FULL TRANSCRIPT
Slava Rubin (00:00)
In this episode of Smart Humans, we talk with Blake Hughes, who's the managing director of InfraHub Compute. And we talk about the world of cloud compute and how you can invest by buying your own servers and getting to rent them out to end clients. He comes from a global perspective, sitting in Spain. He talks about the world of investing from Asia to the US to Europe and Latin America.
where the world is headed and how you can try to make money on this trend of AI and cloud compute. And of course we finish with his picks for three years out.
Slava Rubin (00:59)
Hello and welcome to the latest episode of Smart Humans. I am super excited for today's guest. We're gonna be talking about a whole new asset and a whole new way to invest. So Blake Hughes, who's Managing Director of InfraHub Compute, welcome to Smart Humans.
Blake Hughes InfraHub Compute (01:15)
Thank you and nice to be here.
Slava Rubin (01:17)
Absolutely. So we always like to start in the beginning. How did you even get into the world of alternative investments? Go back as far as you'd like, whether it's childhood, grade school, your first job, college, whatever it is, take us back to wherever you'd like.
Blake Hughes InfraHub Compute (01:31)
Yeah, OK, so I started working with a company called Asda in the UK. It's actually owned by Walmart, so I'm sure you know who that is, being over in the States. Spent more than a decade with them, sort of working my way up through the ranks. I suppose you could say the demands of shift work and the daily routine of like a traditional nine to five role really did begin to take its toll.
I needed a greater challenge, probably more fulfillment as well in what I was actually doing. And it was at that point I sort of transitioned into what we're sort of talking about today, which is the alternative world. So we're talking back in what would be now 2008. I've been involved in numerous product promotions. So individual savings accounts, pensions, the property market, unique collectibles, which is quite fun, like rare wines, whiskies.
even classic cars at one point. I think one of the best cars I actually sold to an investor was an SS Jaguar 100, if you're into cars. Very, very nice motor. $300,000 would be the equivalent of what we sold it for in sterling. And so, yeah, very, very nice car. And yeah, I suppose that the easiest way to sort of understand out of all of that.
Slava Rubin (02:33)
How much was that?
Nice.
Blake Hughes InfraHub Compute (02:48)
history is that it all proved to be a lot more stimulating and rewarding 100 % more than sort of the repetitive cycle of the retail world I was previously in. I moved into raising funds for exciting new startups, specifically within the UK with a company called Bure Valley Group. Raised over 80 million pounds, so that's sterling for what we'd classify as revolutionary concepts that were improving the world.
within tech. Some examples would be Tribune, designed a new invention within the logistics. Basically driving down and still is to this day, globally fuel usage and emissions in 40 foot articulated lorries across the globe. A cyber security firm called GBMSTech that protected consumers from data attacks used by lots and lots of companies predominantly within the SME arena.
renewable energy firms, there was one called Store Electric, quite unique, was delivering energy using salt caverns of all things. And then where it sort of comes to fruition today is that we came across a cloud computing platform called Cudo Ventures. And ⁓ their concept was very interesting at the time, specifically then, not necessarily today, it wouldn't be classified as revolutionary today, but it certainly was back then.
because they were using computer power that sat in data centers idle to power their platform or power their business. We absolutely love the idea as a group we raised over three million to get them or help them grow and establish themselves today in this space. I think the last count they had or they were downloaded in hundreds of different countries, hundreds of thousands of users.
and also contracted out with the likes of AMD, so advanced micro devices, and also Semi-PlayStation, so some big names on sort of their books. During that sort of timeframe as well, we had the emergence of AI, which is obviously exponentially growing today. It's huge and very, very exciting. And sort of looking back now with the connections that we had with tech and also naturally being within the cloud industry at that point.
It was a natural progression for us as a business and myself to create our own company in the space. So in short, rather than raise money for others, we moved into raising funds to promote our own company. This happened just outside of COVID, which is obviously a very, very strange time for all, but it enabled us to build this fantastic company that we're promoting today. And Next Gen Cloud's got this vision of disrupting hyperscalers.
So ⁓ high tech cloud hyperscalers. And the reason being that there's a huge viewpoint out in the market, still today, that the market's basically being monopolized by what we classify as the big tech firms. And we require more options, let's put it that way. There are alternatives being looked at by hundreds of thousands of different companies to actually get involved in this space for more cost-effective solutions and better availability. So I suppose in simple terms,
If you require today access to artificial intelligence or workloads and require GPUs, don't know you know what that is, but it's basically it's a graphics processing unit or microchip. The world is in short supply and what's happening is currently whatever is being sort of manufactured by the likes of Nvidia in terms of infrastructure, generally the top firms take all of the supply and they're in the race to build the next big thing, so to speak.
and we're there to supply an alternative service to everybody else within the SME market. Five years now on, it's a $345 million value business. We've just gone through Series A, about to now promote to go to Series B, and the vision here is to basically achieve an IPO within the near-to-distant future. LSE on NASDAQ, not necessarily.
sort of appeal to either at the moment, if that makes sense. So we're not necessarily chosen one yet. LSE makes sense for us because it's London Stock Exchange, very European or UK entity. NASDAQ clearly has some seriously good numbers involved. So we could go either way and NASDAQ obviously promotes cloud. But based on the future sort of forecasts, there could be a unicorn on the cards, which would be amazing for everyone involved.
