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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

#411

Post by Earw0rm »

tootie wrote: post #215
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 presently in shortage but generally it's a commodity. It also depreciates.

And while there's no challenging the underlying proposition "AI has value", right now 95% of corporate users are still at the "throw everything at the wall and see what sticks" level in terms of model usage compute.

It's sheer brute force, tons of waste, seems like very little thought going in to fitting the implementation to the problem.

The value of compute can drop significantly in the event of users figuring out how to optimise for their particular need. And yep, there are wasteful applications that can burn whatever compute is available, but how much demand for that is there when it's properly priced?

Extreme example. Generating novel 4K VR video on demand. I'm certain there's a market for it, at $10/hour probably quite a healthy one, at $100/hour not so much.

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

#412

Post by JumpCrisscross »

BoorishBears wrote: post #275
JumpCrisscross wrote: post #240

Earlier quoted context omitted.

> 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…

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

Sorry, I'm referring to the national pushback against datacenters being built in peoples' backyards. xAI didn't face backlash. At least not organised enough to stop them. Their competitors, today, are facing backlash sufficiently powerful to stop new datacenters from being put down.

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

#413

Post by SkiFire13 »

blensor wrote: post #410
nl wrote: post #309

Earlier 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 (!!)

I also feel that the GPU/NPU value does not lose money as fast anymore. What I am wondering though is how long can you run such a system at basically full load without interruption before it starts to just physically degrade. If I have a H100 and I let it run for 4 years at full throttle does it still have the same theoretical value as it had at the start or are the chips just burning out. I think I remember that bac…

Quite the opposite, GPUs running at a stable rate degrade less than GPU that continuously hit highs and lows (like it would happen on a gaming rig).

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

#414

Post by JumpCrisscross »

oblio wrote: post #258
JumpCrisscross wrote: post #244

Earlier quoted context omitted.

> that make no sense (profits spiking 50% They were unrealized gains on non-marketable equities. It’s clearly disclosed and done according to GAAP. It’s put under other income precisely so analysts can strip it out when modelling long-term trends. Like, yes, if SpaceX goes to zero Google would have to realize losses and probably lose a quarter or two of GAAP profits. (But not cash flows. Cash-flow wise, it may wind u…

> but far from making no sense. When I said "it makes no sense", I didn't mean "the accounting math doesn't work out". I meant "raising a potential conflict of interest among related parties". This whole AI financing this is the motherlode of "potential conflict of interest among related parties". And people who are obtuse enough to ignore this because it's not illegal right now will discover 5-10 years from now that…

> whole AI financing this is the motherlode of "potential conflict of interest among related parties"

Sure? Lots of things are potential conflicts. In the Google and Anthropic deals, I'm not seeing evidence of problems.

And that's saying something, because we have a lot of evidence of actual circularity or related-party deals being done with no arms-length anything across AI, in many cases in ways that definitely do see like they are illegal.

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

#415

Post by imtringued »

baq wrote: post #394
noosphr wrote: post #319

Earlier quoted context omitted.

You undervolt them because the last 50% of power adss 10% of compute.

Undervolting is not running at max utilization by definition almost. …but the real question whether you want to undervolt your asset if you’re renting it out is why bother? You probably expect to replace it anyway after it’s spec lifetime, for sure want to replace it when a more efficient solution is available since datacenters are power and volume constrained and customers care about performance much more than hardw…

Why bother saving opex and capex?

Just waste more money! It's easy.

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

#416

Post by 0xbadcafebee »

atleastoptimal wrote: post #113
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?

The music would have a risk of "stopping" if these deals were backed by a speculative entity. However AI actually has real value/revenue, and is not a speculative product (i.e. people aren't buying tokens to resell them, a token is "consumed" at moment of inference)

The value of AI companies is speculative just like the railroads were. Railroads also have real value. But you have to have everything ready to use those railroads to make money, or they're just steel bars in the dirt and a big loud heavy thing that moves along the horizon. Too much speculative investment in the railroads (in part) led to the panic of 1873, because just having a promise of a return isn't the same thing as having the return.

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

#417

Post by topspin »

treis wrote: post #14
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?

There's no realistic way for the music to stop. The demand for LLMs is staggering and the big providers are charging full freight for inference. They might not make back the money from training but these data centers are definitely going to be fully utilized for at least the next 5 years.

> The demand for LLMs is staggering

The demand is finite. There is clear evidence that it has limits. When costs become great, the consumers set limits, create budgets and seek alternatives. Consumers are still figuring out where the cost/benefit lines are, and we can all see that the lines at least exist.

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

#418

Post by baq »

imtringued wrote: post #415
baq wrote: post #394

Earlier quoted context omitted.

Undervolting is not running at max utilization by definition almost. …but the real question whether you want to undervolt your asset if you’re renting it out is why bother? You probably expect to replace it anyway after it’s spec lifetime, for sure want to replace it when a more efficient solution is available since datacenters are power and volume constrained and customers care about performance much more than hardw…

Why bother saving opex and capex? Just waste more money! It's easy.

Why do you think it’s a waste? If you’re buying GPUs to rent them you’re almost buying a bond. If you’re leasing them, it’s even more obvious that you’re collecting the spread. The GPUs have a financial lifetime after which the business doesn’t pencil and they get sold for peanuts so you can put a better bond in your volume-power.

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

#419

Post by eecc »

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 also a rapidly depreciating asset.

I don’t know but this dude at my son’s school has a 32GB RTX 5090 and it’s worth more than what he paid for; and he did the same trick with the RTX 4090 before that.

Until shortages are the rule, these assets are appreciating

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

#420

Post by egr »

Here is my take:

- roughly 1B revenue per month is a good look for SpaceX - provides some credibility to otherwise non-existent xAi business.

- pos. News for Google due to their share in SpaceX.

- can be interpreted as leasing versus building for Google, a nice Hedge on compute capacity.

- saves Capex for Google at time of horrendous GPU, memory costs.

It is only a bridge until 2029. What will be the value of the SpaceX data centers by then? Fine print matters on deal with Google. MS made billions up front payments to Coreweave. SpaceX has no upfront payments, has to stem Capex alone. Very favourable for Anthropic and Google.

  Provider     Compute Sold    Valuation
  --------     ------------    ---------
  Nebius       ~$46.4B         ~$55.3B
  CoreWeave    $99.4B          ~$55.8B
  SpaceX       ~$70+B          ?
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