Frank Curzio 00:00

Michel Amar, CEO at DigiPowerX, thanks so much for joining us on Wall Street Unplugged. Again.

Michel Amar 00:06

Good morning, Frank. How are you today?

Frank Curzio 00:08

I’m doing okay today. So, uh, I’m looking forward to getting an update. The last time I think we did this was a couple of months ago, and I know you just announced the U.S. data centers and the stock fell, and you came out and had a great report, and the stock went up tremendously since then. But I want to talk about so much that has happened, including the Cerebras mega deal. And this is a 10-year colocation contract with Cerebras Systems, worth $1.1 billion, with the ability to scale to $2.5 billion, right? So, uh, talk about that. You know, I guess I’d love to learn the insides of it, right? It’s an amazing deal, but was there— is there a lot of people out of bidding for this? Are you seeing demand for hyperscalers? And how did you decide where Cerebras is perfect for you guys?

Michel Amar 00:53

Good morning. So, yes, we are very, very pleased with what we accomplished so far this year. It was definitely a milestone and a pivoting moment for us. We worked very hard to get this contract, and now we get the validation that we are in play in the AI infrastructure build. So far this year, we capexed close to $100 million, all self-funding, in Alabama, and we are in very good shape to deliver phase 1 December this year, which will be an incredible accomplishment considering we sign in May. We locked in all the long-term equipment.

Michel Amar 01:54

We are, as we speak now, building the data hall. We should be in good shape for December. And we will address phase 2 and deliver phase 2 by the end of March next year. And then we have a 40-megawatt IT load, state-of-the-art data center, with the latest chips from Cerebras, which is one of the best chip makers for inference these days. We believe that the data center alone is worth anywhere from $25 to $30 million a megawatt. So the data center finish is worth $1 billion to $1 billion too. I read that Blackstone paid $27 million a megawatt a month ago for a data center.

Michel Amar 02:55

So basically, every dollar we diluted in— every stock we diluted in the past is serving a purpose and creating added value 3x to 4x. So I think it’s very important for the investors to understand that we are creating tremendous value by building that data center. Then you have a contract that has an additional value, a $1 billion to $2.5 billion contract, has also tremendous value on top and beyond the data center physical value. So we’re very, very proud, happy about what we are doing now. We are getting into the world of AI infrastructure, and we found a very solid partner that we can develop for future projects as well.

Frank Curzio 04:09

So it’s a— it’s a huge difference between $1.1 billion and $2.5 billion, right, with extensions. What do the extensions include? Is it further billing out the Alabama plan? Is it— you know, how do you get that contract to $2.5 billion? It’s literally more than double the $1.1. It’s a huge deal, right? And it says, you know— and I see this with a lot of these contracts that are going on with some of the companies where, you know, they’ll sign and say, “Okay, with the extension of a possibility of, you know, 2x plus that contract,” how do you get to $2.5 billion? Because that changes, you know, the landscape of your company if they do extend to $2.5 billion.

Michel Amar 04:41

So basically, after 10 years, when you have, you know, Cerebras is the tenant, having billions of dollars of GPUs inside that data hall, a full organization trained, they’ll go nowhere. They’ll stay there because it’s much more convenient for them to renew than to change a location.

Frank Curzio 05:09

Yeah.

Michel Amar 05:09

So an happy tenant will never leave the location. They’ll stay there for economic reasons, for efficiency, and convenience. So they’ll stay there. And usually, that’s what happened to a tenant that has billions of dollars of equipment inside the data hall.

Frank Curzio 05:34

Now, let’s talk about— you know, your stock price has been coming down. You had great news on it, right? I mean, we’re in early for our subscribers under $1.70, right? So— but the stock has run up after this news tremendously to $8, and now it’s come back down. And I think recently people are talking about, you know, New York, which accounts for, you know, I’m not too sure if it’s a third of it or maybe 25% of the total maximum, right? We have a little bit over 400 megawatts of power for you guys. And then you had the governor come out and say that, you know, an executive order pausing construction of data centers for one year. Again, a lot of political reasons. They say to seed effects of environment, energy, and stuff like that. Talk about that. Are you guys grant— does that impact you? Because that has hurt your stock in the past few weeks. I’m interested to see. You guys grandfathered in. You guys have been talking about this for a while. You know, how does that work for you guys? Does it impact you?

