The Canadian Investor - Data Center Revolt and the Best Ways to Invest in Pharma & Biotech

Episode Date: September 7, 2026

The AI infrastructure boom is running into a growing obstacle: communities and regulators are pushing back against massive data center projects. Simon and Dan look at why opposition to new data centers is accelerating, particularly around electricity demand, utility costs, water usage and the strain these projects can put on existing infrastructure. They also discuss what delays could mean for the AI buildout, which parts of the ecosystem could benefit from constrained computing capacity, and why Alberta is emerging as an important battleground for new projects. Then, Simon follows up on last week’s Royalty Pharma deep dive by looking at the different ways investors can gain exposure to pharmaceuticals and biotech. From diversified ETFs to established drugmakers, higher-risk biotech companies and the royalty model, they break down the trade-offs between diversification, upside potential and clinical-development risk. They also discuss why seemingly “safe” pharmaceutical giants can still carry significant concentration risk, how AI could reshape drug development, and why healthcare may be one of the more overlooked ways to invest in the AI theme. Stocks/ETFs discussed: RPRX, MRNA, MRK, JNJ, ABBV, LLY, VRTX, REGN, AMGN, GILD, ISRG, SHOP, HUT, SEI, TT, IXJ, ZHU.TO, XPH, IHE, IBB, XBI.   Subscribe to our Our New Youtube Channel! Check out our portfolio by going to Jointci.com Our Website Our New Youtube Channel! Canadian Investor Podcast Network Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Dan’s Twitter: @stocktrades_ca Want to learn more about Real Estate Investing? Check out the Canadian Real Estate Investor Podcast! Apple Podcast - The Canadian Real Estate Investor  Spotify - The Canadian Real Estate Investor  Web player - The Canadian Real Estate Investor Asset Allocation ETFs | BMO Global Asset Management Sign up for Fiscal.ai for free to get easy access to global stock coverage and powerful AI investing tools. Register for EQ Bank, the seamless digital banking experience with better rates and no nonsense.See omnystudio.com/listener for privacy information.

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Welcome back to the Canadian Investor Podcast. I'm Simone Benaj. I'm back with Dan Kent. We have a fun episode here. A little bit different. So we'll be doing two different segments. You'll start off with what you entitled Data Center Revolt, especially around in Alberta, with a lot of projects being proposed and not fully going through. You tell me, you know more about the Diz than I do. The segment will mostly be on just a lot of the whole revolt against data centers,

which kind of, I would say six months ago was like, you know, hall meetings and all this type of stuff. And now you have states that are effectively, I don't want to say shutting down projects, but delaying them. I mean, we're seeing a ton of it in Alberta. I don't want to say that projects, well, a few of them have been just shut down in Alberta as well. But there's, I've had a lot of people asking me whether or not this will impact the industry because all you're seeing right now is these town hall meetings and these, you know,

states shutting these projects down as to whether or not it will impact. AI. I was digging into it over the last few days. It's a very hard question to answer. I'll try my best. But yeah, I'll just kind of go over the situation, what's happening, who I think will be kind of the winners if this continues, the losers if this continues, things like that. Okay. And then I'll go and do almost a part two on how to play pharmaceutical companies and biotech. So for those that listened last week on last Monday, I talked about, I did a deep dive into the royalty pharma. So I'll talk about other potential plays to ways to play it and the different pros and con for

each. So make sure you tune in for that. I thought it just was kind of a nice way to wrap the whole discussion around versus last week. So we'll finish up with that. So let's get started here on the data center revolt. And maybe the one thing I'll say is I guess it would be a little bit of the nimbie, right?

Not in my backyard kind of sentiment. Yeah. Yeah. To a certain degree, a lot of it from the people, like just kind of people living in the areas, yes, but to like the municipalities or, you know, the states or whatever, they don't really care about any of that. It's more so just the logistics of it. But I find this kind of interesting because I am in Alberta and Alberta is, I mean, you can't really miss it. They're going heavy into data centers. That's kind of Daniel Smith's kind of avenue there.

And, you know, a lot of these ones, there's a lot of them going in the, you know, a lot of these ones. there's a lot of them going in the area that I live in and all of them are facing heavy competition. I do find it a bit ironic that we're contesting these data centers so much because of their potential impact, but, you know, Alberta has been so dependent on oil and gas. And now, you know, back in the oil boom, Alberta kind of let these oil and gas companies do whatever they wanted to, which ended up in hundreds of millions of dollars in unpaid property. tax from a lot of these bankrupt oil companies plus I think we're talking 10 to 100 billion dollars in orphan well cleanups that's a whole entirely other story but I wonder if it's kind of a situation

where maybe we've kind of learned our lesson and want to ask more questions or if it's just the fact that it's big tech versus versus energy because yeah there's a lot of that that's gone on from here but the pivot right now for Alberta seems to be in allowing these large hyperscalers to come in and build out these data centers and use up a lot of excess natural gas we have in the process, but they have to build the plant. So I think the reason why a lot of people are asking this question is if these data centers can't get built and these hyperscalers are spending all this money, like what exactly does it mean? And it actually does have the potential to cost the hypers meaningfully more money. There's been hundreds of billions in dollars of projects for

data centers blocked or delayed in 2026. So this actually dwarfs the amount of that were blocked in 2025. And there's actually, I was reading an article, there's more revolt right now for data centers in people's local jurisdictions than there has been in the past for like nuclear power built in the area. So they're not really small, calm town halls either. Like some of these are getting so intense.

