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Google to pay SpaceX $920M a month for compute capacity at xAI data centers

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Re: Google to pay SpaceX $920M a month for compute capacity at xAI data centers

#721

Post by solenoid0937 »

rootusrootus wrote: post #609
solenoid0937 wrote: post #507

Earlier quoted context omitted.

This is absolutely terrible advice and is out of touch with modern financial understanding. Bonds feel psychologically safer, but lead to failure more often than total market equity portfolios, even when you account for market crashes. https://youtu.be/p25PPBgMiEk

I feel like I should go learn some more. I'm not in a pure index fund, I'm really in VFORX (almost completely, I'm not too original nor sophisticated financially and don't try to pick my own stock picks these days except with my "lunch money" just for fun). Do you think something like VFORX is a bad option? It's actively managed, so the fees will be a little higher than a pure index fund, but it's Vanguard and the fe…

Active management in general is a poor idea. You'll get better risk adjusted returns by investing in total world equities (like VT). Check out Bogleheads to learn the basics. If you want to get more advanced, you can learn about factor investing as well, but VT is enough for the vast majority.

If you want to get intuition for why this works, this is a really fun and interesting video: https://youtu.be/TQuxVz52w2w

Re: Google to pay SpaceX $920M a month for compute capacity at xAI data centers

#722

Post by histriosum »

JumpCrisscross wrote: post #638
delecti wrote: post #505

Earlier quoted context omitted.

Yeah, launch costs alone make it infeasible, and power being "free" exacerbates the cost (gotta get all those panels up there). Cooling is also dramatically harder, plus shielding, and it makes repair/upgrade basically impossible. I'm not going to assert that large scale space compute will never happen, but I feel confident saying it won't happen this decade or next.

> launch costs alone make it infeasible Last time I did the math, launch costs were well balanced against permitting delays (mediated by interest rates). The break even rests almost entirely on radiator mass efficiency (which is, admittedly, a function of launch costs). Like, if everyone’s terrestrial datacenter projects start getting blocked, and demand for AI continues, the price a rational buyer would pay for in-o…

Wouldn’t it be easier and cheaper simply to focus building your data centers in other poorer countries where your permits won’t be blocked? Why would the next most logical choice be “let’s put it in orbit”?

Re: Google to pay SpaceX $920M a month for compute capacity at xAI data centers

#723

Post by k2enemy »

Gareth321 wrote: post #580
davedx wrote: post #484

Earlier quoted context omitted.

Start gradually converting your equity to bonds is the standard advice on that timeframe. If you're dreading equity drawdowns, that's what fixed income is for.

Bonds are no longer recommended. Current research indicates 100% equities to be the best composition leading up to, and past, retirement. To point, the economic uncertainties around geopolitics, AI, and war, plus irresponsible debt spending by governments and the prospect of QE (and higher inflation), is pushing long term rates steadily higher. There’s a reasonable chance that 30y treasuries are nearing 6% by the end…

> Bonds are no longer recommended. Current research indicates 100% equities to be the best composition leading up to, and past, retirement.

Are you referring to Anarkulova et al? Might be worth mentioning that the fixed income part is replaced with international equity, not more domestic equity.

Re: Google to pay SpaceX $920M a month for compute capacity at xAI data centers

#724

Post by fc417fc802 »

marcosdumay wrote: post #494
fc417fc802 wrote: post #202

Earlier quoted context omitted.

The earthbound equivalent would be strapping each chassis to the back of a dedicated solar panel and having the panel double as a giant heat sink. The problem is that doesn't work on the surface due to (at least) rain, the day/night cycle, and the cost of real estate.

That's not right. This works a couple orders of magnitude better on the ground than on space (unless your computers run at several hundred °C). The reason people don't do it here is because it's too expensive.

What isn't right? I pointed out that if you adhere to the same power density then cooling is no longer a challenge on earth (in reply to the observation that cooling a DC on earth is one of the biggest challenges).

For the record the equilibrium temperature in earth orbit is above freezing but below room temperature. Cooling won't be a problem at all unless you bring along a self contained power source. Heat distribution however might be - you will need an efficient yet lightweight construction to spread the heat generated in the chassis across the entire solar panel.

Re: Google to pay SpaceX $920M a month for compute capacity at xAI data centers

#725

Post by SwellJoe »

bwfan123 wrote: post #309
runako wrote: post #281

Since the S-1 filing, xAI has taken over and is likely the largest share of revenue. I would estimate that ~95%+ of xAI revenue, and 100% of its profit, is from renting their datacenters. This is a datacenter REIT bolted onto a social media company bolted onto launch business bolted onto a niche ISP. The expected price to sales is ~100x. The best datacenter REITs trade at ~10x and pay a dividend, which SpaceX does no…

Circular financing at its finest. And Self-dealing between the hyperscalers, openai, and anthropic. google invests in anthropic and spacex - and shows appreciated values as earnings. Then it turns around and rents tpus to anthropic to show it as revenues. The main buyers and sellers for all of this are the hyperscalers, openai and anthropic. It is a game of musical chairs while the party is still on.