And thereafter, sort of where I come in, my company is called InfraCompute as mentioned, and our job is to simply supply that computer capacity to help build out NextGen to achieve its goal. in summary, I suppose the best analogy here, if you think of the gold rush all the way back then, it wasn't the people striking gold that made the most money. It was actually the businesses selling the picks and shovels.
And I suppose AI cloud is the gold rush of our time and my business Infrahub is selling the picks and shovels to help that happen.
Slava Rubin (07:39)
Awesome. So we'll dive into InfraHub in just a second, a bit more. Before we go there, you mentioned collectibles, classic cars. We'd love to know how our guests here invest their own money. So the classic way to invest is 60 % into the public markets, 40 % into bonds, 0 % into alternatives. Obviously you're running an alternative investment company, so I doubt you're a 0 % on alternatives. How do you mix across the
public markets, bonds, and alternatives if you had a percentage up to 100.
Blake Hughes InfraHub Compute (08:08)
Yeah, so mean, that's a great question. mean, when it comes to, I suppose, looking at alternative categories and what I would invest into or what I do invest into and what to avoid. So I've been working in this sector now for what is, wow, 17 years. So still going strong, hopefully. Personally, I prefer real assets. So obviously infrastructure with the background that I work in, but you don't have to just include high-powered computers. You've got renewable energy.
data centers, huge opportunity there. I personally believe across the globe. Real estate is good, but not your typical property purchase. There's things like logistics hubs, student housing, healthcare facilities, I quite like that. Even farmland and timberland is becoming quite attractive at the moment. Another, I saw, I suppose, stable choice to keep an eye on is private markets like equity.
But predominantly for me, I prefer businesses in the growth stage or the buyout phase. Much more appealing. Venture capital obviously is always sort of a standard choice, but we're sort of including early stage innovation there, particularly in AI again. But biotech is good and climate is also interesting.
Slava Rubin (09:16)
So
for you personally though, what percentage is public markets and bonds and what percentage will be ⁓ alternatives?
Blake Hughes InfraHub Compute (09:25)
I mean, me personally, I'm all on the private alternatives.
Slava Rubin (09:29)
So of 100%, what percent will be into these private alternatives?
Blake Hughes InfraHub Compute (09:32)
Probably 70-30 split on average.
Slava Rubin (09:35)
70 for what?
Blake Hughes InfraHub Compute (09:38)
Private.
Slava Rubin (09:40)
And 30 is public markets and bonds.
Blake Hughes InfraHub Compute (09:42)
Yeah, you still obviously have to have a bit of diversification, but from my background, that's definitely more heavy weighted towards private.
Slava Rubin (09:49)
Awesome. And then the 70 % alts, imagine that was blown up to be 100%. What are the big chunks? Is it the real estate and the renewables energy stuff that you were mentioning? Or what are the big chunk?
Blake Hughes InfraHub Compute (10:00)
Yes, so
mainly that my main chunk personally is assets, hard assets. So not just necessarily the infrastructure that we saw ourselves, because obviously bought assets within our own business, but definitely around renewable energy and the data center piece as well.
Slava Rubin (10:16)
And do you invest into crypto at all?
Blake Hughes InfraHub Compute (10:18)
I have done in the past. I think with crypto it becomes a little bit volatile and NFTs as well. Whilst they're appealing, it's not necessarily my thing, let's say. But there's certainly been some seriously good wins in the past.
Slava Rubin (10:33)
And then for you personally, you mentioned collectibles. Are you investing at all into those, whether it's cars, watches, wines, whiskeys, et cetera, or more just taking advantage of them for fun?
Blake Hughes InfraHub Compute (10:45)
⁓ Yeah, I mean the latter. mean I do own some investments in whiskies and it's quite interesting to be involved with it now. I did have wine I've now sold that on. But in terms of classic cars, I'm not necessarily in that market now in terms of purchase, but I was working there in terms of offering other people the ability to get involved.
Slava Rubin (11:03)
Awesome, is there a specific whiskey that you're proud of that you own or that you like?
Blake Hughes InfraHub Compute (11:07)
Not specifically, I don't like the taste of it. Let's put it that way. I'm not a whiskey drinker, I'm more of a gin drinker. But in terms of my portfolio, I've got a wide variety of multiple different whiskies. It's more about the numbers for me necessarily than the...
Slava Rubin (11:21)
Got it, okay, awesome. And then in terms of art, are you investing into art at all or are staying away from that?
Blake Hughes InfraHub Compute (11:28)
No, not at the moment.
Slava Rubin (11:30)
So it sounds for you, are 70 % into those alternatives, but you like a lot of the hard asset stuff, which is mostly real estate and these renewable energy type investments. Is that right?
