AI Is at a Crossroads

Data centers want tax breaks. There's a better solution… Published By Money & Markets, LLC. May 13, 2024 Published By Money & Markets, LLC. May 13, 2024 [Turn Your Images On] [Turn Your Images On] From The Desk of [Matt Clark, CMSA®]( Chief Research Analyst, [Money & Markets Daily]( AI Is at a Crossroads: Data Centers, Tax Breaks and an Overlooked Solution Money & Markets Daily, In 2023, state and local governments provided $23.7 billion in economic incentives to businesses nationwide. To put that in perspective, it’s more than the gross domestic product of countries like Albania, Malta, Jamaica or Nicaragua. While that is slightly less than the amount of incentives paid out in 2022, it’s almost as much as all incentives offered from 2018 to 2021 … combined. [Turn Your Images On] Governments use these incentives to sweeten the deal and bring new businesses to their area. And the most common tactic is to offer tax breaks on goods and properties. Suppose you run a company and you want to expand. In that case, governments will waive taxes on equipment you buy and property you use as long as you invest a certain amount in the expansion, employ a certain number of people and pay above a certain wage. It’s a sweet deal if you can get it. In 2023, the biggest sector beneficiaries were tied to semiconductor manufacturing, electric vehicles and EV battery manufacturing. I want to focus on a segment that flew under the radar a bit. Nearly $2 billion in economic incentives were tied to data center projects. However, some lawmakers are questioning data center incentives … and even pulling some off the table. Today, I’ll show you why the solution will please both governments and Big Tech simultaneously. --------------------------------------------------------------- [Turn Your Images On]( [AI’s Power Grab: A 10X Opportunity]( W.S.J. reported AI’s “insatiable thirst” for electricity simply isn’t sustainable. That could send one small energy stock soaring over the next year … beginning as soon as May 30. [Click here for the full details.]( --------------------------------------------------------------- The Data Center Boom Big Tech companies like Apple, Google, Amazon and Meta need data centers. Every time you post a picture on Instagram, buy something online from Amazon or stream a movie on AppleTV, data from those activities are stored in data centers. As of March 2024, the U.S. had 5,381 data centers — more than Germany, the United Kingdom, China, Canada, France and Australia … combined. With the rise of artificial intelligence, Big Tech will have to build out data centers on a massive scale. The founder and CEO of Dell Technologies, Michael Dell, said data center capacity will have to increase by 100X over the next decade. State and local governments are taking advantage of this by offering Big Tech companies massive incentive packages to build new facilities in their backyards. In addition to tax breaks on equipment and property, governments are even offering breaks on electricity usage. So while you and I pay normal electricity rates, these tech companies with power consumption needs often pay a reduced rate in states like North Carolina, South Carolina, Tennessee and Texas. Data centers already used massive amounts of power before the onset of the AI mega trend, and now that usage is only getting larger as companies implement power-hungry AI chips into their data center infrastructure: [Turn Your Images On] Consulting firm McKinsey & Co. projects data center power usage will grow from 17 gigawatts in 2022 to 35 gigawatts by 2030. That’s enough to power more than 26 million homes in the U.S. Some governments are reconsidering offering tax incentives for data centers because it strains the reliability and affordability of local electric grids. In Georgia — home to more than 50 data centers — lawmakers are working on legislation to pause economic incentives to data centers, while in South Carolina, the House passed a measure to prevent data centers from receiving discounted power rates. The Senate removed that measure. All of this puts the AI mega trend at a crossroads. Data centers need power to operate, but governments are becoming leery of giving rate breaks to these power-hungry centers for fear of passing those costs on to taxpayers. But there is a solution… We Don’t Need Data Center Tax Breaks The challenge is simple: How can we keep building data centers to support AI expansion without blowing up existing power grids or causing a massive burden to taxpayers? The solution isn’t in new policy but in new technology. Our chief investment strategist, Adam O’Dell, has uncovered [the one company]( with the power (pun intended) to solve this critical issue. It’s already well ahead of its competition after spending billions on research and development and cutting through regulatory red tape. Big Tech firms like Apple, Google, Amazon and Meta are going to look to this one small company to solve this crossroads crisis. Adam just released a special presentation on this critical piece of technology the AI mega trend needs, not just to sustain … but to thrive. You don’t want to miss out on this massive opportunity, so be sure to [click here]( and learn more about this next innovation in the AI revolution. You and your portfolio will be happy you did. Until next time… Safe trading, [Matt Clark, CMSA®]( Chief Research Analyst, [Money & Markets Daily]( --------------------------------------------------------------- [Turn Your Images On] Unemployment Claims Point to a Rate Cut Initial filings for unemployment benefits hit their highest level since late August 2023. Jobless claims [totaled]( 231,000 for the week ending May 4. That’s up 22,000 from the previous period and higher than the Dow Jones estimate of 214,000. Previous spikes in new claims marked lows in the unemployment rate. The [Federal Reserve’s chart]( shown below, tracks initial claims (the blue line) and the unemployment rate (the red line). This chart had set both to equal 100 in April 2022 to allow for a direction comparison.  A higher unemployment rate followed spikes in new claims for March and June 2023. The latest reading is likely to be followed by an even higher unemployment rate. That's bad news for hundreds of thousands who will likely lose their jobs in the coming months. It’s also likely to force the Fed to cut interest rates this summer. — Mike Carr, Chief Market Technician, Money & Markets Jobless Claims vs. Unemployment Rate [Turn Your Images On] [(Click here to view larger image.)]( --------------------------------------------------------------- Check Out More From Money & Markets Daily: - [AI'S NEXT PHASE: LOOK AT DATA CENTER STOCKS]( - [THE AI REVOLUTION’S “INVISIBLE” BOTTLENECK]( - [WHAT THE RAILROAD REVOLUTION TEACHES US ABOUT AI]( --------------------------------------------------------------- [Turn Your Images On]( Privacy Policy The Money & Markets, P.O. Box 8378, Delray Beach, FL 33482. To ensure that you receive future issues of Money & Markets, please add info@mb.moneyandmarkets.com to your address book or [whitelist]( within your spam settings. For customer service questions or issues, please contact us for assistance. The mailbox associated with this email address is not monitored, so please do not reply. 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Likewise, past performance is no guarantee of future returns. Certain investments carry large potential rewards but also large potential risk. Don't trade in these markets with money you can't afford to lose. Money & Markets permits editors of a publication to recommend a security to subscribers that they own themselves. However, in no circumstance may an editor sell a security before our subscribers have a fair opportunity to exit. Any exit after a buy recommendation is made and prior to issuing a sell notification is forbidden. The length of time an editor must wait after subscribers have been advised to exit a play depends on the type of publication. (c) 2024 Money & Markets, LLC. All Rights Reserved. Protected by copyright laws of the United States and treaties. This Newsletter may only be used pursuant to the subscription agreement. 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