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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

#261

Post by atleastoptimal »

fc417fc802 wrote: post #241
atleastoptimal wrote: post #158

Earlier quoted context omitted.

Speculation exists for every security. However wrt revenue numbers, Anthropic/OpenAI’s revenues are largely made of companies/individuals purchasing tokens. Enron’s was accounting which stated future potential revenue as current earnings. They are not the same. Enron pulled off a lot of shady schemes to hide their accounting practices. All of the “circular deals” AI labs are doing are publicly known and clear to see,…

It's an interesting point that the token revenue will presumably survive a crash in stock prices. But (IIUC) much of the new infrastructure is funded using stock is it not? So it seems like token revenue theoretically surviving doesn't address the risk to the rest of the economy here. And if the economy takes a large enough hit then presumably so will token spend because someone has to pay for that after all. Sure th…

That is true, if all the new data centers don’t produce revenue then there will be a crash. However you’d have to bet that the models won’t stop getting better, or if they still keep getting better, that somehow better models does not translate to increased productivity. Would it be wise to look at how AI has progressed over the last 5 years and make that bet?

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

#262

Post by undersuit »

ryandrake wrote: post #120
NetOpWibby wrote: post #94

Earlier quoted context omitted.

This is what I’m looking forward to

I can't wait until these datacenters go bust and bulk DDR5 RAM and GPUs are sold on pallets by the kilogram rather than by the gigabyte.

So little of that is going to happen.

The DDR5 will be registered DIMMs. The GPUs will be 600W paperweights with a custom form factor. Similarly the NICs and other PCI-E accelerators. The motherboards also adopt custom form factors to fit in racks. The hard drives will be using SAS connectors. The flash will be in E1.S form factors.

The server CPUs that you want for a home desktop or small server, high clock SKUs, will be in high demand.

Any savings for someone willing to build a system from second-hand server hardware will be eaten by using adapters or sourcing a rack.

I'm not saying you won't be able to make a slightly outdated frankenserver with more compute than you need, I'm saying that's not going to bring down prices for Grandma's machine that she needs working to check on her retirement account.

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

#263

Post by Spooky23 »

bko wrote: post #128
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?

Or, hear me out, maybe there's a compute shortage and xAI has compute and manages that well. There are no dark GPUs. Compute translates directly to money for these frontier labs. I think everyone is reading way too much into this. Sure there is some circular transactions that are sus, but this ain't it.

xAI lets companies like Google move fast and hurt people at arms length.

Google itself has a good reputation as a facilities operator. SpaceXAI is operating gas turbines emitting exhaust at ground level.

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

#264

Post by cooper_ganglia »

top_sigrid wrote: post #218
celdon25 wrote: post #208

Elon is brilliant when it comes to hardware. But unfortunately with xAI, he went on a firing spree, PayPal Mafia style, just like with Twitter when he bought it, shortly before doing another hiring drive, and failing to hire software engineers at scale. The datacenter deals came after. But now, the man who promised the world an AI system that defends free speech and is “pro-human”, is instead selling to his competito…

> Elon is brilliant when it comes to hardware. What shall that even mean?

Tesla, Falcon 9, Starlink, Mechazilla, SolarCity, Colossus, Neuralink, Starship, Optimus...

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

#265

Post by Dig1t »

jhallenworld wrote: post #243
bko wrote: post #128

Earlier quoted context omitted.

Or, hear me out, maybe there's a compute shortage and xAI has compute and manages that well. There are no dark GPUs. Compute translates directly to money for these frontier labs. I think everyone is reading way too much into this. Sure there is some circular transactions that are sus, but this ain't it.

>There are no dark GPUs This might not be true. Someone was comparing Nvidia's production rate with known data center capacity, and they do not match. Their conclusion was that people (possibly even Nvidia) were hoarding GPUs- in the very short term this might be a good strategy, but GPUs go EOL fast. There are other stories about paused datacenter builds that match with this. TSMC is definitely fully allocated, base…

All that means is that there's a bottleneck at the data center layer. When he says "dark GPUs" he's saying that there are no dark DEPLOYED GPUs.