They're pretty much making national news. Like people do not want these facilities in their area, which ultimately kind of feeds in, it feeds into the fire in terms of the revolt for those who are watching. Virginia, which pretty much holds the most data centers on Earth is even considering an outright pause on all new projects. And it seems like the majority of the revolt here due to consumers is, is worrying about utility costs. So these data centers suck up a lot of power.

They suck up a lot of water, even if, you know, a lot of them have kind of said that they, what do they run like closed circuit or whatever closed circuit kind of, you know, the water goes in. It doesn't come out. they don't use all that much water. They use a lot of water. There's absolutely no question. And they had mentioned that in some states in the U.S., they're seeing power costs sore. And they're attributing 60% of this increase due to data centers. So the issue here is that the data centers can afford the higher power costs.

They don't really care. It's the average American in this instance from the article that I was reading that just kind of gets hit the hardest and can't afford it. And another thing they're saying, is a lot of these companies are pitching job counts, which is an absolute farce, in my opinion. Like, they'll talk about how they, you know, this place will employ 2,500 people, whatever it may be. Yes, it will until the place is complete.

And then it probably has a absolute fraction of that. You know, if it employs 2,500 jobs during construction, it might have 25 jobs after it's completed to run the place. So there's a lot of people who just don't trust these companies, what they're saying. and the whole AI infrastructure buildout is happening so fast that a lot of these counties or states or communities didn't even have time to react initially, but now they are.

So back in July, New York paused all data center permitting for anything requiring 50 megawatts and up in early August. Texas froze all new data center grid connections. And the wild thing here is I read an article that suggested Texas received requests for 474 gigawatts of connections. And their all-time peak usage when the grid was at its absolute most was 91 gigawatts.

So you're talking just absurd amounts of power. Trump has kind of tried to speed up the process. I know he's signed orders that can fast track federal approvals of these projects. But the thing is, I don't think he can do anything at like the state or municipality level. Like they can shut these down no matter what. what and they are. It's kind of hard to imagine where this goes right now. You have these

hyperscalers kind of ramping up KPEX and you have a boatload of projects getting shelved because, you know, people, counties, whatever it may be, states are kind of finally starting to step back and see if this is even feasible. And I highly doubt these hyperscalers are going to kind of sit around and wait for the audits to be done on the viability of the buildings, the grids, whatever it may be. They're seeing insanely low vacancies in terms of of data centers, and they're also seeing demand for compute go through the roof. So I think they're kind of going to go where they're allowed to build. And I think Alberta is actually one of the places where they're allowed to build,

but I'll get to that at a bit. But with all the block demands south of the border, you're seeing a lot of it trying to come to Canada at least. And apparently, Quebec will take them, but they make it virtually impossible to do so because they want to charge them like double the power rate. on the facilities, so they're going to pay an absolute premium for power, so they won't go there. BC kind of caps the size of them. Saskatchewan is saying Canadian companies only, like they'll take them, but Canadian infrastructure

only, and you must bring your own power. So I think in a way, the genius thing about what Alberta is doing here is we have a ton of natural gas. So if you want to, you know, if you want to bring the data center here, you have to build your own gas plant to provide it. That's kind of what they're doing right now. One of the prime examples would be that big one, that meta data center, which I think is a, it's like a $10 billion US, I believe.

So like 13, 14 billion Canadian. And there's a pretty much a $5 billion gas plant being built to accompany it. So Alberta isn't just approving these everywhere. There was one in Olds that was just shut down because they wanted to put a massive gas plant to power it. I think it was something like 100 feet away from houses. and the thing is the reason I bring this up is Alberta is kind of going through these. It could be cold, right? Yeah, it could be worse, but I can see it if you live 100 feet away from these places,

why you wouldn't want the build. But there's kind of a lot of outrage in Alberta overall. And I think a lot of people are assuming that they're just taking whatever project they can. Like Alberta is, they're only taking the best of the best. There is a ton of applications for a lot of these projects right now. And I think a lot of investors, myself included, have kind of been trying to wrap their head around what this means. This revolt is not going to shrink demand for AI at all, but it could definitely impact the supply side. I don't really see these project delays, cancellations, pausing, slowing down anytime soon.

They're probably going to speed up. I mean, people have the right to ask questions about all of this. However, there's, I also think there's kind of the element of, of social media algorithms just kind of feeding you what you want to see to the point where they they kind of come heavily influenced by one side of the argument. We've pretty much seen this since the invention of social media. Like if you don't like data centers and you engage in a few videos that kind of show the negatives of data centers, you will not see a single video on, that doesn't portray the absolute negatives for them. So it kind of feeds the fire in that way.

