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Behind the Markets
Special Report
Mr. Wonderful’s Test for AI Data Center Stocks: Power, Permits, and TenantsAuthored by Bridget Bennett. Article Published: 10/19/2026. 
Key Points
- Kevin O'Leary estimates roughly 65% of data center projects announced in North America may never be built, which could make permitted, powered sites scarce.
- Recent sell-offs in CoreWeave, Applied Digital, and IREN reflect spending fears, but O'Leary sees compute demand running about 3x available capacity.
- O'Leary holds Bitzero Holdings for liquidity alongside private projects in Utah and Alberta, favoring land, power and permits over chips.
- Special Report: A free options guide built for traders starting from zero
Artificial intelligence (AI) infrastructure stocks just learned how quickly spending fears can outrun demand. CoreWeave (NASDAQ: CRWV) fell about 25% in a matter of days during the recent sell-off, while Applied Digital (NASDAQ: APLD) and IREN (NASDAQ: IREN) slid roughly 50% from their summer highs. The worry is familiar. Data center builders are pouring enormous capital expenditures (CapEx) into new campuses, much of it borrowed, and investors want to know whether that capacity will ever pay for itself.
But the market may be counting the wrong thing. The bigger threat to the buildout isn't too much supply; it's how many announced projects quietly never get finished. If permits, water and power are the real constraints, the sites that clear those hurdles could become far scarcer and more valuable than the sell-off implies. Two Growth Verticals Are Driving the AI Infrastructure TradeKevin O'Leary, the businessman known as Mr. Wonderful from Shark Tank, invests in Bitzero Holdings (NASDAQ: AIBZ) and is developing private data center projects in Utah and Alberta. The theme is his largest, accounting for well over 20% of his portfolio. He divides the opportunity into two verticals. Power is the first, since the economy needs far more grid capacity regardless of AI. Compute and storage capacity is the second, and demand extends well beyond AI. Much of what Amazon.com (NASDAQ: AMZN), Alphabet (NASDAQ: GOOGL) and Microsoft (NASDAQ: MSFT) operate through their data centers has nothing to do with AI, according to O'Leary. In his view, compute demand is roughly three times available capacity, with no slowdown in sight over the next three years. Permits and Power Separate Real Projects From Press ReleasesThe price tags explain the market's nerves. Tenants that once asked for 250 to 500 megawatts now want at least 1.4 gigawatts—roughly $16 billion from the ground up through operations—split about evenly between equity and debt. Before a tenant rolls in a single rack, the developer needs land, Environmental Protection Agency (EPA) air permits, water rights, dark fiber and power. Planning alone can cost $20 million to $30 million per gigawatt. Power is the hardest piece. Former crypto miners pivoted to AI because they already had grid connections, but most states now require new projects to bring their own power, usually natural gas run through turbines. Time is the hidden cost. Internal rate of return (IRR) depends on speed, and a site facing a three-year permitting wait cannot produce a return that anyone will finance. Tenants want capacity online by the fourth quarter of 2027, a demand O'Leary calls insatiable. Here's where it gets interesting: Once the power contract, water permit and air approval are all signed, a project's value can jump sharply, according to O'Leary. Scarcity, Not Oversupply, Could Define the Next 24 MonthsThe popular bear case says too much capacity is coming and that pricing power could fade once it is built. O'Leary rejects that view. By his estimate, about 65% of data center projects announced across North America in the past two years will never be built, derailed by missing water, fiber or power, or by a political moratorium. He expects 60% to 65% of those projects could be shut down within 24 months. Politics is the sharpest risk. O'Leary cites polling showing that more than 70% of people oppose a data center in their state, though responses shift when the site is three miles away and offers jobs paying $150,000. With midterm elections approaching, blocking data centers can win votes. The oversupply debate assumes announced capacity equals built capacity. O'Leary's math assumes most of it never shows up. He has not heard of a new project announced in roughly seven months, and he estimates that his Box Elder County, Utah, site could fund about 30% of the county's budget within 24 months. A digital asset bill known as the CLARITY Act could add further compute demand if it passes. Public Liquidity and Private Projects Can Share One PortfolioO'Leary splits his exposure on purpose. Bitzero, with land, power and permits in Norway and Finland, gives him liquidity. His Utah and Alberta projects are private. Location drives cost. Saudi Arabia offers power at close to one cent per kilowatt-hour, though capital is difficult to raise there right now. Norway, Finland and Alberta come in under six cents, backed by hydro, nuclear and stranded natural gas. Long term, he treats data centers like commercial real estate with utility-style cash flows. In climate-controlled storage, he targets 17% to 22% returns and prefers no more than 30% leverage. Investors seeking lower volatility could stick with large caps like Microsoft or Anthropic, if it ever goes public, according to O'Leary. The upside is scarcity. If roughly two-thirds of announced projects fail, permitted and powered capacity becomes the prized asset, and operators already online gain leverage with a short list of about 11 major tenants. The risk is political and financial. A moratorium can stop any project midway through permitting, and heavy debt leaves little room for delay. Spreading sites across countries lowers that risk without eliminating it. The Path to Power Matters More Than Headline SpendingCoreWeave, Applied Digital, IREN and Bitzero share the same fault line. The market is pricing their spending, but what may matter more is whether their sites have power, permits and tenants in place. In O'Leary's view, Bitzero's public listing allows it to issue debt and equity, while its operations show that it can run a facility profitably—an edge that private projects still chasing permits lack. The scarcity argument doesn't require every builder to win or AI enthusiasm to hold every quarter. It requires compute demand to remain strong while permitting stays difficult. A sudden wave of newly permitted capacity or a hyperscaler pullback in chip spending would weaken the thesis. Stay focused on who has signed power contracts and cleared permits, because that's what moves data center stocks once the spending headlines fade. . |
