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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

#271

Post by XorNot »

JumpCrisscross wrote: post #240
fc417fc802 wrote: post #232

Earlier quoted context omitted.

> and power-supply agreements Don't you mean gas turbine purchases and questionably legal operation? But yeah I feel exactly the same way. The AI part of xAI looks like a mess but it seems that they still managed to score a massive win.

> Don't you mean gas turbine purchases and questionably legal operation? The point is it’s running. They built fast before the backlash got organized. Now everyone has to deal with delays and thoughtful permitting processes.

The point is they're in a business no one would claim is particularly profitable but claiming a valuation like they're in a totally different business - one where they're not even top 3.

Its not that there isn't value in that business, but it's not the AI business either. Its the one where Oracle is laying off staff to try and avoid a revenue crash on future commitments.

Both Google and Anthropic would be trying to can this sort of rental arrangement as fast as possible since it's a mind bogglingly expensive way to get something you already do in house.

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

#272

Post by shdh »

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…

It is depreciating, but demand has been very high.

There's a reason old 3090's went from $600 in 2022 o to over $1K in 2026.

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

#273

Post by joefourier »

chasd00 wrote: post #104
skybrian wrote: post #80

Earlier quoted context omitted.

No, that's silly. Chips don't rot like produce. Some components will go bad and will need to be replaced. The owner can choose how fast to replace them depending on how prices look in a few years. The rest of the building (including things like power) will still be useful.

i think what op meant is they're instantly out of date. You're not going to be able replace every GPU in your datacenter on every new release from Nvidia and customers are going to go to whoever has the highest performing gear.

Demand is so high and supply so low customers will go to anyone that has any gear, period. Anthropic is paying xAI for GPUs from 2022, not the latest Nvidia release.

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

#274

Post by missedthecue »

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?

Every product adoption success he's had since PayPal has been hardware.

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

#275

Post by BoorishBears »

JumpCrisscross wrote: post #240
fc417fc802 wrote: post #232

Earlier quoted context omitted.

> and power-supply agreements Don't you mean gas turbine purchases and questionably legal operation? But yeah I feel exactly the same way. The AI part of xAI looks like a mess but it seems that they still managed to score a massive win.

> Don't you mean gas turbine purchases and questionably legal operation? The point is it’s running. They built fast before the backlash got organized. Now everyone has to deal with delays and thoughtful permitting processes.

You're taking an odd tone here.

The "backlash" is the poorest residents one of the poorest large cities in America trying to fight for their right to clean air.

Your point might end at "it's running", but holistic thinkers have no problem considering the how they arrived there, given what it's doing to these folks for marginal benefit.

It's not like xAI would go under if they had chosen a less populated location and waited to get permanent power.

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

#276

Post by hadlock »

Dig1t wrote: post #265
jhallenworld wrote: post #243

Earlier quoted context omitted.

>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 specific…

Adding to this, a lot of fiber installed in the 1990s is still dark. Multi-wavelength XYZ and other improvements mean the same fiber from 35 years ago can carry 100 or 1000x what it was originally designed for. Also, like Solar, all the cost is in labor. When they designed the Seattle/King County fiber network, they knew they would never have access/permits to go back and add more, so instead of running a single 12 fiber bundle the size of your pinkie, they ran 3 x 1024 bundles the size of your arm through the hollow bridges that span I-5 freeway and snakes through Seattle underground. Almost all of that sits dark today despite being in a very busy area, simply because fiber technology keeps getting better.

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

#277

Post by guywithahat »

qaq wrote: post #178
bpodgursky wrote: post #112

Earlier quoted context omitted.

They are making $24B/yr on datacenters they built in < 2 years for $2-3B. To call that a "modest ROI" is... quite a statement.

Where did you get 2-3B from? Colosus 2 GPU's alone were 18B Total cost including construction, power and water treatment facility might be close to 25-30B.

I'm not OP but that was the cost of the initial facility if I remember correctly when it was first up and running, what you're describing I believe is the full cost after all expansions/etc

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

#278

Post by [deleted] »

redox99 wrote: post #234
Retric wrote: post #219

Earlier quoted context omitted.

Executive compensation is often based around share prices, so this can be worth quite a lot to the people making these decisions without any long term upside for the company. If you want to understand how companies behave you really need to look at things from the perspective of people making the decisions.

I don't see Alphabet share price changing much just because of SpaceX being valued 2T instead of lets say 1T (being extremely generous). In fact this deal will hurt their profits, which is more likely to hurt Alphabet stock price than the valuation of an asset that they hold.

[deleted]

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

#279

Post by noosphr »

shdh wrote: post #272
adjejmxbdjdn wrote: post #251

Earlier quoted context omitted.

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…

It is depreciating, but demand has been very high. There's a reason old 3090's went from $600 in 2022 o to over $1K in 2026.

My local inference rig now costs three times what I bought it for. If I'd gotten the max ram I could at the time I would have made $10k after selling the excess to my current spec.

How someone can look at an asset class thats appreciated an order of magnitude in the last two years and say it will depreciate in value when the tailwinds are even stronger now is beyond me.

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

#280

Post by AtlasBarfed »

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.

There is a compute shortage.

In fact, for all these companies to do what they're going to do, they need a massive, massive massive amount of data centers, a highly improbable number of data centers that need to be built in an highly improbably short amount of time.

And the capitals about to dry off in about a year. So it's a race between these improbable timelines on data center construction, with capital evaporating.

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