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One thing that is interesting that Dan Foch has made a point quite a few times is people want the benefits of, you know, scrolling mindlessly on Instagram or whatever app they use, which, of course, is there in big part because of those same data centers. They want to keep using those for free. They want to use Chad GPT for free. They want all these things, all these tools that they love to use or love to get entertained with, but they don't want the data centers.

So at some point, you know, these don't magically appear out of thin air, right? like they the data comes from somewhere and I'm not saying you should have one and be happy to have one in your backyard that's not what I'm saying but it is interesting that people on the one hand they're addicted to this technology but they also don't want what is required to have this technology yeah I think a lot of people well I don't want to say a lot of people but some people didn't even realize that that's kind of how these were used prior to AI like Effectively, like your cloud, you know, where your photos are stored, your Facebook, all that type of stuff, your Instagram. It's all fed through these data centers.

The only issue you have now is you have AI causing demand to absolutely skyrocket and now they need to build more of these things. My argument would be could they build them elsewhere? Yes. Would it probably take longer? Because right now what they're trying to do is get them up as fast as possible. So they're probably looking to hook up to grid infrastructure, whereas, I mean, in my opinion, there is plenty of space in northern Alberta where there is absolutely nothing where you could slap these things up. It's very cold for the vast majority of the year, but there's probably not a lot of infrastructure there. So the timeline to build them out is probably a long time.

And these companies just don't have that right now. And keep in mind, too, they could be on areas where, like, you actually have to build new roads to get there, right? it could be as intense as that. And I was, for those on YouTube that will be seeing this, you'll actually see, I just pulled data from the Alberta website, major projects. I put the minimum estimated cost at $1 billion. Maybe there are some smaller data centers that I could have found, but I just put it at $1 billion. I did just because the data is not, as I was talking, Control F for data on the page. And I got a 20 result. So I think it's pretty close, whether there's 18 or 19 proposed projects, a billion plus.

There's a lot of them that are proposed, some that seem to be already underway. I'm assuming the ones that are completion by 2027s are probably approved and underway. But there is 20 just doing this quick, like not very scientific research, but just wanted to give some perspective for those listening to audio.

So you're right, there is a lot of these projects. Yeah, it's a big rush to get them in. And then if you want to get, and mostly that's because, as we had discussed before, like, these hyperscalers have a lot of equipment that depreciates very fast that is waiting to get fired on right now. And if you have any sort of delays in these projects, like it tends to pose some issues. So if the supply side is limited and demand is still high, the end result is you have higher prices for compute. So for that reason, I think that the hyperscalers will be just fine. Yes, maybe it takes them an extra, well, I don't want to say two or three years, but it might take them realistically.

If there's some issues with getting approvals, like audits have to be done, there's more time taken to approve these things, which again, I feel is the right way you have to go about it. Because if we look back to Alberta during the oil boom, I mean, we kind of let, we kind of let a lot of these companies run rampant do whatever they wanted and it ended up in a suboptimal situation. So you're going to want to do this. but ultimately they're going to get them built anyway. And in the meantime, they'll sell the limited amount of compute they have for substantially higher prices while they can because demand is not slowing down.

So on the flip side, if you have these data centers that are kind of delayed by regulatory conditions or, you know, potentially they have to abide by different conditions to get them built, it could cost them more money to put them in. Like there's absolutely no. question. And, you know, if you, unless you've been living under a rock, you know, they're pretty

much investing every single penny that they have into this infrastructure already. So you definitely don't want them to cost, you know, things to cost more. We just see in Amazon, I think they raised their Kpex by 10% a year. And that was, they had mentioned that's almost solely due to memory prices. It was like one thing that caused it to launch up. So higher prices are ultimately not a very good thing. But if you have these projects that are expected to take, longer. It's it's kind of an issue for them, but I think over the long term, they will be fine. And then just getting to the kind of the investment side of things, which is what I've been asked most about is kind of who will win or, you know, who will set the benefit from this and who

will kind of be hit hard if these delays kind of pick up. I would say there's some pretty clear winners from this if the situation stays the same and we start to see a lot of delays on this. The first one would be, again, as I mentioned, the ones who already have finished capacity. if you have finished computing capacity, you can sell it, and regulatory conditions impact future capacity. Obviously, you can raise your prices. You're going to be one of the companies to benefit.

The second one, and this is actually a very interesting one, is crypto miners. So a lot of Canada's Bitcoin miners, like HUD 8 or whatever it was, Galaxy, they converted a ton of their Bitcoin, or sorry, their Bitcoin mining facilities into AI data center facilities. And now they're, like, it's the prices they can charge for that is absolutely dwarfing

anything they'd make in the crypto mining area. And this is something that, like, nobody would have thought of this. I definitely didn't think of this. I didn't think they would convert those into, you know, selling compute effectively. And, you know, the more capacity remains constrained, the more these miners can can leverage that. And then the third, and this is actually another very unique angle. and I found this, I can't remember the article on it, but it was those selling bridge power.

So a company like Solaris Energy Infrastructure, which I did not know existed prior to me researching this, it's a mid-cap company in the US and it sells or rents gas turbines to data centers. So they can skip the interconnection situation to the grid and get things up and running because again, it's also important to understand, And I find a lot of people kind of think that, okay, these states and they don't like the data centers.

