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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

#291

Post by dylan604 »

enos_feedler wrote: post #285
BoorishBears wrote: post #268

Earlier quoted context omitted.

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 hig…

There is zero evidence of this shift in pricing occurring. It’s still a dream which seems unlikely

It feels like this is the line people are using to justify the expense of compute capex

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

#292

Post by fc417fc802 »

supern0va wrote: post #246
minraws wrote: post #139

Earlier quoted context omitted.

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…

>The ARR were fine but showing skewed quarterly profitability numbers by slowing down research due to hitting compute capacity suggests otherwise. I have to say, I find this really puzzling. We know for a fact that Anthropic are making bank on metered inference. That's their biggest source of profitability, we are seeing software companies start to majorly adopt coding agents over just the last few months. Right as t…

> can you clarify what you mean by "slowing down research"

He is claiming that they have been investing less in R&D and that this is juicing their numbers in an unsustainable way given how close the competition is to catching up. His evidence is the content and cadence of model releases recently. (I'm not taking a position one way or the other, just clarifying for you.)

> Maximum usage of AI subscriptions is a loss, but do we actually know how that nets out?

They almost certainly don't have to care. All the enterprise accounts use the API pricing AFAIK and that appears to be profitable and is expected to be the vast majority of the usage in the medium to long term (if it isn't already).

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

#293

Post by iririririr »

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…

no need for a car analogy.

the comment you replied to is word-by-word what people hyping canadian telecoms were saying before the dotcom crash!

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

#294

Post by aprdm »

snypher wrote: post #290
Dig1t wrote: post #265

Earlier quoted context omitted.

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…

Don't you think that under excess demand, production will ramp, competition will become available etc? These posts read like we're all out of fresh silicon or something.

No. Because the investment to get into the game is too big and takes too long. The ones who can create the silicon are already oversubscribed.

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

#295

Post by iririririr »

noosphr wrote: post #279
shdh wrote: post #272

Earlier quoted context omitted.

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.

everything* is 3x more expensive in the same amount of time though. that's inflation mostly.

* except ram

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

#296

Post by db48x »

hadlock wrote: post #276
Dig1t wrote: post #265

Earlier quoted context omitted.

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 f…

Yea, fiber is great. They can do hundreds of terabits/s per fiber today, and petabits/s is not far away. Bandwidth is fundamentally cheap enough that my ISP offers 50Gbps residential service!

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

#297

Post by otterley »

dylan604 wrote: post #291
enos_feedler wrote: post #285

Earlier quoted context omitted.

There is zero evidence of this shift in pricing occurring. It’s still a dream which seems unlikely

It feels like this is the line people are using to justify the expense of compute capex

The fact that you can sell or lease out something for more than you bought it for is justification in and of itself.

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

#298

Post by panopticon »

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.

> I don't see Alphabet share price changing much just because of SpaceX being valued 2T instead of lets say 1T

Half of Alphabet's revenue increase last quarter came from marking up unrealized gains in their Anthropic investments.

I'm not saying Alphabet is doing this to juice the share price, but I want to point out that they don't have to sell shares to post banner earnings results and see a 10% jump in share price overnight.

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

#299

Post by winfredJa »

cooper_ganglia wrote: post #264
top_sigrid wrote: post #218

Earlier quoted context omitted.

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

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

Optimus seriously.

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

#300

Post by otterley »

It's not a datacenter REIT. Datacenter REITs don't sell compute. They sell space, power, and cooling in which compute lives.

I get the point the author is trying to make (in that SpaceX's most valuable asset is its compute capacity), but it's not quite the right analogy.

SpaceX is basically Elon's holding company for everything-but-Tesla at this point. If you're betting on SpaceX, you're betting on a conglomerate.

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