For any of you who are dealing with the hyperscalers or labs, who are building these data centers and are wondering what to do next, send them this argument in my email, I will happily shout at them directly. For now, that's going to do it for today's AI Daily Brief.

Appreciate you listening or watching as always, and until next time, peace.