And they're like, okay, these states and these municipalities, they agree with me. They don't, they don't really want this data center there either. Well, not really. Like, all they really care about is the logistics of it. So the infrastructure, like Texas just banned grid connections. So they just, they're worried about the power grid. They're not worried about where. I think they're doing a review.

I was showing like a screen share. It's like an audit and a review. Yeah. They're doing an audit until that's done. the memoratorium on it. Yeah. So if you want a data center up and running right now, you want to kind of skip that interconnection situation, these companies who are selling or renting these power supplies

to these companies, it might make sense. I don't know the entire logistics of that. I can't imagine how much you would need to sell or rent to one of these facilities to get up and running. But it is a thing. The one thing I will, like as I say, a lot of these states, they're not, they don't have the same. views as the, you know, smaller people living in these communities. For the most part, they just,

they want to slow it down because of, for the most part, the energy, infrastructure element of it. They don't want to overload the grid. They just kind of want to take their time, audit a lot of this stuff. So those would be. Well, it's also becoming increasingly, like, not popular, right? So, they are also politicians who want to get reelected. So that is the other part pushing this, I'm sure. Yeah, definitely. So I had, that was quick winners, which I'm sure there's a lot more if a lot of these projects keep getting delayed and kind of the supply side remains constrained. The losers. And keep in mind, I don't really believe that these companies will go down in price or be poor investments.

All I'm kind of saying with this is these are the type of companies would generally not benefit as much from a delay in the build. The first ones would be those who rent compute, pretty much a zero question. if you have to rent compute and the supply side is constrained, you're in a lot of trouble because they effectively control the price. So Snowflake, which is kind of a data company. Shopify is another one. I think that rents a lot of it. That would be one situation. The other one would be regulated utilities. So they're able to grow at the pace. Their rate base will grow. So fewer connections to the grid, fewer infrastructure builds from these types of utilities, which equals a smaller rate base. And then as I had mentioned that the hyperscalers to a certain degree, I think these

companies will kind of find ways to get it done, even in the face of a lot of regulatory scrutiny from just the entire country, effectively U.S. Canada. I think the reason they'll be impacted is on the hardware side of things. They have a lot of hardware, a lot of stuff waiting in inventory waiting to get turned on. If there's any delays, the hardware depreciates while generating effectively no revenue. So the third one would be volume suppliers. No, memory could go up in price. We never know. It could appreciate. Well, actually, yeah, I guess. I doubt it, but it's possible. I mean, we pretty much saw that, yeah, over the last year or so, year and a half. But I agree with you. And for the most part, yes, they are rapidly depreciating assets. Yeah. The third one volume

supplier. So the one company I can think of it, I'm not picking on it in particular, would be trained. they're kind of a cooling, air conditioning, all that type of company. They've had orders booked for years, but a lot of these companies will trade on future order books. And if you have delayed infrastructure,

problems with that, it could hit the order book, which is ultimately not good. Overall thoughts on this, I think the build out is coming anyway. I do think that AI will be a substantial benefit to society as a whole.

I mean, if we look to that Moderna melanoma vaccine that they do, developed. AI didn't necessarily develop that vaccine, but I had read some, some articles on it that said the gene sequencing, all that type of stuff, pretty much impossible to do in the timeline of a patient with stage three or four melanoma. The AI makes it fast enough that they can get that developed quick enough to get into these patients. So, I mean, I think net benefit to society as a whole, that doesn't really mean I disagree with the public perception. You know,

know, everyone has a right to want to know the facts with all this stuff. We've been burned by many corporations over the years, you know, the environmental impacts of it, what's going to happen to utility prices, all that type of stuff. But it's interesting because there's so many bottlenecks in this space and this is pretty much going to be another one tacked onto the space, whether or not, you know, you could get out in six months or so Texas could just remove the limitations. They could start pumping out these data centers again. But the way the trend is going, it's actually going to be, they're probably going to have more difficulty building these in the future. I still think they get it done, but it might end up costing them more money. Yeah, I guess, yeah, I'm pretty, I think

more and more and more optimistic about the future of AI, but then again, I'm going to rewatch Terminator tonight, so maybe I'll change my mind after that. Okay, no, that was a good overview. Yeah, and I showed like if you are listening on audio feel free to hop on YouTube you'll be able to see the screen shares that we did just showing some of the articles but also the projects that are have been submitted to the alberton government so definitely something to i think we'll keep an eye on because it's pretty fascinating because we need you know if we want to keep scaling AI we have to build those data centers that's simple yeah and i think once you start to get enough backlash from, you know, the people, then there actually is an element where, where things might change.

I mean, Alberta kind of seems dead set on doing what they're doing, but we've had regulators, you know, reject a few of these things. So, yeah, it's going to be an interesting situation. I think it's something that's going to persist for years and years. Smart investing doesn't have to be complicated or time consuming. With BMO, all-in-one ETFs, you get a complete, diverse. diversified portfolio wrapped up in a single ticker. It's easy. Whether you're conservative investor or more aggressive, BMO has an all-in-one solution for you. And now, it's even more cost-effective. BMO has cut management fees to just 0.15% on select asset allocation ETFs, helping you keep more of what you earn. Simplify your investing today at BMOetifs.com.

