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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

#331

Post by coliveira »

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?

This, along with many other recent deals, shows that there is no real competition between these mega companies. They're at this point only orchestrating the market (or should I say scheming) to build an oligopoly and move as much resources and money to the hands their little group through circular deals.

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

#332

Post by latchkey »

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…

"depreciating" is not being used in the right sense.

There is depreciation, which is taking the purchase price and dividing it across N number of years (typically 5). That's the D in EBITDA and is mostly used as a profitability calculation.

The depreciation of a GPU also gets mucked up in the current GPU financed market as well. DDTL loans. The people running the GPUs often don't even own the GPU, they lease it, so there is nothing for them to depreciate (D).

The analogy that a GPU is like a used car makes zero sense. There is no oil or tires to change on a GPU. They don't wear out in the same way that a rental car would. They are housed in climate controlled locations with clean power. They just don't fail the way that is portrayed in the press.

Useful life of a GPU is based on profitability. When does opex cost more than profitability?

Some companies, like mine, also have support contracts. Anything goes wrong with the GPU (or any part of the system), Dell comes and fixes it at no extra charge. We just migrate customers and workloads to hot spares while the parts are replaced.

As for compute going down in value... the 122TB of enterprise nvme and 2GB of ram in each server that I bought 2 years ago is now worth vastly more than I paid for it. I'm also renting my GPUs out for more money now due to supply being so tight and demand being so high.

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

#333

Post by fwip »

irishcoffee wrote: post #148
olyjohn wrote: post #96

Earlier quoted context omitted.

Since when is leasing capacity in a datacenter considered investing?

Why does one lease something? To provide value equal or better to the cost, no?

If I lease an apartment for two years, that's not an investment.

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

#334

Post by phil21 »

olyjohn wrote: post #96
irishcoffee wrote: post #92

Earlier quoted context omitted.

I believe you've described "investing with a hope for a profitable return" which is usually the point of investing. Circular investing is a thing that is happening with all of these companies related to language models. Google hoping for a ROI isn't a great example of that.

Since when is leasing capacity in a datacenter considered investing?

I dunno, I’ve never leased space in a datacenter without considering it an investment.

And one I expected to perform significantly better than either the risk free rate or just passive investment into the stock market.

Same reason I invest in capital equipment to put into the space I lease.

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

#335

Post by rcpt »

542458 wrote: post #223
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.

I think the only way it makes sense is if local busybodies succeed in banning data centers from the ground.

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

#336

Post by NewJazz »

emodendroket wrote: post #325
NewJazz wrote: post #249

Earlier quoted context omitted.

Uh, only when people don't seem to understand it, or try to personify it. Which is quite often.

People “personify” their cars but I don’t think because they think cars have human cognition

Not in the same way.

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

#337

Post by fragmede »

noosphr wrote: post #282
shdh wrote: post #281

Earlier quoted context omitted.

Fundamentals dictate hardware is a depreciating asset, they're not wrong. They're just ignoring the reality of the current market.

This was true when Moores law wasn't dead. Per watts performance has been flat since Ampere. There is a reason why undervolted 3090s are still used.

Performance goes way up if you use liquid nitrogen to cool the chips. Maybe finally someone's willing to pay for that.

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

#338

Post by phil21 »

throwaway5752 wrote: post #239
gunapologist99 wrote: post #170

Earlier quoted context omitted.

Better not mention your theory to all the other Tier 1 data centers. Or maybe you're saying that it's only AI that's short-lived.

Respectfully, I tend to think of tier 1 data centers as someone I'm paying for colocation services and the value they provide is power infrastructure and redundancy, network infrastructure and redundancy, cooling, and physical security. The shortage I referred to is in GPUs, that's what really being rented here. Even if GPUs lasted forever, they're are a depreciating asset because they become obsolete with improvemen…

> GPUs do not last forever, either. I've read here, and heard from others, that they aren't even living up to their 5 year depreciation schedules under production load, closer to 2-3 years

People said this about GPUs during the crypto mining craze and were wrong back then too. While I can’t speak for the entire industry I can say my personal experience follows any normal intuition over solid state electronics.

Some early failures in the bathtub curve, and then you start seeing fans, heat paste, and board capacitors fail far before you start seeing any chip failures at scale.

Sure you can abuse anything you want to burn it out, but I doubt that’s what’s happening inside these facilities.

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

#339

Post by gruez »

VirusNewbie wrote: post #323
gruez wrote: post #305

Earlier quoted context omitted.

https://www.bls.gov/cpi/tables/relative-importance/home.htm What do you find controversial, and would cause a material difference in the headline inflation rate?

Housing has a massive lag when it comes to CPI. CPI works by asking how much people pay for rent. If home prices raise 20% in one year (not at all unreasonable in various times in the last ten years), it takes a long time for that to be reflected as many people have their rents fixed, some people have rent control, some landlords will only raise rents on new tenants, etc.

>Housing has a massive lag when it comes to CPI.

>[...] many people have their rents fixed, some people have rent control, some landlords will only raise rents on new tenants, etc.

In other words, rent is lagged when it comes to the CPI... because the rent people actually pay is also lagged?

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

#340

Post by diab0lic »

joxdosba wrote: post #66
SecretDreams wrote: post #38

Earlier quoted context omitted.

Look, there's two things: * LLMs are useful * Company valuations around LLMs are not realistic Both can be true, much like they were during the Dotcom bubble. The internet turned out to be a pretty real thing. A couple examples below might feel familiar in the next couple months/years. > Blucora (then InfoSpace): Founded by Naveen Jain, at its peak its market cap was $31 billion and was the largest Internet business…

Btw how much is MicroStrategy down since the year 2000?

It peaked at $18B market cap in 2000. Adjusted for inflation this is 18x1.93=34.74B.

Today’s market cap is 45.35B.

It isn’t down, but it isn’t up much since 2000.

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