Winklevoss Twins' Big Miss on Crypto, Top VC Tech Sector Warning, Atlassian's 10% Staff Cut

Welcome everyone to The Information's TI TV. My name is Akash Masricha. It is Thursday, March 12th. Before we get to today's show, I wanna flag an exclusive story that we published late last night. The Information reported that Anthropic is in talks with a consortium of PE firms including Blackstone and Hellman Friedman about forming an AI-focused joint venture to sell Claude to companies funded by the investment firms. The recent rift between Anthropic and the Department of Defense temporarily impacted these discussions, but according to the information's reporting, talks are ongoing. You can check out that story on our website. Today on the show, we are sitting down with Josh Wolfe from Lux Capital to discuss a note that he sent to founders earlier this month about some of the big risks impacting the tech sector that thinks they should be preparing for. We'll also get into the news that Atlassian is laying off 10% of its staff. The company's shares are down 50% so far this year, so it certainly has its work cut out for— cut out for them. We'll then shift to some exclusive reporting from The Information. Microsoft is in advanced talks to lease hundreds of megawatts of data center capacity at an AI campus in Abilene, Texas. This comes after rival Oracle walked away from the same opportunity. I'll be joined by one of the reporters who broke that story. And we will wrap the show with a look at the Winklevoss twins' turnaround plans for the crypto exchange Gemini, whose shares are down around 70% since its public debut. It's going to be a fun show, so let's get right on into it. A top venture capitalist is sounding the alarm. Josh Wolfe, co-founder and partner of Lux Capital, sent a memo out earlier this month to the company's portfolio founders about some of the big risks that he says could have a big impact on startups and on the tech sector at large. I want to bring on Josh Wolfe to share a little bit more about what he is seeing. Josh, welcome to the show. It's great to have you here.

Great to be with you.

How are you doing?

I'm doing well. What prompted you to send this note out to founders earlier this month?

Honestly, it was a, a confluence of a few factors. The first was capital markets. The second had to do with some of the political interventions, particularly around tariffs. The third was physical infrastructure, something you just mentioned as related to the data center build and the huge CapEx spend. And the fourth was layoffs and really the market's reaction to those layoffs and specifically Block. The capital markets. I think the first piece was this divergence between equities and bonds. And we are micro investors. We are trying to bet on startups. We're trying to bet on the most amazing founders. But ignorance of the macro is no virtue. And so we've always paid close attention to just market signals. And so you had a dynamic where you're reaching all-time highs in equities, particularly those leveraged to AI and tech. And that is the zeitgeist of the moment. And then you had a low point on the 10-year yield. And typically that occurs when people are buying bonds. And usually you can say with a sort of brushstroke that bond investors are usually a bit more risk-savvy than equity investors. Equity investors typically narrative-driven, bond investors more cashflow-driven. And so sometimes the signal weights a little bit more heavily when you see that divergence. So that was number one. Since then, you've started to see, you know, I think we published this roughly March 2nd, so we're call it 10, 12 days post. Markets last week I think were down 2, 3%. The VIX went from 17 or 18 to 29. Some of that because of the confluence of war, although we wrote this right after the first strikes that weekend in Iran between US and Israel. And so the markets felt a little bit shaky. And when your parents are talking about AI and everybody you know is talking about NVIDIA, it's that classic signal that just, we're probably not at the bottom. Okay, so that was the first thing. Uh, second thing was the physical infrastructure. And there were two pieces here. One, if you go back to even the election here in New York and you go back to the Virginia governor election, the key thing that people were campaigning on was affordability. And all of these states around the country were doing everything they could to attract data centers and AI because they thought that it was gonna create lots of jobs. And it has and will in many cases. What they didn't anticipate was that electricity prices would be spiking. And so now you have something like 300+ moratoriums. On data center builds in across 30 states. And that's a new signal. Now, whether or not those things pass, whether they are for electoral fodder to be able to show that a candidate is helping to reduce the cost of your daily living, all TBD, but it was another signal. And then you just mentioned the Oracle project, Oracle OpenAI teamed, funded and fueled rather by Crusoe in that Abilene, Texas plant. Maybe Meta takes it over. but you're starting to see these very large commitments upon which very large capital raises were justified scaling back and saying, wait a second, maybe we don't need this compute. So that was sort of the big second physical infrastructure one, which will lead to a piece of advice that we gave for, for our founders. Third was tariffs and just the nature of that Supreme Court shot it down immediately. The Trump, Trump administration said, that's great, we don't care about the judicial branch, we're using another mechanism. Uh, and the implication there is if costs rise, not just on an individual company, but the dependencies concatenated over different, uh, suppliers, two suppliers, and having that risk mindset to think about that we thought was, was extra important. Uh, extra important. Uh, the fourth was, uh, the market's reaction, particularly to the widespread layoffs, uh, from the note from Jack Dorsey. Market was up and what you saw was suddenly the equity markets were saying, we're going to reward you if you can cut costs, particularly in human capital and human labor. And sure enough, the job report came out, uh, last week. I think it was expecting 50,000, it ended up being something like 90,000 down. People are losing jobs right now at the rate of about 750 or so a day. So the job picture is not that rosy. I think you have 60%, uh, participation in the labor force. Unemployment's up to like 4.4%. Again, we're micro VCs, but understanding sort of all these macro dynamics, it just said, let's be cautious. I have no idea if the markets are gonna crash. I have no idea if we're gonna be in an ascendant bull market. What I do know is it is wise to take precautions because the cost of doing that is virtually nothing, but the cost of not doing it is very high.