They're all betting ignorant retail investors will be the final bagholders. It's a license to steal from retirement accounts.

Re: Google to pay SpaceX $920M a month for compute capacity at xAI data centers

#726

Post by liveoneggs »

polski-g wrote: post #637
softwaredoug wrote: post #570

> compute from its Colossus 1 data center near Memphis, Tennessee, that xAI — now part of SpaceX — originally built for its own artificial intelligence efforts. Is this the same Memphis data center notorious for burning jet fuel nonstop for power?

What would you prefer it to burn instead?

probably boiling water with nuclear energy?

Re: Google to pay SpaceX $920M a month for compute capacity at xAI data centers

#727

Post by nouveaux »

manlymuppet wrote: post #633
tristanj wrote: post #205

This is a masterful piece of financial engineering by Google and SpaceX. Google purchased 10% of SpaceX over a decade ago. After dilution they probably own around 5%. SpaceX is valued at a whopping 94x revenue. This deal increases SpaceX's revenue by $11 billion per year. If SpaceX maintains this revenue multiplier, then this single deal boosts SpaceX's valuation by 94 x 11 billion = $1 trillion dollars. Google owns…

But Google loses $11 billion per year, and they gain $50 billion... in stock? As far as I know they really will be paying $11 billion annually in liquid cash to SpaceX (not a small ask) starting this year, and all they get in return is more money on paper? What incentive do they have to help SpaceX out like this at great cost, if they're not actually buying something valuable? Why are they incentivized to do this if…

They're buying compute for 11 billion and the 50 billion in stock growth is a bonus if it happens.

Re: Google to pay SpaceX $920M a month for compute capacity at xAI data centers

#728

Post by djfergus »

runako wrote: post #281

Since the S-1 filing, xAI has taken over and is likely the largest share of revenue. I would estimate that ~95%+ of xAI revenue, and 100% of its profit, is from renting their datacenters. This is a datacenter REIT bolted onto a social media company bolted onto launch business bolted onto a niche ISP. The expected price to sales is ~100x. The best datacenter REITs trade at ~10x and pay a dividend, which SpaceX does no…

I feel like your analysis is correct and it’s overvalued but employees and insiders have already been selling shares (eg on platforms like Forge) for around the $130-135 IPO price. So there are buyers, question is if there is enough to consume the liquidity of a $75B IPO.

Re: Google to pay SpaceX $920M a month for compute capacity at xAI data centers

#729

Post by credit_guy »

BLKNSLVR wrote: post #420

And SpaceX will spend $800M per month on Nvidia hardware purchase contacts, and Nvidia will spend $700M per month on Google services. I'm picturing a teenager blowing a bubble gum bubble bigger and bigger. I assume it can go on forever!

The doubt you are expressing was very justified until this week. But on June 1st, Microsoft changed the pricing for business and enterprise Copilot, and people started paying real money for using AI. Until that day, Github Copilot was charging users 4 cents per request (if they exceeded their subscription's monthly limit). Now, they charge at the API rate. I monitor my usage, and it's easily 10 times more expensive than the 4 cents per request before, maybe 20 or even more. And guess what? Businesses are shocked about the changes, and thinking hard what to do, but most of them will just pay 10 or 20 times or more for AI than they used to pay until now.

We will hear projections soon, in a few months, but my guess is that the big 3 (Anthropic, OpenAI, Google) will get of the order of $10 billion per month in AI inference revenues. And it will only go up from there.

Re: Google to pay SpaceX $920M a month for compute capacity at xAI data centers

#730

Post by WarmWash »

davedx wrote: post #478
rootusrootus wrote: post #336

Earlier quoted context omitted.

TSLA has a forward PE of ~200x. That is probably the most logical comparison with SpaceX. Proof that the market can stay irrational for quite a long time. It fills me with a bit of dread about the future of the market. I am 10 years out from retirement, have a bit over 1M sitting in that market, and I wonder if it will implode in the meantime. I am fairly committed to the "invest like a dead man" (i.e. index funds, n…

Eh, Tesla had a relatively normal growth company valuation for a while when they were growing strongly. The problem is the stock still hasn't compressed the multiple back down as growth stagnated... because the market swapped out "valuation based growth" for "call option on robotaxi success" at the blink of an eye.

Robotaxi failed so now it's Optimus bots.
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