Michel Amar 06:23

So two thought processes here. First, we’ve always been under moratorium in the state of New York. There’s always a moratorium. I think in 2022 there was one. And we are definitely grandfathered. If you read the moratorium, the state moratorium, it’s for two specific types of data centers: new, brand-new data centers applications. So the ones that are pre-existing are not affected by the moratorium at all.

Frank Curzio 07:05

Wow.

Michel Amar 07:06

And two, for the new one, anything that’s 20 megawatts and up. So you have two conditions. So we’ve been running— we have two locations in New York, one in Buffalo, one in Northern Rwanda. We’ve been running in Buffalo for 10 years, or even maybe, yeah, 10 to 11 years. So we are definitely grandfathered. And we’ve been running for almost 5 years in Northern Rwanda. So we are definitely grandfathered. Now, what we cannot do with that moratorium is expand our footprint of energy. So if we were using 50 megawatts or 60 megawatts in New York, we cannot use 100 megawatts for the next 12 months. So— but if we use 50, 60 megawatts in New York, it will result in a $1.5 billion contract as a colocation.

Michel Amar 08:08

And if you do GPU as a service, 10x. It will result in multiple billion-dollar contracts. So we are okay for the next 12 months to develop what we are allowed to develop, okay, and meet our plan. So I want everyone that’s very concerned by New York State that we’ve been dealing with this type of moratorium forever, and it’s always there. They always renew it. Now they try to control new commerce. It’s actually— the state is eliminating the competition in New York State. So the people that are in place stay in place. And we’re not the only one, by the way. A lot of data centers that are known companies, like TerraWolf is in New York, ART-8 is in New York. A lot of our peers are actually data processing in New York as we speak.

Michel Amar 09:11

Very large companies. So we’re not the only one. We are all grandfathered. We cannot expand in New York State temporarily for 12 months. And which comes to my second point, that it was pretty, you know, smart to geopolitically diversify ourselves and expand to different states like Alabama, like North Carolina, like Texas. So we are looking at different states so we can diversify our risk always.

Frank Curzio 09:48

What are you hearing as someone that’s been in the room with Cerebras or these hyperscalers? And I think Cerebras has to guarantee 750, I believe it’s 750 megawatts of power for OpenAI. What is— what are you hearing out there? Because what I see is 60% of these projects are being delayed. And, you know, I’ve been arguing the people who have the data and have the data centers in place and have the actual power right now, it has to put you in a significant advantage, right? I mean, AI is not slowing down, right? But they need power. Yet a lot of these things are getting delayed. Now you’re seeing things in New York happen. I mean, doesn’t that put you in a better position? Are you hearing— are you getting more phone— I don’t know if you could say if you’re getting more phone calls from hyperscalers, but what I hear in this industry that, you know, they’re coming to you. They’re coming to people with power. They’re in dire need of this power. Are you hearing those conversations as well as saying, “Hey, you know what, Michel, what about the future of North Carolina?

Frank Curzio 10:38

Let us know what’s going on”? I mean, are you hearing things like that?

Michel Amar 10:41

Absolutely. And we are in a much better position today because we got the validation on two levels. Level one, we got a major player like Cerebras/OpenAI. And B, we are involved in all Slacks vertically. We are running now, as we speak, a GPU bare metal rental. So we are not a, you know, a project, future project chat here. We are actually getting AI revenues, and we are actually capable of running a tier-3 GPU bare metal rental vertically. Power, infrastructure, and delivering data processing. So we’re in a very good spot. We get a lot of demand.

Michel Amar 11:43

But of course, you always have to cope with demand with the execution. And part of the execution is the financial aspect of it. We cannot keep on diluting to grow our business. It has to be a, you know, a fair combination of equity and debt financing, which we are working on.