So you, you, you wrote this and I thought the interesting thing is you kind of echoed what you just said, which is that, hey, I'm, I'm not trying to be, trying to call the top here. I'm just trying to say be careful, run some sensitivity analysis, you know, get prepared. What was the reaction from founders? I mean, I'm curious what emails you got back.

So we have a, a big founder list of what we call the Lux Family. And I gotta tell you, everybody was like, thank you so much for sending this. Super thoughtful. Really appreciate it. A bunch engaged with the various parts of our, our infrastructure here. So whether it's finance, operations, accounting, people that are involved in capital markets and bank lines of credits, because the basic advice we had was exactly this. We have no idea if something bad's going to happen, but it's the same colloquial advice I give my kids on a rainy day or a cold day. You need an umbrella, you need a sweater. It's better to have it and not need it than need it and not have it. Same thing for companies. So check your runway, double test your assumptions. This is all basic common sense.

But have they tightened their, their, I mean, their budgeting forecast? I'm curious, in the last 10 days, have they tightened their budgets as a result of the sensitivities that they ran?

No, nobody, nobody, uh, was catalyzed into extreme reaction yet, but I do think that people are basically saying, okay, wait a second, we're paying attention to growth, growth, growth. We're paying attention to hiring, we're paying attention to shipping. Let's make sure that we have no regrets, that there's no SVB-like environment that happens. You know, it happened 2 years ago where we're suddenly vulnerable. Let's just think about where are our exposures. The number one exposures that you have control over is how much cash you're spending, And if it's in pursuit of growth and it's working, great. If not, maybe you want to rein some things in, make sure you have cash for a rainy day. Number 2 is look at your covenants on SVB debt or, um, uh, any of the other venture debt lenders and make sure that your terms are good, that nothing's gonna get pulled on you, swap lines, et cetera. Uh, number 3 is thinking about that concatenated risk in your supply chain. If you're dependent on a supplier and suddenly they're dependent on a supplier and something with the tariffs or any kind of interruptions creates a spike in somebody 2, 3 layers down, You're gonna come to the board and say, we had no idea this was gonna happen. Shame on you. I always like to say failure comes from a failure to imagine failure. That is a creative act. The idea of imagining what could go wrong so that you can do something by throwing time or money or talent to prevent it. So that was the other big thing. And the other piece, which is a very human piece, all of our companies, they don't do deals with companies. Of course they announce so-and-so does a deal with Oracle or with, uh, Nvidia. but you're doing a deal with a person. It is a human that is signing a contract that's greenlighting you, giving the thumbs up. If that person gets laid off and you're seeing Oracle lay off thousands of people or purporting to, you're seeing Salesforce laying off thousands of people. If your key contact, if your key champion is suddenly gone, no fault of your own, and they're laid off, you're in trouble. So the advice here is make sure you have deeper relationships than one single node of risk. Make sure you know 3, 4, or 5 people in the organization. Because if the person that you're working with leaves, you're not entirely screwed.