Blake Hughes InfraHub Compute (11:41)
Yeah, that'd be right.
Slava Rubin (11:42)
Okay, great. So then let's talk about, you know, big question here, the market, which is very high level macro perspective. You know, what's the Blake Hughes perspective on the market, whether it's the stock market, the economy, what's going on in the world, what's going on in the U.S., what's going on with interest rates, inflation, Fed, et cetera. Obviously, you're actually with your accent just for the listeners. You're not actually sitting in the U.S., is that correct?
Blake Hughes InfraHub Compute (12:06)
That's correct, so I'm based out in Spain.
Slava Rubin (12:08)
Okay, perfect. So you give us a quite a global perspective. So we'd love to hear your thoughts on what's happening in today's market, what's happening in today's economy, take it wherever you'd like.
Blake Hughes InfraHub Compute (12:19)
Brilliant. mean, even though we're based over in Europe, we still like to look at the sort of global perspective. I think the markets appear to be emerging from the usual quiet summer trading period, as it's Racing ourselves now for the typical September, we call it the end of year push. There's plenty of reports out there suggesting the low sort of ending.
and investors are definitely prepared for let's call it renewed risks and sort of activity moving forward, especially where we're working as well, and can see lots of activity coming our way. I did read over in the US recently that the Federal Reserve is widely expected to cut their interest rates by around 25 points this month, I believe. I mean, that could really offer some needed relief for the equity markets, which is obviously great. But I think there's a...
cautiously optimistic backdrop at the moment, worlds of growth and easing central banks, but I suppose tempered by what would be policy uncertainty. I think you've got to look beyond the crowded mega caps. That wouldn't be a bad strategy for me. You're seeking diversification with equities, again, infrastructure, real assets, and adding on to that private credit. Regional plays are very interesting at the moment.
Particularly in Asia, I like the look of Asia at the moment, as we're offering some very compelling opportunities right now. In my sort of arena, Europe, looking likely to benefit from some fiscal tailwinds. And your side of the water, so the US and Japan, I mean, always remain attractive anyway.
Slava Rubin (13:44)
Can you expand on Asia? Why are you finding Asia attractive at the moment?
Blake Hughes InfraHub Compute (13:48)
Again, being a numbers guy, if you start looking into specific companies around Asia, the offers that are coming out of Asia are very interesting. It seems like there's an opportunity there for people outside of their own location to get involved and do very, very well. I mean, naturally, you've got to make your own decisions on these things. But for me personally, it does look very, very healthy.
Slava Rubin (14:11)
So when you reference Asia, which countries, which markets are you talking about?
Blake Hughes InfraHub Compute (14:15)
Thailand is good at the moment, especially without going too far into too much detail. There's a lot of infrastructure building at the moment in terms of connecting islands. And if you think about tourism, where tourism's huge in say Thailand, but if you sort of break it down to the mini islands surrounding it, they don't receive any of that tourism. There's a lot of infrastructure building going on the islands to then build potentially.
the connections and the bridges across from one island to another, which naturally means the influx of tourism will come in. I think it's a very good play to be looking at maybe properties or infrastructure build out within that arena or area, not arena.
Slava Rubin (14:51)
And then how do you actually try to expose yourself to that infrastructure opportunity in Thailand? So what's your investment vehicle or are you trading on like Thai public markets or how would you try to invest into that or how do you invest into that?
Blake Hughes InfraHub Compute (15:05)
Yeah, mean, it says multiple different ways of doing that. mean, the first one, the obvious one there is to buy real estate actually on the island itself, build out, get ready for the influx of the tourism and the people that are coming in and take access to that. But there's also...
Slava Rubin (15:20)
You're talking about
buying an actual piece of real estate on an island in Thailand, physically. Okay, great, great. Keep going, keep going.
Blake Hughes InfraHub Compute (15:23)
Correct. Correct. Yeah.
No problem. And then in terms of actual funding and startups, it's not necessarily startups, but it is in the alternative arena where companies are generally offering the ability to fund out the build out of the infrastructure that's being built to connect those islands. You can go in and take equity within those companies on the basis that they're going to build. You can also buy obviously parts of the property build out itself. The sort of the list goes on. But it's more for if listeners are listening in terms of
paying an interest into that, simply go and have a look. There's multiple different avenues you can get involved and earn potentially some seriously good returns.
Slava Rubin (16:03)
And you're sitting in Europe, and you mentioned European fiscal tailwinds. What do you predict for the coming 12 months for Europe? Answer that however detailed or broad you'd like.