Frank Curzio 12:08

So talk a little bit more about that. Maybe you could explain to people, because sometimes people who know your company are familiar with it, with NeoCloud. And you call it bare metal rental. And congratulations, you guys are generating revenue off this. Now, again, this is proven, right? You sign a contract with Cerebras. It means that, you know, now the AI transition is here, and now you have, you know, NeoCloud. Could you explain that part of the business? Like, who maybe your clients would be on the GPU as a rental as a service? And explain that in a little bit more detail, because I know we get a lot of questions about it. I know what it is. You know what it is. But just for every investor that’s looking at this for the first time, how big of a deal that is for you guys?

Michel Amar 12:42

So I’ll explain a little bit the total picture. So you start AI as a real estate, and you rent a space. Then you go to the next step, a little bit smarter. You do a colocation deal, meaning you are in AI, you build the data center, you maintain the data center, and you find a partner, a colocation tenant that will sign a deal and will handle, from the CDU to the rack, the management of the GPUs. And then you go to the next step, which is GPU bare metal. You buy the GPUs, you set up the infrastructure, and you run the GPUs and rent GPU bare metal. And then next step, which we are implementing as we speak, we are opening an office in Silicon Valley, and we gathered tremendous talents to do GPU as a service. So now that’s the last layer. So if you put it on top of a layer of a software, then a GPU that you rent $4 an hour, GPU as a service, you’re going to rent it for $10, $12, $15 an hour.

Michel Amar 13:56

And it’s tremendous margins in that business. So we are setting ourselves up to be all stacks on, from power to building, to colocation, to bare metal, to GPU as a service. We are a full-stack company today, which has a much bigger value than just a real estate play.

Frank Curzio 14:22

Yes. Now, when I look, people like us and even, you know, our subscribers got into your stock very early, and the news story early on. I know that Peter Lynch, Ken Griffin, are also investors. Now I’m looking at your stock here, and it’s around $150 million. It might be a little bit lower than I’m too sure on cash and equivalents, right? No long-term debt. Alabama asset alone is worth over $500 million. You signed a $1.2 billion contract that could scale up to $2.5 billion. And you’re predicting 250, 300 million run rate starting next year. Yet your market cap now has fallen to, what, 370, even below that mark. What’s the disconnect here? Because it’s getting to the point where you guys have no long-term debt, right? You guys have all this cash on your balance sheet. You guys are in perfect position. I would think existing investors right now, and guys like me would be, you know, I’m buying more as well, but it just seems like, you know, there’s a big disconnect here, isn’t there?

Michel Amar 15:16

So a couple of things. I think that the last three, four weeks, the market, AI in general, has been down. And I believe that a lot of investors got a little bit scared about New York, even though Alabama has nothing to do with New York. Alabama on its own is worth, as you mentioned or stated earlier, when the project is done, in my opinion, a billion dollars on its own. So Alabama on its own is worth more than our market cap, for sure. And New York, we are grandfathered. So I think that there’s the also the introduction of these big companies, SpaceX going public, drew a lot of money from a lot of, you know, small caps. We are still a small cap. We still are tremendous growth from the beginning of the year.

Michel Amar 16:18

I believe that, you know, investors are looking for new catalysts, debt financing, you know, approvals, new contracts. And, you know, we are in a business that you can’t bring catalysts every week. You have to execute as you bring a catalyst. We brought an incredible contract, and we are executing that contract. And I’m planning to do an event, actually, on-site and interviews. And I will invite, you know, analysts and you, Frank, if you want to come.

Frank Curzio 17:03

Absolutely, yeah.

Michel Amar 17:04

And to see the site, the actual site. It’s very impressive to see the accomplishment. So we have a site that’s going to bring about basically $50 to $60 million EBITDA a year. That’s tremendous, okay, from one location, one project. Then we have a bare metal rental, additional EBITDA. And then we have the platform today and the credibility to do more business for ’27 and ’28. And that’s where we stand, and we’re in a very, very good position compared to our peers. We must be one of the, basically, only AI companies today that has zero debt, that self-funded close to $100 million in CapEx that is worth 3X, and that still remain with $155 million cash on our balance sheet. Okay, so we are strong, no pressure, no debts.

Michel Amar 18:11

The market volatility, it is what it is. The real value of our company is there, and it’s real. It’s translated by this data center that has a great value that I stated earlier. It’s translated by the contract value as well, and also our credibility now as an AI infrastructure business. So we’re very pleased. We’re not going to get distracted by the volatility, temporary, of a market. And we work harder, we build, and we create value.