I want to ask you a related question on the topic of a story that we published this morning. So we, we wrote about— well, actually late last night, we, we published a story about Anthropic looking to work with private equity firms. And I know that you follow the credit markets and you also follow the private equity sector pretty closely. And I'm curious from the conversations you're having what the vibe is amongst private equity firms right now, because I mean, we have this SaaSpocalypse that is ongoing in the public markets. I imagine it's not a great time to be buying because you just have no idea how the enterprise values of these companies are going to shake out. You also have the companies that they may have bought during the ZIRP era and taken on all this debt and loaded it up. All that debt is probably coming up on refinancing at some point in the next couple of years, and it's a totally different environment. What is the— what is the vibe right now amongst private equity and the people you talk to?

Well, you have to also look at the stock prices of many of the big PE players that were hit because of the presumption, or in some cases the verification of exposure to many of the software names. Um, Apollo was probably the least hit because they had the least exposure to it. I think everybody is looking, and they're well diversified. None of these platforms are going out of business. Even the growth equity firms like Vista or Thoma Bravo are going to be in really good positions because they'll also be able to take fresh capital and buy things for cents on the dollar, recapitalize things. So I'm not worried that this is like some bubble disaster in SaaS. We've long prophesied that there was going to be a shift away from SaaS and enterprise software into deeper tech and harder tech, a total self-serving view that has henceforth proven true. But I think the private equity guys are savvy enough to be able to pounce on opportunities that are super low priced, and you'll probably see a lot of consolidation. So there will be people that do have really messed up capital structures, debt that does need to be refinanced. That might happen at higher prices, but there might be other companies either in their portfolios or adjacencies that aren't as indebted, have cash, have growth, and you'll end up seeing a lot of mergers. So I don't think that there's any sort of linear prediction that you would say here that the private equity guys are screwed in any way. I think what Anthropic is doing, uh, with Blackstone and others, or, or is purporting to, is actually very wise. These are huge aggregators of hundreds and thousands of businesses, and the name of the game in private equity, particularly if you're doing a true levered buyout, is how do you squeeze efficiencies out of the business? You can lay people off, you can get, uh, pricing power in, uh, aggregate buying. You can get pricing power if you have an indispensable product and can raise your revenue. Uh, but there's a lot of things that people are typically looking at as levers. Same thing with like an activist investor coming in. But if you can use AI as one of those tools, now there are people that are using AI just to lay people off because it's part of the narrative and people will accept it and you're gonna see a lot of that. But there's people that legitimately say we can actually reduce our spend on SaaS, uh, instead of having 60 or 70 vendors doing everything from HR to payroll to, um, lead generation and marketing. We can do some of that internally, and that's why you've seen the SaaSpocalypse. And in other cases, uh, I think Ed Roppett's very smart to say if we can go to one buying center, give them some discounted rate, it's a virtue, uh, uh, for them as a sponsor to these companies. And, uh, they could probably get, you know, another 500 enterprise clients, which has been the vector that they've decided to focus on rather than the consumer. It's a good hedge also, uh, relative to everything that's happened with DOW.

Now you talked about data centers, and one of the things that I have been— that we had Bradley Tusk on the show a couple weeks ago, and, you know, he was talking about the pushback locally that comes from having these data centers, and electricity costs are rising, and yet we have hyperscalers that— I mean, there's, there is no reluctance to continue to invest in data centers. And he basically suggested that we have this election cycle coming up. Politicians are very much interested in getting reelected, and so it would do them good to be able to say, hey, maybe we shouldn't build as many data centers because of the rising electricity costs. Do you think that there is any kind of a reckoning coming here on that level?