I've been thinking about doing a Quebec city trip where I bring my mountain bike and the family tags along. I could spend part of the day riding while my wife and my daughter explore the city, walk around the old streets, stop for ice cream, and burn that energy in a beautiful park. Then at night, we'd all meet back up, go out for dinner, and make it a family trip. And while we're doing that, our home in Ottawa would just be sitting empty. That's when it hit me, listing our home on Airbnb just. makes sense. Someone else could enjoy our place while we're away, whether they're here for a summer weekend, visiting family, or coming in for a big event in this city. They could explore the Rideau

Canal, take the kids to the water park, catch a CFL game downtown, or just use our place as a home base to experience Ottawa like a local. The extra income could go right back toward our own trip, and we can choose to host only when it works for us. Your home might be worth it. more than you think. Find out how much at Airbnb.ca slash host. There is an old saying in investing. It's not about timing the market, but time in the market. The most successful investors aren't usually the ones trying to catch every top and bottom. They're the ones who spend the most time in the market. I've been a quest trade user for over five years, and the reason I stick with them is that they remove the friction of regular investing.

With no commissions on stock and ETF trades, you don't have to wait until you have thousands of dollars saved up to make a move. You can contribute small amounts regularly and keep your portfolio growing consistently, removing the stress of trying to time the market. And they keep making it easier to build a well-rounded portfolio. Soon, you'll be able to trade precious metals through Questrade, giving you even more ways to diversify.

Questrade makes the whole process seamless, allow you to focus on what really matters your investment strategy, not trying to avoid fees. Ready to invest, head over to questrate.com, open and fund your account with code TCI and receive $50. Conditions apply. Okay, well, you were talking about Moderna, so now we'll transition over to the other segments.

I wanted to look at other ways to invest in pharmaceutical or biotag, just because it's not a needy industry, at least to invest in individual companies. And I will talk about those towards the end. But like I said last week, we did our two deep dyes. Mine was royalty pharma. And essentially, like we talked about last week, it's not an easy space to invest in because you have to factor in trials, FDA approval. I know that's in the U.S., but obviously that's the most important market.

Patents, potential competition in the future from a new drug, even AI. right, like as a potential boost or headwin or tailwind, depending on how you see the impact of AI here. So there are riskier ways to invest in the space. And there are some, I would say, good alternative to royalty pharma in terms of like air quotes safer ways. Again, there's risk with everything. So the royalty route, just a quick overview, just to wrap up what I had mentioned last week. So royalty pharma is a way to get broad exposure to the space. you bet on their team of experts and that is able to identify properly underwrite investment

into drugs that will have potentially very significant. The royalty streams down the line. The beauty with the model is they make a lot of bets so you're not reliant on one single drugs. Some will fail. Some will do well. You're betting that the ones that do well will do better than the ones that fail. And you can, like I said, go back to last week's episode if you want a deeper dive on it.

It was just a quick overview to make sense of it for those that did not listen to that. So the first way and I think the easiest way for most type of investment or to get exposure to a sector is the ETF route. So the ETF route allows you to bet really on different pharma companies. And that's really different from the royalty pharma play because you both get diversification, but there are some key differences. First, with the ATF, you're diversified across multiple businesses that will often have more than one drug in their pipeline. You get a part, you essentially get a stake, obviously, or your owner in each of those companies by buying an ETF. Whereas royalty pharma, you get exposure for specific individual drugs. So royalty pharma may have a royalty deal on a drug by company XYZ, but no exposure to the nine other drugs.

that this company has. And I think that's really important to understand because they have deals with large pharmaceutical companies, but they might just have a deal for that specific drug when that large pharma company has several other drugs that have already been commercialized. So that's a different kind of diversification that you're getting. So it's more of a drug diversification, whereas DTFRAO will be more of a company diversification. And of course, drugs as well embedded in that, but I think it's an important caveat to just remember. And of course, you get ownership of the companies with the ETF while royalty pharma just gives you a stake in the revenue generated by that drug itself.

Anything you wanted to add before I continue here? Nope. No. So there's really three main types of ETFs in this space. So the first type of ETF is just the broad healthcare ETF. So there's a couple of different ways to play that. But with this, you'll not only get pharmaceuticals, companies and biotech, but you'll also get medical device companies, you also get large insurers.

So you're just getting exposure to the actual sector as a whole. So you can look at plays like IXJ, the I shares, Global Healthcare ETF. And with high shares, you always have to be a little careful here because they tend to pretty much always be market cap weighted. Maybe there are some that are equal weight, but for the most part, BlackRock is really heavy in the market cap weighted. Whereas if you compare that to ZHU, so the BMO equal weight, U.S. Health Care ETF,

so that one is a bit less, obviously, it's more diversified because of that specifically, so the equal weighted component. So whether you prefer one or the other, that's entirely up to you. I tend to prefer when I look at ETF, I have a bit more of a bias towards equal weight when I'm looking at sector specific

because you can get some really weird weighting. Waitings. Yeah, where you can hit like stuff like 15, 20% for one single business. So that's something that I'll talk about with the pharma ETFs. Do you have any preference to you for the most part when you look at sectors, equal weighted or market cap weighted? If I was going into like an individual sector ETF probably equal weighted, but it really depends.

