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law  or  policy,  market  or  reliability  constraints,  limits  on  transmission  and  distribution  infrastructure,  or  a 
preference  for  protecting  other  utility  customers  and  the  broader  grid.  New  large  loads  on  the  electrical  grid 
may  be  increasingly  subject  to  mandatory  curtailment  in  regions  where  there  is  insufficient  grid-connected 
power  generation  to  reliably  supply  existing  and  new  electricity  loads.  For  example,  states  such  as  New  York 
and  Texas  have  recently  moved  to  regulate  large-scale  data  centers,  whether  by  pausing  state  permitting  for 
new  large  facilities,  as  New  York  has,  or  by  subjecting  large  electricity  loads  to  curtailment  or  disconnection 
during  grid  emergencies,  as  Texas  has.  Such  moratoriums,  or  similar  actions,  could  delay  or  prevent  the 
construction or expansion of facilities on which we depend for compute. Opposition to data center development 
has  also  become  more  organized  and  coordinated  across  jurisdictions  and  our  public  profile  may  draw 
particular attention to projects associated with us. The loss of, or a significant disruption at, any major facility 
may  not  be  readily  absorbed  by  our  remaining  or  future  infrastructure.  We  are  expanding  our  data  center 
capacity internationally as part of our efforts to diversify our infrastructure footprint and reduce concentration 
risks associated with operating a significant portion of our compute infrastructure in the United States and to 
support our international growth strategy, including by entering into letters of intent and negotiating lease and 
related agreements for data center facilities in multiple non-U.S. jurisdictions, which exposes us to additional 
risks  related  to  foreign  regulatory  requirements  and  approvals,  data  sovereignty  and  localization  laws, 
governmental  access  or  assistance  requirements,  cross-border  data  transfer  restrictions,  foreign  tax  regimes, 
and  increased  operational  complexity.  Our  ability  to  enter  into  definitive  agreements  for  data  center  capacity 
and  operations  in  non-U.S.  jurisdictions  depends  on  the  timely  formation,  registration,  and  receipt  of 
governmental  approval  of  local  subsidiaries,  as  well  as  the  establishment  of  local  banking  arrangements,  and 
any  delay  or  failure  in  completing  these  steps  could  delay  or  prevent  us  from  mitigating  our  infrastructure 
concentration risks, executing our international growth strategy, securing planned compute capacity, or could 
result  in  substantial  additional  taxes,  penalties,  or  other  liabilities.  In  addition,  regulatory,  legal,  and  other 
constraints  in  many  jurisdictions  may  limit  the  locations  in  which  we  can  practically  site  or  contract  for  data 
center  capacity,  which  could  constrain  our  ability  to  diversify  our  infrastructure  footprint  as  quickly  or  as 
broadly as we currently intend.

We  and  our  principal  competitors  rely  on  substantially  similar  inputs  to  develop  and  deploy  frontier  models, 
including  advanced  chips  sourced  from  a  small  number  of  suppliers  and  data  center  capacity  and  compute 
obtained from CSPs and other third parties. As we and our competitors increasingly pursue vertical integration, 
the  basis  of  competition  could  shift  over  time  to  encompass  not  only  which  company  can  develop  the  most 
capable  models,  but  also  which  company  can  develop  the  best  underlying  components.  Our  future 
competitiveness  may  depend  in  part  on  our  ability  to  successfully  develop  vertically  integrated  compute 
infrastructure on competitive terms and timelines, and there can be no assurance that we will be able to do so. 
Our  competitors  may  be  better  positioned,  or  may  invest  greater  efforts,  to  vertically  integrate  across  the 
compute supply chain, including through proprietary chip design, fabrication, ownership or long-term control 
of data center infrastructure, access to dedicated power generation assets, exclusive supply arrangements with 
hardware manufacturers, or by securing the limited sites suitable for large-scale data center development ahead 
of us. Competitors that succeed in controlling a greater share of these supply chain layers may be able to secure 
compute at greater scale, lower cost, or with greater reliability than we can, particularly during periods of high 
demand  or  supply  constraint,  when  captive  supply  relationships  may  confer  certain  advantages  over 
participants  that  depend  on  third-party  providers.  Such  competitors  may  also  develop  proprietary  hardware-
software  co-designs  that  optimize  compute  efficiency  for  their  specific  model  architectures,  which  could 
compound  any  capability  gap  across  successive  model  versions.  While  we  are  pursuing  initiatives  to  develop 
dedicated  data  center  infrastructure,  there  can  be  no  assurance  that  these  efforts  will  be  completed  on  the 
timelines  or  at  the  costs  we  anticipate,  or  that  they  will  be  sufficient  to  offset  any  structural  advantages  that 
vertically  integrated  competitors  may  achieve.  Competitors  that  succeed  in  these  efforts  may  be  better 
positioned to remain at the frontier of AI regardless of broader market constraints.

Natural hazards, extreme weather, or other disruptions affecting the regions where these inputs are produced 
or where our facilities are located could further constrain the availability of chips, power, water, or data center 
capacity on which we depend. If we are unable to manage the foregoing risks, our business, financial condition, 
and results of operations could be adversely affected.

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