Uh, yeah, as I, as I noted in my opening comments, and Brad's a great guy, by the way, uh, very politically savvy and tech savvy, um, and a friend. 300 moratoriums right now, you know, or 300 bills for moratoriums across 30 states. That is, that is not like a small pattern. That is a wave. That is a movement. And it's been validated again because whether it was Mondani in New York or the Virginia governor, they won on a message of affordability. So that is going to be, I think, the main message going into the midterms— affordability. You know, at a national level, federal level, we're at war. Straits of Hormuz closed, oil's up. We're releasing reserves. People are going to try to temper that. But it's going to be a force that is putting a lot of pressure. Some people will say And, and, and by the way, I think some of the hyperscalers may actually be relieved because they've made so many capital commitments, but they won't publicly admit it. They'll say, ugh, these politicians, they're trying to thwart our growth plans. But the reality is, I do think that in some companies, in some domains, what the individual company does rationally, collectively is irrational. And the amount of spend, the amount of CapEx, the amount of build for these multi-gigawatt data centers, it, it to me does not make sense. And I know there are people on the other side. Good friends that run large funds that will say, no, no, no, this is not like fiber optic cables 25 years ago, that there is no dark fiber this time. There are no dark GPUs. And that is true, but each of these major large labs are competing for 100% of my attention. And I give them roughly each 20% of my market share. I open 5 different browsers and I'm typically using them or running Claude Code or Codex. And I'm just not that optimistic that all of this compute is actually going to be needed. And so I think they're relieved to see some political pressure actually push back and end up canceling some of these projects.

Okay. But cast it forward then. What happens? I mean, something gets canceled and then what? We have the overcapacity issue again?

Look, when NVIDIA reported 2 weeks ago or 3 weeks ago, to me it was like peak expectations because the fundamentals were amazing and the stock was down 1, 2, 3%. And that was all you need to know. I mean, expectations are fully baked into the fundamentals, uh, if not above and beyond. And that's what markets do. You know, it's, it's the difference between expectations and fundamentals. So what, what happens? I believe there's going to be a narrative shift. It's something I've been talking about for 2 years. And it really happened, uh, because I read a paper from Apple of all places, most of which, uh, Apple was being dismissed because Siri and Alexa have been horrible. They've been laggards in this. Apple's CapEx is virtually nothing in the AI game. And so people discounted, but, but you read this paper. And it said, hey, we can do large language models on device using flash memory. And the same insight that I had back in 2016 with a company, Zoox, in self-driving cars about NVIDIA being the soul of the new machine when it was a $15 billion market cap, we shared with our LPs and some of our public market friends and said, I think you're going to have a big boom in the memory players, not just for the attach rates of high bandwidth memory for the NVIDIA and the GPUs that are going into the stacks, but for on-device inference where 50% of your inference will be on your device, not having to go to the cloud. You'll go to the cloud to search as you might replace Google in some aspects of that, but you're going to do 50% of your cached emails, chats, text, photos, videos, health data on device. And that means that the winners there might be SanDisk and Samsung and SK Hynix and that has, and Micron in the US. So that has been the big push that I think you've seen over the past 2 years and these stocks have been ascendant. Uh, since we made that call. And so that's what I think happens next. I think you're gonna get a glut in the data center and you're gonna end up with a paucity and a scarcity, uh, on the localized edge inference.

Great.

Well, Josh, there's a lot to watch for there. I wanna thank you for coming on. That is Josh Wolfe, partner and co-founder of Lux Capital, here on TITB. Atlassian says it is laying off 10% of its staff in order to invest more in AI and enterprise sales. CEO Mike Cannon-Brookes made the announcement in a blog post Wednesday night. Atlassian shares are down around 50% since the start of the year. The stock has been hard hit in the SaaSpocalypse. Here to weigh in on that news is Jason Salino, equity research analyst at KeyBanc Capital Markets. Jason, welcome to the show. It's great to have you here.

