741–750 of 1001 posts
> 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?
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…
I'm sorry this is a misplaced framing. ==> Those facilities are being leased because Grok is failing. Space X does not want to lease away it's competitive advantage to a primary competitor. It'd be like Tesla leasing factory space to Toyota and Ford. 'GPUs, Energy and Data Centres' are a hugely critical resource in the AI race and SpaceX is now leasing it away. Will it make money? Sure. But this is 'Strategic Fumblin…
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That's for standalone servers. xAI has something that nobody else has. The single largest interconnected cluster[1]. For inference it doesn't really matter, but for training that networking is crucial. [1] Probably, there could be undisclosed clusters owned by other companies.
I would think that for training Google has optimized their entire setup for TPUs so I can’t see how this would be used for anything but inference
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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…
I would bet that there is a nice clause in that contract that gives exit options to Google at year 1, 1.5, 2, etc. Perhaps they only need to pay $11B, or $16.5B, before exiting the contract. Plus, instead of getting nothing for these $11B/year, they surely get some compute power that should have some value.
from the linked article
>After this year, the agreement can be terminated by either party provided they give 90 days’ notice.
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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…
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No. The definition of fraud is "lying for financial gain". This doesn't qualify.
Heres the way I understand it as a child could understand. You are google. I am your friend who wants to sell lemonade. You have invested in my stand and own a piece. You propose a deal, You'll buy $11 of lemonade from me every week. Does my stand look like it sells way more lemonade, than it would in reality? And since you own a piece, your own piece has appreciated. You ran the numbers and that spending of yours he…
Fraud is:
* an intentional misrepresentation of fact, whether by words or conduct, by false or misleading allegations, or by concealment of what should have been disclosed;
* made by one person to another;
* with knowledge of its falsity;
* for the purpose of inducing the other person to act, and upon which the other person relies;
* resulting in injury or damage.
Neither the Google/SpaceX situation nor your story constitute fraud. RTFM.
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But what is xAI? I thought that was the company that had the compute + Grok, the AI company? Since when does SpaceX (which I thought was a space company?) own AI-compute hardware and/or can do model hosting? Are all of Musks companies just one big thing now where the names no longer matter, or how is it supposed to work? Edit: seems I'm just a bit behind: "xAI — now part of SpaceX ", seems really strange for a space…
Musk sold Twitter into xAI which he then sold into SpaceX as a financial engineering effort to lessen the impact of massive debts and cash burn. The IPO and some clever structuring is the final step in the process.
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…
> Comcast is one of the best-run ISPs You mean the company with such a bad reputation that it had to aggressively rebrand? I take it you've never had the displeasure of doing business with them. That said it wouldn't surprise me in the slightest to learn that it was one of the most profitable ISPs for investors. That would fit quite well with the general theme of prioritizing the interests of investors over all else.
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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…
> Anyone who holds bonds in this market will likely lose money. Yes, you lose money (or more precisely you lose opportunity) but you gain certainty. Which is what you want for retirement That’s pretty much the definition of risk premium.
Stocks generally rise with inflation, whereas bonds continue paying out the same nominal amount, which buys you less over time.
As a retiree I'm 50/45/5 in stocks/bonds/cash, having opted for a conservative portfolio. The stocks are the only reason I haven't lost buying power. But the bonds have performed so poorly that I've barely kept up with inflation despite the amazing bull run in stocks.
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I'm sorry this is a misplaced framing. ==> Those facilities are being leased because Grok is failing. Space X does not want to lease away it's competitive advantage to a primary competitor. It'd be like Tesla leasing factory space to Toyota and Ford. 'GPUs, Energy and Data Centres' are a hugely critical resource in the AI race and SpaceX is now leasing it away. Will it make money? Sure. But this is 'Strategic Fumblin…
I think they're sacrificing short term terrestrial GPU advantage to fund their space GPU mega-advantage. It's a risky bet, but if it pays off then SpaceX will be one of the most powerful companies the earth has ever seen.
They have rapidly depreciating assets in GPUs and they can't use them.
Because Grok is failing.
They are licensing out their unused capacity.
XAi is not strongly related to Space X - they were folded into one thing because XAi was losing money and failing (the Social Media part is worse).
XAi isn't really some kind of strategic advantage for Space X and even though revenues from the data centres may be positive - it's a 'stop gap' - it's probabaly not a 'net positive' thing to do.
The best thing for Space X would have been to never merge wht XAI.
The second best thing for Space X would have been to close XAi/Twitter lines of business a long time ago.
The 'Wrench in the Logic' is that by putting these things together, EM is able to dupe so many people into so many ridiculous concepts.
Data centres in space, 1M people on Mars, all sorts of crazy things.
It's a bit like Putin's and Steve Bannon's Media Strategy: 'Flood the Zone' with nonsense, and people speculate as to all kinds of things.
The Space X IPO is a 'retail push' meaning he needs to get all the Dentists in America and their Private Bankers to want to 'Hold the Bag' and then keep holding it for a long time.
Space X - at it's core - is a decent company, wrapped in layers and layers of hyperbolic nonsense.
All it takes is a bit of rational thinking to wade through what is plausible, and what is not, and we can see how overvalued this is.
Note: this is different than the other 2 AI IPOs which have some sketchy economics - but the premise is not far fetched, 'that people will want AI in large quantities'.