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xAI is looking more like a datacentre REIT than a frontier lab

martinalderson.com

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Re: xAI is looking more like a datacentre REIT than a frontier lab

#221

Post by WarmWash »

hdndjsbbs wrote: post #198
WarmWash wrote: post #154

Earlier quoted context omitted.

>Rich people have access to different types of investments, You mean hedge funds and private equity/private credit that all under perform S&P500?

The people who have private investments in SpaceX pre-IPO definitely have access to investments I don't have access to.

I didn't even mention venture capital because the win rate is so low. When you have billions already, then maybe you can buy $10M lotto tickets that get pitched to you. If you're a regular guy and want risk exposure like that, you can buy penny stocks.

Everyone is so fixated on the winners, that they completely forget (or aren't even aware) that there a many many times more losers.

Re: xAI is looking more like a datacentre REIT than a frontier lab

#222

Post by skybrian »

Qhemlomo wrote: post #100
skybrian wrote: post #65

Earlier quoted context omitted.

If the S&P 500 dropped 20%, that's about a year's growth. Long-term investors who bought before that would be poorer than they thought they were, but they're not worse off than they started and there wouldn't be any particular bill to pay. If they're a long term investor then they can wait for it to come back. (A similar argument could be made for larger drops.) The real suffering comes from whatever effect there is…

They can sit it out but that doesn't mean no one paid the bill. And some others might need to pull out when its down. Money doesn't appear out of thin air. Why would it lead to recession if a handful of big companies lose money they have? It will show that the USA is in a recession for sure, but otherwise

No, asset values are not like energy. There's no conservation rule.

When stocks get bid up, market valuation goes up far more than the amount of money that changed hands. Most of the market cap appears "out of thin air." It's just what people think it's worth.

And when the stock goes down again, it goes back where it came from.

The investors who bought stock at too high a price lose some of the money they put in, but there are others who never paid that price.

Re: xAI is looking more like a datacentre REIT than a frontier lab

#223

Post by 542458 »

trothamel wrote: post #69

I suspect that this is the start of a play for SpaceX's orbital datacenter project - if they're really planning on launching as many satellites as they've said (and Starship is going to massively lower the cost of launch), they won't be able to fill them with Grok. So perhaps it's best to become the infrastructure provider to the other AI Labs.

Is there anything to read on how the economics of an orbital datacenter make any sense? Because I don't really see how blasting a server into space solves any of the typical issues associated with datacentres beyond easier access to solar.

Re: xAI is looking more like a datacentre REIT than a frontier lab

#224

Post by cyanydeez »

TSiege wrote: post #6

> And Google is a major shareholder in SpaceX, so they certainly have incentive to juice the valuation of the IPO. Google own 5-6% of the shares of SpaceX. SpaceX is seeking a valuation of $1.77T which means Google's shares would be worth $88.5B-$106.2B. I'm not a skeptic of AI/LLMs but this makes me deeply suspicious of these circular deals. What happens when the music stops?

we should all be asking where the downstream ROI suppose to come from, because it sure as shit isnt in any of these AI endevours.

Re: xAI is looking more like a datacentre REIT than a frontier lab

#225

Post by zoogeny »

martinky24 wrote: post #173
zoogeny wrote: post #72

If xAI is a datacenter REIT, it is a special kind that has a promise that no other datacenter provider could dream of: LEO datacenters. As far-fetched as that may sound, the biggest profit center for SpaceX in my understanding was Starlink. xAI already has extremely high-bandwidth connections from Earth to LEO available. Connecting that to solar powered orbital datacenters seems doable in realistic timeframes, especi…

You're hand waving the whole "data center" part away. Comms is one thing. That's probably 1% of the challenge.

Sure, but considering the size of the challenge it makes sense to figure out the parts that can be studied on the surface first. Challenges like procuring, challenges like setting up relationships with potential customers. You probably want to figure out everything you can so that when you move on to the hard part you aren't distracted by the rest.

Consider the alternative. SpaceX figures out how to build the datacenter in space thing but fails at the rest. That would be an expensive mistake.

Re: xAI is looking more like a datacentre REIT than a frontier lab

#226

Post by alpha_squared »

_alternator_ wrote: post #122
stefan_ wrote: post #17

Earlier quoted context omitted.

Data center operators are in the business of selling electricity. They do not command large PE multiples. This is an even worse business, because xAI decided to also be the bagholder for the NVIDIA graphic cards. Not to mention they finance an unreasonable number of 20-somethings on way too large salaries with shitty opinions and no AGI delivered.

This take clearly has a bone to pick. But ignoring that, the first sentence is just not reflective of the reality here—xAI is making a killing on renting out its GPUs, way more than "just power". The dynamics that normally make infrastructure providers have slim margins don't apply when demand far outstrips supply; the situation right now is closer to monopoly pricing power. It will likely take a few years for supply…

> xAI is making a killing on renting out its GPUs, way more than "just power"

What's your evidence for this? Because from the S-1, SpaceX is largely an internet service provider that happens to launch rockets and own xAI.

Re: xAI is looking more like a datacentre REIT than a frontier lab

#227

Post by SecretDreams »

chatmasta wrote: post #217
mlyle wrote: post #159

Earlier quoted context omitted.

Without a moat, P settles to MC. No one makes significant profit.

xAI covers their cost of N-1 datacenter while running their own models in N and building out N+1.

And they make all of their money from the N-1 data center they are renting which is sand moat.

What point are you making?

Re: xAI is looking more like a datacentre REIT than a frontier lab

#228

Post by SecretDreams »

Brybry wrote: post #91
SecretDreams wrote: post #40

Earlier quoted context omitted.

What's their novelty or moat to maintain the value chain? And why do we only see google, who already owns it, raising their hand to rent at these prices?

Anthropic is also paying $1.25 billion a month for xAI datacenter compute (though Google does own ~14%? of Anthropic too). [1] https://www.businessinsider.com/spacex-ipo-anthropic-paying-... [2] https://www.nytimes.com/2025/03/11/technology/google-investm...

I'm not a big fan of this level of circular financing and ownership. The transparency is severely obscured.

Re: xAI is looking more like a datacentre REIT than a frontier lab

#229

Post by oblio »

JumpCrisscross wrote: post #209
oblio wrote: post #202

Earlier quoted context omitted.

Did I say it was circular financing? I said "financial chicanery". I even included a link to a video explaining said financial chicanery. What are you even going on about?

The comment you’re responding to and the comment above it are about circular financing. It’s reasonably to assume that’s the same chicanery you’re talking about; expecting everyone to watch a random video to understand your comment is unreasonable.

I listed a bunch of data points that make no sense (profits spiking 50% in a non-Christmas quarter for companies) and weren't directly tied[1] to the circular financing.

[1] They're indirectly tied to it.

Re: xAI is looking more like a datacentre REIT than a frontier lab

#230

Post by PixyMisa »

crystal_revenge wrote: post #143
mohamedkoubaa wrote: post #119

Earlier quoted context omitted.

I have a riddle for you: If it looks like a bubble and waddles like a bubble and quacks like a bubble what is it?

It's not interesting to say "this is a bubble!" I've heard that about virtually everything (and in many cases it's likely true). What is interesting is pointing out the mechanics that make the bubble pop. This is precisely what makes the movie the Big Short interesting: we see that people did identify, within a reasonable time frame, when people would start defaulting and how that would cascade into a true crisis. It…

Also, SpaceX is a rocket and communications company with a secondary AI play, where Anthropic and OpenAI are pure AI companies.

And it is far and away the world leader in satellite launch capacity and satellite internet.

Does that justify the massive valuation? Probably not. But it's a factor.

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