This is a reference to the 1990's dot com bubble where internet infrastructure companies overbuilt network capacity, leading to the term "dark fiber". That was an indicator of a bubble because it showed that capacity was larger than demand. OP is saying that this is specifically NOT happening in the case of GPUs yet, indicating that demand still outstrips supply of compute.

>GPUs go EOL fast

We are seeing the opposite of what was expected, GPUs are actually getting more valuable because demand is so great, something that basically never happens. Even older chips have become more valuable.

>paused datacenter builds

It doesn't seem that datacenters have been paused because of lack of demand for AI, it seems mostly that there is a lot of pushback by cities to build these things and also there is a shortage of power to run them.

IMO none of these things point to a AI being a bubble (over-hyped, demand does not match the stated value). It mostly points to the opposite, there is massive demand for AI and every layer of the supply chain is struggling to keep up with that demand.

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

#266

Post by joefourier »

outside1234 wrote: post #248

EDIT: A data center REIT where 1/5th of the datacenter falls apart each year and needs to be rebuilt . (aka "not a good REIT investment") Because the GPUs go out of date.

And yet Anthropic is paying xAI over a billion dollars a month for those out of date GPUs in their first datacentre (H100s being nearly 4 years old at this point).

Even A100s are still barely available on the major clouds despite being 6 years old.

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

#267

Post by bigbuppo »

atleastoptimal wrote: post #121
Terr_ wrote: post #114

Earlier quoted context omitted.

That's like saying "nobody is speculating in Enron stock" simply because there was electrical power that was sold for real revenue and consumed.

Enron collapsed due to legitimate fraud. To imply Enron is an apt comparison requires assertion that AI companies are actually cooking the books. Is that what you are saying?

Remember when nvidia asked us to stop calling them enron because unlike enron they actually admit to doing all the things enron did so it's not illegal?

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

#268

Post by BoorishBears »

adjejmxbdjdn wrote: post #251
bko wrote: post #128

Earlier quoted context omitted.

Or, hear me out, maybe there's a compute shortage and xAI has compute and manages that well. There are no dark GPUs. Compute translates directly to money for these frontier labs. I think everyone is reading way too much into this. Sure there is some circular transactions that are sus, but this ain't it.

Compute is also a rapidly depreciating asset. I want to make a comparison with a car rental business and say that it would be like valuing Hertz entirely on the basis of the number of cars they own, as opposed to how many they rent out, but cars have a much longer depreciation period, if there are no customers they’re not costing you more money, unlike your computer which you are using for training and sucking up mas…

Compute is about to come an appreciating asset in the near-term, and it some ways it already is.

The frontier labs are shifting from pricing grounded in the price of compute, to pricing grounded in the intelligence provided, or more specifically the economic value of that intelligence downstream.

The margins on that allow them to pay a hefty premium on compute and still come out ahead.

As they buy more compute at high prices, they're also pricing out competition from cheaper models. It's already become materially more difficult to get compute to run open weight models at competitive prices as a result of frontier labs in the last year.

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

#269

Post by BoorishBears »

JumpCrisscross wrote: post #220
tootie wrote: post #215

Earlier quoted context omitted.

Compute is presently in shortage but generally it's a commodity. It also depreciates.

> generally it's a commodity The NVIDIA GPUs, HBM, land-use permits and power-supply agreements xAI nailed down are absolutely not commodities. I think xAI is a mess. But let’s call a spade a spade, they speculated on AI compute and they are currently right.

This feels highly revisionist: they bet on becoming a frontier lab and were aiming for AGI.

If they were speculating on compute, it seems highly unlikely they'd have spent the operating costs for the last 3 years of model development and deployment instead of just getting even more compute.

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

#270

Post by grogers »

JumpCrisscross wrote: post #220
tootie wrote: post #215

Earlier quoted context omitted.

Compute is presently in shortage but generally it's a commodity. It also depreciates.

> generally it's a commodity The NVIDIA GPUs, HBM, land-use permits and power-supply agreements xAI nailed down are absolutely not commodities. I think xAI is a mess. But let’s call a spade a spade, they speculated on AI compute and they are currently right.

My read is that xAI built a lot of compute for their own use, but they didn't get any adoption so they are reselling the unused capacity to recoup at least some of the costs. So calling it a good bet is kind of misleading
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