Hi, thanks for having me. Big fan of the show. So glad to be on.

Thanks so much for coming on. What did you make of the cuts?

Well, you know, it's always tough to see, you know, companies make those big announcements, but I think it's kind of an admission that, you know, with AI and Agentic, Atlassian needs to get on the offensive. And in order to do that, they have to self-fund with some cost reductions.

Okay. I wonder in your modeling, 10%, do you think they could have cut more? I mean, you know, they're framing this as an AI cut, which we've had this discussion with Block. That was, albeit a much larger cut. But did you have any calculations on your end around how much, uh, bloat the company might have had? And if they were to, uh, cut, what would bring them down to, to what their competitors have?

Yeah, no, that's a good question. I think, um, you know, we have— we haven't necessarily taken a look at the overall, call it, organization from like a headcount perspective. I, I think what's important to know is earlier this year, I think that they had some selective hiring freezes. So this is kind of a bigger staff reduction. When we look at, call it, the overall tech market and we hear these announcements of AI driving reductions in force, Mike was pretty clear in his blog post that it wasn't fully because AI is replacing these jobs. But again, I think it had to do with them needing to self-fund to make some investments in key hiring for enterprise sales and, and AI solutions.

So when you look at Atlassian's stock drop then over the past couple months, in the past year even, what do you think explains that?

Well, when we, when we talk to institutional investors, I think when you look at the DevOps names, particularly Atlassian, because it's a license seat model, you know, they, they're, there's this perception that they're under threat. Developers, developer headcount had been steadily growing for a decade, right? One of the biggest hurdles for software development was software development costs and finding developers to do it. You know, Jira, Confluence, these are products that are used by nearly every developer. So when investors were worried about AI and Agentic, I think their natural conclusion was that maybe you see a reduction in developer headcount. So I think a lot of the reduction in the stock has been related to those worries. I'm a little more optimistic that Atlassian can't necessarily be replaced. When we talk to different software companies that we cover, a lot of them aren't reducing headcount for developers. The most likely scenario is probably they keep headcount flat. You know, with cloud code and different other forms of coding, we've seen a huge productivity uplift and we've seen actually an acceleration in application development for agents and other AI-type applications. So we're seeing an increase in activity, but it's not relating or translating to headcount growth. So I think that's another factor that's kind of weighing on the stock's growth algorithm long-term.

It's kind of interesting to me because if you look at the company's financial profile right now, I mean, this is a company that is operating still north of the Rule of 40. I mean, it's growing around 20%. It's got free cash flow margins of a little north of 20% as well, I think. And so if rule of 40 is what people are looking for, and we know people saying, well, we want rule of 50, rule of 60, I mean, it's not like it's out of the ballpark, but it's certainly in the ballpark. And yet maybe this connects to what the previous guest was talking about. I mean, it's the narrative shift around Atlassian. And maybe the fact that these would be the, the easiest software to develop on your own with AI.

Yeah, I think, um, like if you look at the blog post, Mike, Mike kind of outlines that it's not good enough to be a great software company anymore. I think the hurdle has certainly been raised. I mean, their financial profile is quite attractive, right? I mean, and if you look at it on a valuation basis, we basically set new trough levels for for multiples, especially for them. You know, in a world of Rule of 40, maybe the bar is Rule of 50, Rule of 60. You know, this could be a meaningfully more profitable business, but when we think about long-term value, a lot still comes from growth. So I think it's probably good that they're, you know, maybe getting on the offensive, but investors will want to see the ROI on those investments. You know, they, they pulled strings to drive a narrative shift. You know, they're end-of-lifing their data center kind of customer deployments. I think that's something that investors have wanted more from a stick perspective than their more balanced carrot approach for a long time. You know, they're making key investments in strategic acquisitions, but it's tough to battle the narrative. Sometimes.