Frank Curzio 18:52

And you have, you have executed on every level. What are some of the catalysts? I mean, I know you, you know, we talked about them, right? Where, all right, get New York developed. What about North Carolina? What are some of the catalysts that investors can look forward to? Because that maybe is not priced in. So, I mean, we know, okay, hey, you’re building this 2027. You talked about EBITDA coming, you know, with the contract with Cerebras. What are people missing here where you have so much more potential on this? Where you said, like, just your one asset in Alabama is worth pretty much double of your value, of your stock price right now in terms of market cap. But what are some of the things, like, in the next six months? Because I think that’s what people are looking for and saying, okay, why am I going to invest in this? What could happen? Because now that that deal’s been signed, you know, I think everyone’s okay. There’s a news, and now they’re executing. But what about North Carolina? What about, like, in the short term, the six, nine months that people can look forward to?

Michel Amar 19:39

So in the next six months, and before the end of the year, the catalysts are as follows. A, a debt financing partner to finance our growth so we mitigate dilution. That’s very important. And I’m working very hard on it, and I’m very optimistic. Then how do we exploit the footprint of power we have in our pipeline? We have New York. We know we’re grandfathered for 50, 60 megawatts. So that converted is another couple billion dollars of contract, okay? And it’s meaningful. North Carolina, it’s a ’28, ’29 item waiting for the load study. And that will be a 200 megawatt, diversified, different state. And then we have this LOI we signed with West Virginia power plant.

Frank Curzio 20:33

Yeah.

Michel Amar 20:33

That belongs to a few partners. One of them is on my board, Ajay Gupta. And Ajay Gupta is partner with Tony Robbins. And we are trying to formulate a cooperation or partnership at the power plant. But it’s a huge, you know, huge project, 1.3 gigawatts. So I want to make sure I do not rush to a big project that I cannot finance, okay? I have to be able to finance the growth. So step one, we find our financial partner for debt financing. We reinforce, we validate, and execute our data center with Cerebras. We expand our bare metal rental, and we move up a layer software with GPU as a service. Now we are a full-stack service company. And then we set up our 2027 and 2028 platform, and we grow from there.

Michel Amar 21:42

And we have a very incredible upside potential for the next three years. Because if you think about 40 megawatts, in my opinion, a data center of 40 megawatts is worth a billion dollars, okay? Plus the contract value, that’s worth, you know, X, plus the bare metal. And we can grow that business 3X, 4X in the next three years. So from there, I believe that we have a good shot of being comparable to our peers. And you see the market value of our peers per megawatt. We are way, way undervalued.

Frank Curzio 22:27

Yeah. And you have, you know, contracts in place generating AI revenue for the first time.

Michel Amar 22:33

Exactly. And I would add to, you know, certain investors called me and said, yes, but there’s an execution risk. I said, come to my site and look at the beautiful Tier 3 running 100% 24/7 successfully. And we are printing AI revenues now as we speak. It’s not true for everyone, you know? So we are a little bit more advanced than a lot of our peers. We also are going live on a colocation this year where our peers got contracted earlier and will deliver later. So we are doing a very good job. I’m not worried about the level of a market cap now. You know, it’s part of the volatility on the last few weeks. I think that we have serious assets and value, and we’re adding a lot of value for our shareholders.

Frank Curzio 23:30

You know, you have such a strong runway, I wonder. And this is one of the sectors. Because when I do, you know, comparative analysis to other companies, again, some of them are signing deals, but they’re not going to be available for a lot longer than yours. Do you ever see consolidation in this space? I mean, there’s one space I don’t think anybody’s talking about where, you know, it does make a lot of sense where, you know, you might be able to save costs. But there’s a lot of companies that aren’t in your position that have these contracts, or it’s going to take a lot longer. I’m just curious, have you heard anything about that? I don’t know if you could say it, but it just seems like this industry is pretty much ripe for consolidation. There’s just so many players in it. And I think, you know, everyone has their struggles within it. But, you know, to see where you guys are right now, it just, you know, that’s another layer here when, you know, the stock at this valuation that I see. Yeah, I just wonder if one of these other guys will come to you and say, hey, you know what? If we’re together, it’d be good.