Blake Hughes InfraHub Compute (16:13)
I mean, in terms of Europe itself, mean, a lot of the, let's say, positive outcome or positive outlook in terms of what we're doing over here does sort of drive heavily through infrastructure cloud and what could be an influx of a huge amount of capital and businesses. To sort of explain that in more detail, so sort of understand what I'm saying here.
is there's a huge conversation going on at the moment. And I wouldn't necessarily just call it a conversation, but it's about sovereignty and secure cloud. it's sort of Europe itself is moving quickly into that position. Now, put simply, if you're a European entity, you'll soon be wanting to either use services within the European borders, or more importantly, especially for us, move your current workloads from other locations across the globe.
to a secure and sovereign position near home. I'm sure you've heard of the BBC. I read a BBC recent article explaining that the likes of Google, Microsoft, and AWS provides 70 % of Europe's cloud computing infrastructure. Now that is, in reality, the scaffolding on which many of these services depend. Now this is, for us, clearly a concern.
with new laws and acts potentially being signed off in the not too sort of distant future, requests to join up and transition to our business and many of competitors out there is literally happening as we speak. But in reality, if you look at the market as a whole, you sort of understand the influx of capital. So $122 billion spent in the US on cloud infrastructure and cloud services last year, 70 billion in Europe.
And if the BBC is reporting that it's 70 % of all European workloads sort of happened on a US basis, there seems to be a huge amount of traffic that's going to be coming our way very, very soon. Even the likes of Nvidia ⁓ in terms of us gaining growth, profit, et cetera, are reporting a 1.8 trillion achievement by the end of 2023 in terms of what the cloud market could deliver.
So the phrase, huge, doesn't even cut it, so to speak. But yeah, it's boiling.
Slava Rubin (18:22)
Nice. And we always like to try to put our guests here in the hot seat about some predictions. So what do you predict in terms of let's call it the U.S. stock market in the next 12 months, 12 months out? Do you think it's going to be flat, up or down?
Blake Hughes InfraHub Compute (18:38)
That's a great question. And in terms of having some evidence behind what my answer would be, could be quite limited. But I think rather than predicting specific markets, think globally the markets are on the up. It seems very, very positive across the, not necessarily an exponential boom, let's call it, but certainly investment trends are definitely starting to head in the right direction, I think, in all markets.
Slava Rubin (19:04)
So globally, you're quite bullish on the macro.
Blake Hughes InfraHub Compute (19:07)
Yeah, I wouldn't go and say bullish. I'll just say that it's, I believe that it is heading north.
Slava Rubin (19:12)
Amazing. If you were going to prioritize your dollar between Asia, Europe, Latin America, or the US, how would you stack rank those four in order for the next 12 months? I am.
Blake Hughes InfraHub Compute (19:27)
Again, you put me on the spot here, Slavin.
I suppose in terms of, back up obviously what I've already said, my sort of outlook here is personally, Asia would be first in terms of what my appetite is. Thereafter, whilst Europe is doing and looking likely to be moving forward healthily.
It's still got a long, long way before it catches up with what the US markets can sort of do. So you put US number two, you're at number three. Yeah.
Slava Rubin (19:53)
Latin America after that.
All right, very interesting. All right, well, not everybody knows where InfraHub Compute is exactly. Obviously, this is your company. So can you just give us the background on ⁓ what exactly it does?
Blake Hughes InfraHub Compute (20:05)
Yeah, stripping it right back, I mean, we enable customers to purchase hardware. It's typically unavailable to the outside world. We plug that hardware into a dedicated cloud network and those servers then run AI workloads from end users anywhere in the world and generate a passive income. So if you think of Airbnb for the property world, then this would be like
buy to let for AI compute. That's the best way of sort of understanding it. Once the clients come in and buy hardware from us, the manufacturing process takes place with Nvidia. We ship the equipment to one of our data centers, installation takes place. There's obviously maintenance involved and operations, but it's all part of a service where they go on a long term journey with us, maybe five, six, seven year journey with us of passive income.
Another good thing is to point out that the servers themselves are hosted in green energy data centers and within this space is key to clearly doing things right. And lastly, our clients receive money or earnings directly into their bank accounts on a monthly basis, which creates that, obviously, that passive income model.
Slava Rubin (21:14)
Sorry, when you say clients, you're referring to the investors or the people that are using the service?
Blake Hughes InfraHub Compute (21:20)
Yes, no. So when we say investors, I mean, it's not actually an investment, which is why it's quite a niche opportunity. It's an asset backed opportunity. It's no different to buying a property, really. We do sort of promote our products or opportunity within the alternative market because it seems to look that way. That makes sense. The clients or the customers are interested in the purchase, but generally we do speak to a lot of investors who invested in the alternative world.
Slava Rubin (21:26)
Okay.
Blake Hughes InfraHub Compute (21:46)
It's almost an alternative to the alternative market. But yeah, they're the owners that receive the income. So anybody who owns the high-powered computer, end users would use it to build out things like maybe even the next movie, Avatar. I'm sure you remember Avatar. That was created by GPUs, created by this equipment. That movie, by the way, specifically took four years in the making to create using these microchips. they hadn't...
delivered these GPUs to create that movie using traditional methods when it took 50 years of traditional CPUs. And when I say traditional methods, actually actual filmmaking, was not an impossible. So yeah, they're the type of end users that come into our platforms. Those businesses, can be blue chip companies, SMEs, even the person in their bedroom creating the next big thing and application on a smartphone. It really is that open and diverse.