Let me ask you one last question. We've had Mike Cannon-Brookes on the show before, and he talked all about what they were investing into Rovo, which is their, uh, basically their Glean competitor, I think, the way that I understand it. Glean, of course, is the fast-growing startup. But I mean, since that conversation, there's only been more and more companies, enterprise companies, uh, introducing these types of, uh, enterprise search features or features that can sort of make sense of all your data. How good is Atlassian's AI products and Robo compared to all of the other options that, that you see other public companies having?

Yeah, I mean, that's another good question. We're seeing a lot of companies, especially on horizontal software, develop their own agents, develop their own AI bots, develop their own AI capabilities. When we talk to large Fortune 500, you know, IT executives, they have to make a decision whether to use the AI and the agents from the incumbent software developers, providers that they're already using, or use, you know, new entrants. I think large platforms like Atlassian have an advantage in cross-selling those AI features. So from like a technical standpoint, I think it's still quite early. And, you know, it seems like we're trading leads every other month. The traction we've seen in robo has been slower, but they've made some packaging changes to kind of increase that adoption. So time will tell, you know, usually the best technology wins, um, but time will tell.

Great.

Well, Jason, I want to thank you for coming on. That is Jason Salino from KeyBank here on TI TV. The Information published exclusive reporting that Microsoft is in advanced talks to lease hundreds of megawatts of data center capacity at an AI campus in Abilene, Texas. This comes after Oracle walked away from the same opportunity. There are a lot of layers to this story, and so to break it all down, I spoke with Anisa Gardizi last night, our cloud and compute reporter. She was one of the reporters behind that story about what she found. Here is that conversation. Anisa, welcome back to the show. It's great to have you here.

Thanks, Akash.

Okay, so I want to recap a couple things about the data center construction story in Abilene, and then we'll get into the news. So we know that Oracle and OpenAI, they have this deal to lease 1.2 gigawatts in Abilene, and this is the facility that Crusoe is constructing. We know that there was talk about expanding the 1.2 gigawatts to 2 gigawatts, uh, and then one by one, first OpenAI said we're not interested, and then Oracle said were not interested. And so that has really left Crusoe trying to find new tenants, I guess, for this facility. And we also know based on the last time you were here, Nvidia kind of stepped in and said, hey, here's $150 million as a deposit to just keep things afloat, basically. But we're still looking for a tenant for this. Now, with that in mind, what did you find in your reporting this week?

We reported that it's actually Microsoft who's in advanced talks now to become the tenant of that site in Abilene. So we knew that lots of companies were circling the project after Oracle decided not to move forward. And we're now hearing from our sources that it could be Microsoft that, that steps in. So that was the, the development in this long saga that I know you've also been following closely.

And so Microsoft in this story would basically be acting as the Oracle player here. They would be the cloud provider that would lease the space, but ultimately Microsoft would then have to find its own customers to then allocate this compute that it would be operating in this data center, right?

Exactly. But I think one advantage that Microsoft has is that Microsoft's cloud business is much more robust. Than say Oracle's. So when Oracle did that first 1.2 gigawatt deal, it dedicated all of that capacity to OpenAI. But I suspect that Microsoft is not too worried about that because, um, they have their entire Azure cloud business, um, their own internal AI teams that could use the capacity as well as many cloud customers. So it'll be interesting to see if they look for one specific customer or just wrap this into their entire cloud business, which I think is what is going to happen.

Okay, now where does Meta come into the story? That was another name that came up.

Yes. So Meta, after Oracle decided not to move forward on the project, Meta was in early talks to be a tenant at the site. And so now we hear Microsoft is in advanced discussions. Um, you know, the companies are probably having conversations today and tomorrow with both of those firms and potentially more, um, about who's gonna, gonna end up with the site.

So we have these names floating around. I mean, if we take a step back here, what do you think all these negotiations tell us about the AI data center construction story as a whole?