Like the one the one ETF right off the top of my head I could think of is, I think it's XIT, which is the tech, the Canadian tech ETA. That one's, that one's cap weighted. And it's like, at one point it was like 55% Shopify and constellation. I would imagine Celestica is one of the number one holdings in there now. But with that one, I'd probably still go cap weighted just because there was a, in my opinion, a ton of bad, bad companies in there. Like Blackberry was in there. And so it really depends.

Whereas like the energy. Well, even that one is so. small in in terms of broadness of the number of companies that you're often time just better off like buying the companies and avoiding the management fees, right? Yeah. Yeah. Yeah. In the states, there's a lot more, I guess you could say sector specific ETFs that have diversity

here. I mean, if you were to actually name it, I think it's a stretch on some of the companies they include in that tech portfolio. Like you probably should have like three or four. But that really all depends. Yeah. And then the next type, so you're getting. getting a bit more specific here. So pharma, pharmaceutical ETF. So just wanted to talk a little bit

about the distinction between pharma and biotech, because even me, I didn't fully understand the difference until I did research for this segment. So pharmaceutical companies will typically be more established company with a pipeline of commercial drugs, whereas biotech companies tend to be riskier and earlier in the research approval process of new drugs and will typically carry more risk. But the distinction is actually, so that's the way I think it's good to see it from an investing perspective, but the distinction is actually on the way they develop drugs and then how they, how established they are. So essentially, I guess the biotech companies, they'll use more like biogenic or a term like

that to essentially develop new types of drugs. and cures potentially, whereas the pharmaceutical, the pharma space is more like traditional in terms of developing new drugs with like compounds and things like that. So that's kind of the more scientific way to that they should be distinguished. And again, I'm sure someone who's in the pharma space or biotech will be like, you completely butcher that. But for someone who's not in that space and doesn't know it all that well, I think that's just a good way to understand. And from an investing perspective, I think, yes, typically pharmaceutical companies will be larger, more established. But keep in mind, there are some pretty large biotech companies that are large pharma.

And there are large pharma companies that have biologic medicines and vivorous and biologic was the term I was looking for. But like I said, typically you'll see more research risk on the biotech side, but the distinction is just getting more and more murky over time because there are large pharma companies that have, biotech drugs that drugs that were developed with biologic medicines. Oftentimes they, they bought out these smaller companies as the trial data became better and better. So just wanted to clarify that. Hopefully I didn't confuse people even more, but that's the way I'll look at it. But in terms of pharmaceutical ETF, you have XPH is an interesting one here. So I'm just going to share my screen. This is the State Street.

pharmaceutical EDF. It's not quite equal cap. I think they do mention it that it's like not quite equal cap, but equal weighted, but pretty close. So you can see just the weighting. The biggest name is 3.75% and in the top 10 and the smallest is 2.05. But then you have the other extreme. If you start looking here as IHE, so the I shares US pharmaceutical ETF, where it's the issue we were talking about earlier. So you have two names, you have Johnson and Johnson and Eli Lilly that are combined 43% of the ETF. And that is a good example of market cap weighted and the issue it can actually create.

Yeah, especially when you have it, you know, the larger players are so large. But yeah, on the on the bio side and the pharmacide, I always used to associate like bio with like the speculative drug producers, whereas Farmer would be like, I just thought pharma, blue chip with like a Pfizer or Eli, Eli, Lily or whatever, and then the bio would be more speculative,

but clearly I was very wrong. Yeah, and I thought the same. That probably aligns reasonably well. Yeah. Yeah. Yeah, I think it aligns a bit with reality, but ultimately the distinction, the more

like scientific distinction is really just the way the drugs are actually developing the processes behind it where one of them is using the biologic like I mentioned and the other one using more traditional kind of chemical methods. So that's my understanding of it. Feel free to send us an email or reach out to us on Twitter if you're in the space and you think we completely butchered that. But I think that's the way I was able to understand it. And then there's the biotech ETF.

So look at pharma. So an example of that would be IBB. So the I share is biotechnology. TF again, market cap weighted. This one's a bit more reasonable. So you have Amgen, Vertex, Gilead Sciences. So these are quite large companies. So they're pretty large companies that are, I think, at hard biotech,

but they have established commercial products, for example. So, yes, you can have some biotech that are quite large, but I don't think your way of seeing it was like a bad way whatsoever. I think you do get more risk in terms. of the biotech, especially the early stage one. And then the other one is State Street again. So XBI, again, you're looking at something that's a bit more market cap weighted in terms of the whole thing. So not quite, but pretty close here. So yeah, I mean, when you have the highest, the biggest name being like less than 3%, I think that's as close as you can get to market cap weighted

without actually being in. Well, and that's the one thing about cap weighted, I guess when it plays out better is you look at the largest company in here, which is Moderna, which went up, what was it, 160%? Yeah, but that's August 28. Yeah, exactly. So it was probably down the list before that. Yeah. So, I mean, that's kind of one of the downsides, but it just shows you the difference between these bio companies and pharma companies, because I don't know, would you ever get Pfizer going up like 160% in a day? No. Maybe if they develop something, but the bio companies tend to have more, roller coaster like if they cure

