xAI sells AI services. Not sure why the author chose to link xAI to the compute rental part.
The compute rental is driven by SpaceX AI likely driven by SpaceX side of the business.
It is not xAI.
xAI is looking more like a datacentre REIT than a frontier lab
381–390 of 580 posts
Re: xAI is looking more like a datacentre REIT than a frontier lab
#382> 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?
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 a new paradigm, duh!
Re: xAI is looking more like a datacentre REIT than a frontier lab
#383I 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.
> anything to read on how the economics of an orbital datacenter make any sense?
I'll do a write-up at some point. But the core drivers are launch cost, permitting delays for terrestrial datacentres and interest rates.
The balance is between, on one hand, the financing cost of the permiting delays against, on the other hand, the cost of launching radiators. (Chips are light. Solar panels without glass cladding are surprisingly light, too. The weight of an orbital datacenter is almost entirely in its radiator.)
The math high-level works with Starship (6 flights/year), 3+ year financing delays and a 10 kg/kW radeiator (assuming 6% financing cost). Of course, there are devils upon devils in the details. But directionally, we're seeing pushback against terrestrial datacenters. And from what I can tell, advanced heat pipes may be the unlock to get radiators down to 5 to 6 kg/kW, at which point I think even New Glenn's $300/kg projected prices become competitive.
It all goes out the window if launch costs don't come down, interest rates go above 10%, terrestrial datacenters start getting built quicker, or demand for this category of compute collapses.
Re: xAI is looking more like a datacentre REIT than a frontier lab
#384Earlier quoted context omitted.
> Compute is also a rapidly depreciating asset. That's the default assumption but in the new GPU+Memory constrained age isn't true. Time on 4 year old H100 servers costs more now than when they were new (!!)
> That's the default assumption but in the new GPU+Memory constrained age isn't true. Is it an age or a temporary situation?
Are current datacenter deployments structured in such a way that the memory can later be moved to newer GPU dies? Or is it all packaged together as on consumer graphics cards?
I assumed the latter and therefore that the memory is depreciating along with the GPU cores it's soldered onto PCBs with.
... or is it a different argument being made, perhaps that depreciation for GPUs has slowed because rising demand will keep them in service longer?
Re: xAI is looking more like a datacentre REIT than a frontier lab
#385Earlier quoted context omitted.
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?
The ARR were fine but showing skewed quarterly profitability numbers by slowing down research due to hitting compute capacity suggests otherwise. I am certain Anthropic spent less on building the next model this quarter if they make it to profitability due to the shear fact that they don't have enough compute. Which solves the profitability problem with relative ease momentarily. Also just to confirm, AI subscription…
> API is definitely being sold at a decent profit.
Where do you get this from?
Enterprise plans are being cancelled or limited all over the place (Uber, Microsoft). I doubt Anthropic would be leveraging a loss leader with their consumer plans, while catastrophically hemorrhaging customers on the enterprise.
They are either operating at a loss (possibly a minor one), or a minor profit (which is chasing customers away).
If they were comfortably profitable they wouldn't need to participate in the circular deal circus.
Re: xAI is looking more like a datacentre REIT than a frontier lab
#386I don't think this is good news for the AI industry.
If they can't build enough capacity where their best option (and they're signing multi-BILLION dollar contracts) is an unproven 'datacenter in space' technology, we are toast.
- near term costs will go up (demand is greater than supply) - tokens shift from all you can eat (TOKENMAXXX) to ROI-driven - engineers with real orchestration skills rule and shift to lower cost optimization (deep seek) - Frontier AI unit economics collapse
Re: xAI is looking more like a datacentre REIT than a frontier lab
#387> 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.
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Re: xAI is looking more like a datacentre REIT than a frontier lab
#388> 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.
correct
but it's really bad news for the industry capacity if your best option is unproven space datacenters.
Re: xAI is looking more like a datacentre REIT than a frontier lab
#389Earlier quoted context omitted.
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…
Source for capital drying up in one year? Not trying to be snarky but that's super big if true.
- iran destabilization will shift middle east capital to military spending and infrastructure repair
- Ukraine war similarly is triggering an EU buildup and reduction in us dependency
- all the IPOs indicate the companies themselves know the private investment is coming to an end so they need the retail investors to keep the boondoggle moving
Re: xAI is looking more like a datacentre REIT than a frontier lab
#390Earlier quoted context omitted.
> That's the default assumption but in the new GPU+Memory constrained age isn't true. Is it an age or a temporary situation?
It's very unclear to me. The key question is on direction of LLMs. Right now, LLMs are taking over human jobs. If the cost of silicon+power If this applies to SWEs, lawyers, business analysts, many research scientists, .... this situation could persist for a long, long time. While capital costs less than the inputs of labor (nominal food, housing, etc.), there is no need for labor. The key question is about continued…
> what rational reason is there to employ a human being?
To maintain a functioning society and social contract?
Is wanting low unemployment in our society not rational?