Yeah, it's a really good question. I think the one thing that is glaringly obvious about the industry after some of these reports is that demand for data center capacity is so high. It is a very interesting sign that, you know, not even days after Oracle passed on a project, you have major companies like Meta and Microsoft looking at taking that capacity. So it is a sign that demand is still very strong. And, um, you know, Oracle deciding not to move forward with a project isn't yet catastrophic. You know, if we, if we were at a point where demand was waning, then a company like Crusoe might have a really hard time getting a tenant and actually have to pause the work that it's doing on the ground. Um, so I think demand is still really high and it's interesting to sort of see big names like Microsoft in these conversations because that shows just how how desperate they are to expand their computing capacity.

And I know I might be opening a bit of a can of worms here, but now tell me about how this expansion— and again, we're talking about the 0.8 gigawatt expansion that was supposed to be OpenAI Oracle. It's not that anymore. Microsoft— how does all this relate now to Stargate, which is the big initiative of OpenAI trying to get its compute?

Yeah, so OpenAI is, you know, last year they had this goal of having 10 gigawatts of committed capacity from Oracle and SoftBank. And what we've reported is that last year they ended with around 7.5 gigawatts across Oracle and SoftBank. And they actually ended up signing deals with other companies like AMD, Amazon Web Services, Cerebras. And so, um, they've sort of, you know, split off beyond Oracle and SoftBank. Um, and so when Oracle and OpenAI were talking about expanding for their now, they now have 6 gigawatts together. They actually ended up choosing other sites. So even though Oracle and OpenAI didn't move forward in Abilene, they, they very much have still contracted all the capacity that they were planning to. They've actually done, like I said, they did 6, which is more than 4.5. Um, so, you know, of course they didn't hit exactly the 10 last year that they were hoping to. Um, but Oracle, um, you know, believes it's hit its commitments for OpenAI and sort of to answer your question, Stargate now refers to any compute agreement that OpenAI does. So it's a very broad, a broad definition now versus what it was when it originally started.

So let's talk about the Crusoe element in all this because Crusoe is the company that of course is constructing all of these data centers or leading that charge in many ways. And it strikes me that there's most at stake for them in terms of finding these tenants.

Yeah, that is a good, a good take. I think one very interesting aspect of everything that's going on in Apolline is that, um, you know, they've, they've been through many customers before, so this Abilene site before it became a site for OpenAI was originally a site for xAI. And then it became a site for Oracle and then a site for Oracle to give to OpenAI. And so they've sort of been through this before. And, uh, you know, company leaders tell people in the industry that one of the reasons they're able to move on things fast is that they actually get things going before they have contracts. So it actually wasn't too surprising to me when I learned that there were crews on the ground working on the expansion before there was a customer because that's actually exactly what they did on their, on their other deal. So that it's, you know, some might view that as risky and not every company is going to do that, but, you know, that would be their reason as to why people are interested in the project because, you know, progress has been made despite there not being a customer.

Right.

Well, Anisa, I want to thank you for coming on. That is Anisa Gardizi, our cloud and compute reporter here at The Information. Crypto exchange Gemini has had a rough go, with shares down around 70% since its IPO. My colleagues today published a deep dive on the root causes behind those struggles and what the Winklevoss brothers are trying to do to turn the company around. I want to bring on Yueqi Yang, our crypto reporter, to share with us what she learned. Yueqi, welcome back to the show. It's great to have you here.

Hey, Akash.

So I know that crypto markets are down, okay? And I know that means that crypto trading must be down. And Gemini, of course, is a crypto exchange. Is that the main reason that Gemini has had some struggles, or walk me through what you found?

Yes, uh, that's a big part of it. Crypto trading volume has been dropping, uh, as the market cools down, and that's affecting all the crypto exchanges, including the bigger ones. Um, but for Gemini, their stock has dropped, uh, quite a lot, as you mentioned. Down 70% from their IPO price. And there are reasons unique to Gemini as well. Uh, Gemini is a small crypto exchange and is facing increasing competition in the space, not only from the bigger ones like Coinbase, Kraken, but also from the non-crypto companies that are expanding into crypto trading. Um, and at the same time, Gemini has kind of struggled to find its focus really in the past 10 years. Our story talk about the various initiative that they've got into, and then, but then they also had to shut down a lot of these efforts. So it seems like this is the reason why stock market isn't reacting well with the Gemini name. The numbers also is not showing a good signs. The cost for the company is rising very quickly and way faster than their revenue growth. So this is why Gemini stock has, at least for now, been really penalized in the stock market.