like all forms of cancer I'm gonna say yes but aside short of something like that I would say no and obviously I'm being overly simplistic there but and the I guess the last way to invest in pharmaceutical or biotech companies obviously

it's going into the individual route that's where it gets way riskier even when you start looking at the big company so the long shots first of all these are companies that have little to no revenue. They are spending massive amounts of money on developing new drugs. This is typically what you'll think of the biotech companies. That's where they live in. It's pretty common for

these type of companies to be working only on one major drug candidate. So it's a boom or bus. So either the drug gets approved and it goes through different trials, has positive data. The stock goes way up, eventually gets approved by the FDA or maybe gets purchased before the FDA approval by a large pharmaceutical company that sees enough data after the phase three trial to decide to go ahead and purchase a company. But essentially here, you're looking at the potential of a multi-bagger or going to zero. So it's really that boom or bus. And the returns will essentially depend on trial data.

If it's positive, the stock will explode. And if it's not, it goes down the drain. So you're also betting that there is, you're also hoping that the company eventually gets purchase by a larger company, especially if the data is good, and then you'll make a killing with that. But this is something where I think investing in these kind of companies, this is where royalty pharma is really attractive because they will take stakes. They will kind of, they will place some bets in these type of companies, not only these type of companies, but they will do some of these type companies. And they have the expertise behind it and they spread out their bets too. Whereas if you're,

an individual investor, unless you know the space really well and you work in it, my personal view is that buyer beware. Like that's, yeah. Yeah, you at least with royalty, they, like, they know what you do, what they're doing. You probably don't. Yeah, exactly. This is like, I don't want to say everybody, but most people. Yeah. This is definitely, I don't know. To me, it's just something where you are playing with fire if you don't know the space well and you start. Yeah, I knew a guy. A guy. this would have been like 2016 that blew up $30,000 in a TFSA on a on a bio company. So yeah, it's, I call them scratch off tickets like those nanocap bio companies. Like you're going to lose on most of them.

You'll break even on some and you'll, you'll hit the jackpot on very few. But it's kind of a human mentality chasing that massive, massive increase. So yeah, they're there are moonshots for sure. Unless again, you know this pays very. very well. You do your due diligence for a lot of them and maybe do your own kind of version of royalty pharma where you spread out your bets. You're obviously not providing financing, but you spread out your bets, put a little percentage in 10, 15 names that you think have a good chance of reaching market or getting to phase three trials and so on. Maybe, I mean, I'm sure

some people have made quite a bit of money, but you need the expertise. And I think the vast majority of people listening to this will probably not have the expertise. Now, the next way is just the established large companies. So we mentioned some of them. You're likely familiar. Think of companies like Johnson & Johnson, Merck, Ticker, MRK, ABV, ABBV, N-E-L-I-L-L-L-Y. These are all very established company. Even though these might sound safer plays, they can still have quite a bit of risk. and the one that's the most interesting in terms of that risk. Have you ever looked? So, you know, Moderna, the results that they had was like combining the drug with

Ketruda, if you remember from Merck. Yeah. You take a guess how much Ketruda actually represents in total of revenue for Merck. I wouldn't even be able to guess because I have no idea. I don't pay it like, I don't know, 25%. No, 50%. Yeah. Just shy of 50%.

So this and Merck is not a small company. Like, Merck is one of the biggest companies. I mean, it has a market cap of $364 billion. Oh, yeah. Yeah. Oh, and it's 50% of their. Yeah, it's 50%. Yeah, if you don't believe me, let's pull this on the annual.

So last 12 months, $32 billion or $33 billion of their revenue, of their 60%. billion revenue came from that one drug. I mean, that's kind of the way a lot of these, like a ton of it is, is one drug that they just make billions off of. Yeah, and if you remember royalty pharma, there was one drug, I can't remember on top of my head that was like generating around 25% of the revenue. And I flagged that at being quite high. While you have here, Merck, that's 50% of its 66 billion revenue is coming from that.

And I think it's also a reason why it's possible. the decent amount with the news of the trial from the Moderna results because it was being combined with Ketruda and I think investors are seeing, okay, it may actually extend the life, you know, the useful life of the drug itself. But I just wanted to mention that because even the 25% we talked about is actually not that high of a concentration when you just compare it to Merck, one of those biggest company. And that is one risk that you have to be aware even if you look at those large companies, concentration risk can still be quite significant.

And there's, I mean, I don't think there's any better example than this. Yeah, it was vertex. Vertex. They make like a cystic fibrosis drug. Yeah, that's right. Which it was 25% of their rate. 25%. But 25%, especially when you have so many other bets in the pipeline, it doesn't feel as intense.