Yes, I suppose that one of the good thing, I suppose, interesting point for me personally, is specifically this model. I mean, you literally just asked the question, is it investors, is it customers? But it's that in the alternative space, you usually have a typical profile of client. We don't. So I mean, we've got from the investment world, so to speak, sophisticated investors, high net worth individuals.
We've got various age brackets and purchases made from multiple locations all over the world, including Monaco, Singapore, UK, Australia, obviously over the water in the States as well, and many, many more. But it's not just individuals, it's businesses, so family offices, venture capitalists, various other businesses all really want to take advantage. And the why is very, very simple really. It's asset backed, it delivers great returns.
in a market where personally I think choice is, well choice and excitement seems to be extremely limited at the moment.
Slava Rubin (23:37)
So in the real estate world, I could buy a piece of real estate, not live in it, and look to try to get renters. That's asset-backed that I'm trying to get yield off of my end clients, which is the renters. Is this basically the same thing, but it's not real estate, it's cloud compute and the hardware to support cloud compute?
Blake Hughes InfraHub Compute (23:56)
Correct, exactly.
Slava Rubin (23:58)
Okay, great. So you're probably one of the best salespeople at the biz and I could be a potential customer. So let's talk about how that would look. So are you offering this opportunity to the retail segment? Meaning can I invest as an individual?
Blake Hughes InfraHub Compute (24:11)
You can purchase as an individual, yes you can.
Slava Rubin (24:14)
I can purchase. And I know you're based in Europe. Is this a European only opportunity? Is this the US? Is global?
Blake Hughes InfraHub Compute (24:19)
It's pretty much global, I will be just stripping it back a little bit more for detail purposes. I mean, we have presence in the States, so we have data centers in Texas and in Canada and Montreal. Obviously, I cloud or cloud specifically, the biggest portion of the world is driven by the your part of the world. So definitely we're in there. But our vision is obviously our main focus is the European sort of location. So we've got data centers all across Europe, including Norway, Sweden, Belgium.
and looking likely to be going into other locations like France and Germany. But Europe and US is where we sort of focus, where we actually offer the ability for businesses to use the computers. But in terms of purchasing, if people want to come in and actually just own the asset and take advantage of the opportunity, apart from the usual sort of red flag locations, I'd call them, we can service anybody in the world.
Slava Rubin (25:13)
Awesome, so I'm coming from New York. Is there a minimum purchase price amount or what is your minimum threshold? Can I put in $500, I have to put in 5,000, 50,000, 5 million, what's the minimum entry point?
Blake Hughes InfraHub Compute (25:29)
Yeah, so there's various different price points on depending on what size of computer you want to buy. Obviously, the bigger computer you buy in theory, the more passive income you get around on a monthly basis. But as it stands right now, the minimum entry sits at $66,000. So that gets you a high-powered computer and so much more, including the service warranty and people looking after you for what would be the long-term journey. But that ranges all the way up to clusters of $30 million. So wherever you sort of fit within that,
range or where you're interested to move forward with and your liquidity, we can sort of help you out.
Slava Rubin (26:05)
Great, so let's use a round number, which is ⁓ 100K US for the sake of this conversation. So let's say I buy into 100K worth of computer. Is that an upfront purchase where I deploy the 100K immediately and then I then have this cloud compute server capability?
Blake Hughes InfraHub Compute (26:22)
Yeah, so unfortunately, these machines, whilst they're sort of golden nuggets and gold dust, as I like to call them, they're not actually yet built. So it's not like something you pull off the shelf. we have to make in the purchase yourself directly, for example, that enables us to then go to Nvidia, pay them to start the manufacturing process. And then from then on, there's a whole journey of manufacturing, shipping, building, installation.
You've obviously fully kept in the loop along that journey with nice little email updates and phone calls, et cetera. But in short, you're paying upfront for the products. The product takes a short period of time to go through that process and be installed in the data center. And once you're connected, you have access to an online portal to measure your performance of your machine, see how much it's earning, et cetera. From anywhere in the world, you can literally be on your boat on the seas and you can see that your machine is earning you money.
Slava Rubin (27:16)
Right, and to earn money there needs to be an end client that's using my servers that I bought. So are you the one getting the end client and I don't have to do anything or do I have to find the end client?
Blake Hughes InfraHub Compute (27:25)
Great question. So that's exactly where NextGen Cloud came in. So NextGen Cloud has the end client. So they have a dedicated platform called HyperStack, which is like the software as a service layer. Attached to them is thousands of their own clients or end users, as you rightly said. But also we have 45 plus dedicated partners that have their audience. So it's sort of talking hundreds of thousands of end users in all shapes or forms wanting to get access to different pools of infrastructure to deliver workloads or AI.
job roles. Currently under management we've got over 110 million dollars worth of that kit but we just need to keep supplying more power and more capacity because that's what the world needs.