Now, you opened with this really fascinating anecdote in your story about the company's pursuits in Australia. And for those of you who haven't read the story yet, I encourage you to because the lead is this big bash that the company throws in Australia when the company enters that market. What ended up happening to Gemini's operations in Australia?

So last fall, they hosted this big launch party in Australia, and it was a fancy party. We had some of the colors in our piece where we talk about— they had this party and where the head of Australia at the time was saying that we're here for good. However, just within about 3 months, Gemini shut down its Australia operation, and this is part of their broader retreat from their overseas expansion. They're also exiting Europe. The founder said that overseas markets are very hard to win and it really doesn't justify the costs associated with getting into these markets. So we started with this anecdote because it shows how quickly things can change, really just within a matter of 3 months or so. Once the market turned, the company had to quickly slim down and cut costs.

So what does the company say it's going to pursue now to orchestrate this turnaround plan?

Prediction market is a big—

oh, okay, because why not?

It's a hot area and And some of the other crypto exchanges like Coinbase, they're also big, going big in prediction markets. But as we know, the two biggest players right now are Polymarket and Kalshi. They're pretty dominant. Robinhood has also been making progress in prediction markets. So this is a very competitive space and the industry probably doesn't need a dozen prediction markets around. If you are a user, you will go to the most dominant one where there's the most liquidity. So Yeah, so prediction market is a new area that Gemini is also focusing on, but it is also an area where it is going to face a lot of competition.

Now, the other thing that you mentioned in your story is that the Winklevoss brothers, they also have tried a couple different angles to the crypto story, not just the crypto exchange. And you talked a little bit about how they kind of took after Michael Saylor and the MicroStrategy play with respect to what they did. Walk us through some of those pursuits and how all of this ended up turning out.

Yeah, so the whole MicroStrategy play, which is, uh, to turn publicly traded companies into crypto holding firms, was a hot topic last year, but then it kind of fizzled out. A lot of these stocks, um, collapsed. So the Winklevoss twins also were caught up in this, um, in this boom and bust cycle with the crypto treasury stocks. And in particular, I will mention that they were trying to do one in Europe where they're trying to launch the European version of a strategy where it will be a Bitcoin holding company that's traded in Europe. However, we find out that with that effort, they're running into regulatory troubles. They couldn't get regulatory approval. In time, and so that effort is now, uh, dead. And meanwhile, they also have another one, uh, in the US where they're investing in this company that's holding the Zcash token, and, uh, that company's shares have also been dropping, uh, more so than the Zcash token price itself.

Very quickly, Yuexi, before we let you go, uh, the company is reporting earnings next week. What should we be watching for?

I think everyone is expecting a clear answer on what the future and outlook for Gemini will be. What is their new strategy? The company earlier this year announced that they're parting ways with 3 of their top executives, their CFO, COO, and CLO. And that was quite a shock in the industry when the news came out. So clearly there's been restructuring efforts going on there. Revamping their leadership structure, and the Winklauss brothers themselves are expected to be more hands-on with operating the firm, as we reported in the piece. So I think everyone is waiting to hear from them. What is their turnaround plan? What are they hoping to focus more on? And what are some bright spots that Gemini can take advantage of?

Great.

Well, you actually— I want to thank you for coming on. That is Yueqi Yang, our crypto reporter here at The Information. That does it for today's show. A reminder, we are on this stream Monday through Friday at 10 AM Pacific, 1 PM Eastern. I want to thank you all for tuning in. We really do appreciate your viewership. Make sure to subscribe to The Information on YouTube and follow us on X, Instagram, TikTok, and check us out wherever you get your podcasts. I'm already excited for our next show tomorrow. Have a great rest of your Thursday.

Bye-bye for now.