And also 25% of their, what, like 3.2 billion? roughly, you know, receipts that they have, royalty receipts. So it's not the same as, you know, 50% of 66 billion. Like it's much easier replace. So yeah, that's something just to keep in mind here because large does not necessarily mean always safer. And then I guess the middle ground company, so they're also companies that are bit in between the two. They're not as diversified as the large players, but have revenues and established commercial products. So these are also not long shots, so where they're not generating any revenue and everything's

dependent on one drug. You can think of companies like Vertex, V-R-T-X, Regeneron, R-E-G-N, A-M-G-N, or Gilead, GILD. They're all companies that would fit in that bucket. But again, they're not as diversified as the big one. So they're kind of the middle ground. So for me, I mean, the more I research the space, the more I like, the business model from royalty pharma. And for people who want exposure to the space, I think the ETF or royalty pharma are probably the two best ways to do it unless you're willing to put a whole lot of work in it, even with individual larger companies, just understanding because people might think of Merck and not do much research and not realize what I just said that 50% of its revenues dependent on one drug, right?

So I think to me, that's the best way, at least from my perspective. And I think for a lot of people who are not well versed in the space, either the ETF route or royalty pharma. Of course, it's not investment advised. Do your due diligence. But those seem like less risky. There's still risk, but less risky ways to play this space. Yeah, I think you're looking at like healthcare in general, probably one of the cheapest ways to kind of play AI, but also probably the one that's going to take the longest to materialize, I guess you could say.

Like, this is not something that's going to turn around in a year. It might take a decade or so. But, yeah, a lot of these companies are. I would almost say one of the most overlooked ways to play AI. I think. Probably because the timeline is too long. Like, people probably want results now. I think people are just not thinking about the potential benefits of AI for these healthcare plays, whether it's developing drugs.

Like drug development? Yeah. Or an intuitive surgical, like using existing data to better optimize its tool, better optimize training for physicians, for surgeons. I think, yeah, the market is very focused on, you know, the companies like the pure AI plays, the LLM. Yeah, the ones that are providing the infrastructure. So think about all the semiconductors, even the hyperscalers, although maybe to a lesser extent now,

but companies like CoreWeave or the obvious power or kind of second order effects or the, you know, you're thinking about here like quantum services, G, Veranova, like the obvious like energy side of things. And then the rest seems a bit more, I don't know, like stuff like this where I think it's a bit more overlooked. Yeah. Yeah. Because a lot of these companies are, they're pretty cheap right now. The sector has been sold off pretty much since COVID. It has not been very popular at all. No, I mean, Intuitive Surgical one that I own and I bought not too long ago, I mean, it's trading at its cheapest valuation in like a decade, basically. Yeah, it's one I'm paying attention to.

Yeah, and it's just gushing cash flow. So it's just, it's not cheap, but it's definitely compared to AI hardware plays. Man, it's like a bargain hunting. So. Yeah. But I think that's it. Yeah. The one thing I have to say this.

So this couldn't be any better timing, I guess. Trump pretty much truth right as I started that data center segment. Uh-oh. He said, this is his words, not mine, the only reason that communities throughout the USA should not want data centers is if they want to end up being backwards and poor. If you want to be successful and rich, let data rain. So if you don't like, it's coming from the very. very top now. He, like, there's a lot of places that are shutting these things down. And he,

he pretty much came out and said, like, if you don't support these things, you're, you're making China happy or something like that. He just went off on it. But yeah, he, he pretty much said, reject data centers if you want to be backwards and poor. So it's, it's hit the upper levels now. And I was trying to get it on just to show for the screen share. I only found a Wall Street Journal article, but it's always, can I share? Yeah, yeah, you share it. Let me see. Can you see it? Yeah, yeah.

So at 8 a.m. So is that, oh, but that's 8 a.m. Your time, right? Eastern. No, I think that's Eastern. I think anyway. But yeah. Is that safe?

If you want to end up being backwards and poor. Yeah. Yeah. It's, he pretty much attributed, well, here you can see here, if we kill the golden goose, you will only have yourselves to blame. So, yeah, I think he's getting pressure. He's getting pressure from the industry, I think, and I think militarily and, and from a sovereignty and national perspective,

it's probably very important for the U.S. to continue to have superiority in that. Yeah. In AI in general, in data centers. So I think he's just doing what Trump does the best. Yeah. There you go. Yeah.

So I think let's call it a day, go have a swim in Lake America, and then... He's also very good at renaming. Yeah, some of the memes are just good. Before we sign off, did you see the one? People can just, I think I reposted it. I think you liked it.

Oh, yeah, the goose. Yeah, the goose. Yeah, swimming. That was just awesome. I was trying to. No, I can't find it. But essentially it was Canada goose swimming, but with the hairdo of Donald Trump. It was pretty good.

Yeah. I mean, you got to laugh at some of the absolute absurdities going on right now from him. But, yeah. Now, much more to add there. So let's. No. Let's call it an episode. Hopefully, enjoy this.

Feel free to leave a comment. Let us know what you think for YouTube. And if you'd want a data center in your backyard, you'd let us know. Or you just want to keep using it without anything else. So yeah, so hopefully you enjoy the episode. We'll be back with a new episode on your favorite podcast player this Thursday. The Canadian Investor Podcasts should not be construed as investment or financial advice. The host and guests featured may own securities or assets,

discussed on this podcast. Always do your own due diligence or consult with a financial professional before making any financial or investment decisions.