Slava Rubin (28:04)
So if today is day zero, I give the 100K, you then get the product manufactured, ready to go, and we wanna turn on the green light with the end client, what day, zero plus what, how many days out, 30, 60, 90, 120, 150, how many days out am I gonna have a client start to pay their first dollar?
Blake Hughes InfraHub Compute (28:21)
Yeah, so we sort of aim for less than 15 weeks to get the whole process completed in terms of you up and running and earning. Four weeks after that will be the first dollar into your bank account based on the performance that happened during that four week window. We have been sort of averaging around less than 12 weeks, but we don't want to, we sort of want to under promise over deliver to anybody who gets involved. It's a great journey to be on. Potentially it might sound like a big time or big,
of time but actually traditionally or average as it sits right now if you were to do this yourself you sort of look in seven months.
Slava Rubin (28:58)
Got it. So with my $100,000 of compute that I purchased in month one, what is generically the average as to the revenue I should be making?
Blake Hughes InfraHub Compute (29:10)
Yeah, so mean, again, that depends on the machine that you're particularly by. So for example, I suppose the easiest way to understand it, every machine goes on a five-year financial projection to enable clients to sort of understand the journey they're going to go on for their monthly income. We work around that you should be...
Slava Rubin (29:26)
But let's say, sorry, sorry, let's
say it's that 66K machine. I bought two of them.
Blake Hughes InfraHub Compute (29:31)
Yeah, so roughly 2800 to $2,900 per month per machine on that model. $2,800 to $2,900 on average a month.
Slava Rubin (29:38)
You said 2000?
Oh, 2,800 to 2,900 per month per machine. So I put up $66,000 upfront and then I'm bringing back, let's call it 2,800 per month. And over the course of X amount of months, then obviously I've repaid it. can't do the math there really quick, but what is that? Like 25 months or something?
Blake Hughes InfraHub Compute (30:05)
Yeah, roughly around 24. So that's the method we work on.
Slava Rubin (30:08)
Got it, so in two years you paid back the machine, but the lifetime of the machine is what, like five years?
Blake Hughes InfraHub Compute (30:13)
The actual sort of obsolescent target, according to the video, is around eight to 10 years. But we generally run a five year model based on the appetite within the market. So with the machines that we, or the hardware that we deploy, it sort of runs on a five year cycle. So an upgrade comes every sort of four to five years. At that point, it doesn't just stop renting, but there will be a decline because then users will start using the better tech. I mean, it is a depreciating asset, obviously it's technology.
Slava Rubin (30:20)
wow.
Blake Hughes InfraHub Compute (30:42)
But yeah, I mean we've got machines in our data centers right now, four or five years old, fully renting, still delivering some seriously good returns, which of course are looking likely to move into year six, year seven and so on. So potentially if supply keeps moving further and further away from what the demand is, which is what's happening in the world right now.
we could have been a position where clients are owning machines that just run and run and run until they become obsolete. And then of course, it's run its turn.
Slava Rubin (31:13)
And what year do you predict, like for example, the 2800 a month, what year does it go down because of the technology not keeping up? Does it go down in year three, year five, year six, year seven? How does the model work in the way you think about it?
Blake Hughes InfraHub Compute (31:26)
Yeah, so we've done a project, we do our projections based on sort of the history that we've gone through in the last four years. So, I mean, roughly after year one, you saw the numbers or your monthly incomes reducing by about 5%. Sorry, not in turn, no, let me correct that. The price per GPU that we charge out drops by 5%.
And then year two goes, sorry, year three goes to 10%, year four goes to 15%, but that's a drop in price. The main thing is occupancy. So if your machine's around about 80 % occupancy over the course of its lifetime, you're gonna generate the numbers that we show. What we are actually seeing is these machines renting way above that, potentially going out of the five-year period. So even though we're showing you...
numbers, financial projections, everything else that's earned is sort of additional benefit, additional profit.
Slava Rubin (32:24)
Awesome, super interesting. And then what are your fees? Like where is your costs? What are your costs and how are they layered in?
Blake Hughes InfraHub Compute (32:32)
Yeah, brilliant. easiest way to explain it, we take anywhere up to 10 % on the front door for the sale of the asset. That covers our OPEX. The reason why... Correct. Yeah, so that pays the profit cost.
Slava Rubin (32:41)
You're talking about the 66K product, for example. So it's like a 60K
product, but you charge 66 for it, is that right?
Blake Hughes InfraHub Compute (32:49)
Yes. Yeah. Now that generally just covers everything we need to run the daily operation. Where we actually deliver our profit is the back end. every client has a contract. So like service level agreement in terms of what they're going to earn in terms of revenue. So 80 % goes to all of our owners of the revenue generated by the machines and 20 % comes to us for the service that we deliver. So.
Slava Rubin (32:50)
Okay, great.
Blake Hughes InfraHub Compute (33:14)
It's not just about selling a machine and then the job is done. It's actually in everyone's interest to get those machines rented. It's not only our clients earn, but we earn as well.