Frank Curzio 24:16

Because the value that you have in that future, in the next couple of years, I mean, it’s there, right? You have that contract in place. You have the power. You have all these companies in dire need of it. It’s just a surprise to see that you’re in better shape than a lot of companies. Yeah, I don’t know. Maybe see consolidation in this space. I don’t know if you’ve been hearing any rumors on that.

Michel Amar 24:33

I believe that when we run our data center from December on, which is not a long time from now, you know, it’s 120 days, basically, we’ll get the attention of not only larger companies, but funds that are investing in the space. So we are in a great position today because we are just after the validation that we are credible and we are getting AI revenues. And just before the final execution where we’re going to get granted the all de-risk validation and therefore the attention from. And then I think we’ll get our worth in terms of valuation.

Frank Curzio 25:28

And I guess the last question here is, when it comes to these hyperscalers, we’ve seen Microsoft with Three Mile Island and say, hey, we want to restart that. That’s going to take four years. I mean, the risks on that to get it state, local, federal approval alone is going to be difficult. And then they’re buying out energy 20 years from now. So these guys aren’t looking at tomorrow. They’re looking at anyone that has energy pretty much that could get online in the next five years will sign long-term contracts. Are you seeing that as well? I mean, do hyperscalers come and say, hey, let us know in North Carolina when you’re closer to it? Or, you know, how far out are they going to look where, you know, you got the Alabama contract, but you see this growth and they see it. I mean, these guys are in dire need to lock it in. Are they having, do they have conversations like that? And again, I don’t want to, you know, if you can’t say things or whatever, but I’m just curious, like, being in that room, how do they talk to you and say, hey, do they say, hey, let us know when this is ready or let us know when this is ready?

Frank Curzio 26:17

Because they are booking out contracts for 20 years plus when it comes to uranium and some other deals. And I know that they have to lock in this power. I’m just interested in those conversations.

Michel Amar 26:26

So absolutely. You know, as much as you become credible and you got the validation, the risk goes down and you get further away in terms of planning. They’ll give you three years, four years, five years plan because they believe that you have the right partner for execution. So we are getting to that point soon where we’ll get, you know, 2030, ’31, ’32 plan for our future sites. And I was reading, I think it was yesterday, SoftBank was saying that by 2040, $5 trillion a year will be spent in AI. So we’re not going anywhere. And you need to be an executor. You need to be experienced in building data centers. We’ve been building data centers for 10 years, Tier 1.

Michel Amar 27:27

Now we are building Tier 3. And not only we are building Tier 3, we are managing, you know, vertically the process. So we understand from a power plant generation, which not a lot of our peers are managing power plants. I think we are one of the few. And so we generate power, we convert power to a setup, a data center, and then we process with the GPU servers this data. So I think we are pretty knowledgeable and credible in the space. And from that point, all we have to do is copy and paste and execute. It’s all we have to do, and we’ll get the valuation.

Frank Curzio 28:16

So I want to end with this because I’ve been covering small caps for 30 years, and I think we have a relationship for a little over two years now. And to see so many companies I see this with where people focus on the stock price, it is all about execution. And I hear you say that is amazing because all you’ve done since I’ve known you is execute. I mean, even with this contract, building this up, transitioning, everyone’s like, yeah, okay, it’s going to take a while to transition Tier 1, Tier 3. You’ve executed every step of the way. Yes, the stock price is down a little bit, but what I’ve seen covering small caps for 30 years is, you know, that’s normal. You’re going to see the ups and downs. As long as you execute, that value is eventually going to be recognized. So I just want to say, you know, we’re in early, we’re happy with everything that’s going on. I want to thank you because you’ve been executing on every single level, everything you’ve promised you delivered on. So, and I know that stock price is what will actually follow. So I think this is going to be a good update for investors and shareholders.

Frank Curzio 29:03

But I really appreciate you coming on and letting us know the catalyst coming up. I think people are going to get very excited.

Michel Amar 29:08

Thank you, Frank, and I appreciate your time. Thank you so much.

Announcer 29:11

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