Slava Rubin (33:22)
So for example, that 2,800 on the 66K machine, the 2,800 for a month, is that its net of your 20 % fee or the 2,800 you take a 20 % fee of that and the rest goes to the purchaser?
Blake Hughes InfraHub Compute (33:37)
the former. So yes, what you see is what we've already taken our fees at.
Slava Rubin (33:42)
Got it, so potentially the total money in from the end client was, I don't know, like 34, 3500 or something, and you took out that 20 % and it ends up as 2800 going to the purchaser's bank account. Okay, great, awesome. And are there any other fees or things that the listener should be aware of or it's those two things, the front end, 10 % and then the kind of 80-20 split along the way month by month.
Blake Hughes InfraHub Compute (33:54)
Exactly right.
Yeah, so good question. there's a, obviously there's power costs to this sort of operation. It's electricity that's going to be powered from the data center into the hardware. We take an average on those particular machines we're talking about, it's $5,500 a year. It sort of average really works out at, you pay that upfront for your first machine. So to get yourself up and running, you'd pay that along with your 66,000 for the unit price. That then gives you a run rate of 12 months from the moment of connection.
At the end of year one, you're then expected to then pay that again. And it sort of works out roughly a month and a half or two months of earnings across the board, sort of pays for your utility consumption for an entire year. The next 10 months is pure profit or income, let's say.
Slava Rubin (34:53)
Okay, helpful.
And you mentioned this a little bit before, but can you give us a sense of, you've been around for four years, can you give us a sense of scale, how many customers, how much revenue, any sort of numbers you want to share that would be helpful?
Blake Hughes InfraHub Compute (35:09)
in terms of what the market that we're operating in at the moment.
Slava Rubin (35:13)
your actual company, just to give a sense of how much experience you guys have and how long you've been around and how big you guys are.
Blake Hughes InfraHub Compute (35:19)
Okay, yeah, so I mean, as I mentioned before, NextGen Cloud, so my company, Infrahub Compute, is a training arm of NextGen Cloud, so it's a one big group. So $345 million value business, $110 million plus in assets under management. We're month in, month out a profitable entity and moving forward to, well, with a view of going for an IPO in 2027. Numbers suggest...
Slava Rubin (35:44)
Nice.
Blake Hughes InfraHub Compute (35:45)
two billion upwards, which would be very, very nice for our shareholders. But if you want to get a broader perspective on who we are and some people that's already done this type of investment, not investment opportunity, but company build out, Core Weave, which is over in the States, which I'm sure you've heard of, they are literally a company that did very, very similar to what we've done over here in Europe. They did it.
maybe 16, 18 months ahead of us, let's say, on that journey. And if you want to go and look at Coreweave's numbers, they're phenomenal. So we're liking to keep our feet on the ground. We want to make sure that everybody has an exciting journey, but also a fair journey. So suggesting anything above a billion dollars puts us into that unicorn position. That's exactly what we want. But yeah, upside could be phenomenal.
Slava Rubin (36:37)
Yeah, the CoreWeave comparison is very interesting. And when I was hearing you talk, I really was thinking about CoreWeave, but I the difference is CoreWeave is running its own company and people can invest as a shareholder, but they can't really participate in getting a piece of the actual servers and then, you know, getting the revenues from that specific server with you guys as being a little bit more direct, right? It's not just a shareholder of the entire kind of enterprise, but rather
This is my specific server, just like in a large building, this is my specific apartment that I'm renting out and that I'm going to get yield on return on, this specific asset that I bought, right?
Blake Hughes InfraHub Compute (37:17)
Yeah, so I mean, but there is some glad you brought that up. So when we're talking about the two companies are aligned for obvious reasons, there is still two opportunities there. So for listeners who are interested in, say, the equity side of things, that the core we've modeled, as you just rightly said, that is NextGen. So we do have shareholders. They don't buy into equipment. They literally obtain equity within NextGen Cloud. So.
just to repeat, that's a company that's got the ambition to go for that IPO. We're sort looking around about two to three year mark. With InfraHub, that also gives clients the ability who's not necessarily interested in the long-term growth option and it's the asset-backed passive income being paid monthly. So you've sort of got both doors there for clients to venture through and take a deeper dive.
Slava Rubin (38:02)
Super interesting. So Blake, we love to know how people like you stay smart. What are you reading? What are you watching? What are you listening to? Anything that makes you you that you can share?
Blake Hughes InfraHub Compute (38:10)
Good question. In terms of books, I don't necessarily have as much time as I used to to read. I try to get through one book a month. But let's give you my top three. So The Intelligent Investor is a great book. That's by, I believe, Benjamin Graham. It just gives you timeless principles of sort of value investing. You've got the most important, I think it was called The Most Important Thing.
That's Howard Marks Goes into risk management explains cycles very very simply and clearly which is what I like to simplify things Yeah And then there's another one called I think it's principles and That's by Ray Dalio. I'm sure it's by Ray and that just discusses frameworks on markets economics and
Slava Rubin (38:44)
I mean, he's a great one. ⁓
Blake Hughes InfraHub Compute (39:00)
really does help with your decision making, or helps me personally with my decision making. In terms of podcasts, I suppose, well, outside of yourself, because obviously we have to give up another three, what's good on podcasts? So the Investors podcast, that's good, but I think it's promoted by We Study Billionaires, takes deep dives into strategies of multiple different types of investors. So that's very, I do like listening to that.
Slava Rubin (39:09)
Of course. Of course.
Blake Hughes InfraHub Compute (39:25)
Odd Lots, again, industry experts, given their knowledge, and Masters in Business is good one as well. The guy's called Barry that hosts that. Can't remember his second name, unfortunately, but Masters in Business is the actual title, and that contains, again, various different interviews with investors, policymakers, and economists.
Slava Rubin (39:45)
Great, lots of good content there. And our final question is we put everybody on the spot, which is what would you suggest for an investment to make in the public markets, meaning in the stock markets and one that's not in the stock markets, whether it's crypto or private asset. You are not allowed to sell your own book, so we want to hear something else. So obviously this is not financial advice, but we would love to hear your two picks and why.
Blake Hughes InfraHub Compute (40:10)
Well, I predominantly obviously focus on the private market as it excites me. But if I was to venture into sort of the public sector, I think without giving a specific name, which I know you want, but I definitely think large cap US equities outside of sort of the mega cap tech group, as it's called, would good place to start. Sort of taking a delve and a deeper dive.
Mega tech stocks like the Magnificent 7 as they're sort of known. They have led recent rallies, I believe, but personally they're elevated. Valuations probably invite caution. That would be my opinion. And instead of, I suppose I'd consider broader US equities and solid fundamentals and attractive valuation potential, that's where I'd look.
I know you want a specific company, but unfortunately...
Slava Rubin (41:00)
Either
a company or a ticker. mean, you could say you're, you know, it's large cap US. It would just need to, we would just need to find the right ticker to support that. Cause we need to track this. Cause we like to see how everybody does as opposed to just generic responses. So do you want to say a specific company or do you want to say large cap non mag seven companies?
Blake Hughes InfraHub Compute (41:20)
former large cap non-max 7.
Slava Rubin (41:23)
Okay, cool. And what are you considering large cap? It's above what size?
Blake Hughes InfraHub Compute (41:27)
over a billion.
Slava Rubin (41:28)
Okay. And then in regards to your private, what would be your private pick? Meaning not publicly listed.
Blake Hughes InfraHub Compute (41:38)
Well, again, taking ourselves out. So looking at private market, again, predominantly infrastructure, energy for me. And when looking at infrastructure, we're not necessarily just speaking specifically about what I do, but renewable energy sector, grid upgrades, digital 5G infrastructure is a good one to look at. Definitely remains highly favorable due to global policy support and stable cash flow.
And for me, I suppose, why that matters over the next three years, which is obviously very, very important, infrastructure, as I said before, is anchored by those regulatory tailwinds and critical long-term demand. And also, private assets make cushion that volatility and offer increased return rates versus the public market. that's where I'd go.
Slava Rubin (42:23)
So infrastructure and energy. All right. Well Blake, we've covered a lot from starting at Walmart to then shifting to doing all kinds of different ⁓ investing and fundraising and helping. You even did the 300K car, which is pretty fascinating. Obviously, you like to focus a lot onto the alternative space, 70%, 30 % into the public markets and bonds, which I thought is quite aggressive and super interesting.
Blake Hughes InfraHub Compute (42:25)
Yeah.
Thank
Slava Rubin (42:49)
the company that you're building and leading up. But before we got there, we were talking about the global market, which is awesome that we got that perspective. We don't get a lot of folks from Europe. You think Asia is super interesting. Specifically, you told us that Thailand could be really cool. You did stack rank Asia first above the US and then Europe and then Latin America, which was fascinating. And of course, with your company, InfraHub Compute, we got to learn how you can buy a $66,000 computer.
and potentially more and start to get revenues off of that, where, you know, over time, you can really start to make quite the earnings, which is really fascinating. Most people don't even know that's possible. They know they could do that maybe with real estate and try to get rent and get somebody to get, you know, rent yield that again here from an asset back. But here it's actually a completely different type of home. It's really a computer home that somebody is then ⁓ renting and using, which is really the age that we live in, which is fascinating.
We compared and contrasted a little bit to CoreWeave, especially with your sister company, NextGen Cloud, and then obviously InfraHub Compute. So really fascinating product. I definitely will be checking it out myself. Then you gave us lots of interesting content from Intelligent Investor all the way to Odlots. And of course we finished with your picks for three years out. You were quite vague, which we don't love, but it's okay. You still gave us the picks, which was Large Cap, Non-MAG 7,
and then infrastructure and energy. Blake, very much. Thank you.
Blake Hughes InfraHub Compute (44:16)
Thank you.
