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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

#521

Post by bastawhiz »

fragmede wrote: post #433
jklinger410 wrote: post #137

Earlier quoted context omitted.

> I think everyone is reading way too much into this. Sure there is some circular transactions that are sus, but this ain't it. Let us pin this comment and see how it ages

Let's say it does all collapse. How would we know it's the 5-6% stake (which in my mind doesn't make them a "major shareholder") that was a circular deal that was the fall of the house of cards vs some other segment?

It doesn't even have to be circular. One company is juicing another company's valuation to make their stake worth more. Down the road they'll sell their stake, end the deal, and leave everyone else holding the bag.

Nothing about this deal is about better technology or talent. It's about an opportunity that's too juicy for Google to pass up on.

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

#522

Post by s1artibartfast »

JumpCrisscross wrote: post #383
542458 wrote: post #223

Earlier quoted context omitted.

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 su…

why are oribital datacenters favored by lower financing costs? Is this assuming that the full project cost is locked up during permitting? Land costs I can see, but how much of a center buildout is that these days?

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

#523

Post by CamperBob2 »

missedthecue wrote: post #274
top_sigrid wrote: post #218

Earlier quoted context omitted.

> 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.

And in a market where the incumbents were either incompetent or didn't bother to show up to the game.

I don't understand why people don't call that out more, when Musk rambles endlessly about how he's going to reinvent data centers and semiconductor fabs.

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

#524

Post by 0xbadcafebee »

ViscountPenguin wrote: post #457
0xbadcafebee wrote: post #409

Earlier quoted context omitted.

The compute is useless if nobody is left to pay for the compute, once all the AI companies die, from all that debt getting called in, once everyone realizes it's a scam. (AI isn't a scam, but the financial deals and promises of unrealistic recoupment are)

The thing I've never understood about the ai investment model is the upside. What's the point of valuations that only make sense if you've built a digital god, when at that point you've literally got a digital god. I can't imagine the tangible value of money being high in that scenario

Money is imaginary, it's just a placeholder, doesn't need to be tangible. In the case of AI it's the promise that you can replace humans with cheap fast robots, to do more things and cheaper. That's valuable. But the wealthy aren't considering that our economy depends on people (replacing all the people too fast would tank the economy from unemployment, and cause a revolt). So you might wonder, why don't they just move at a slower, sustainable pace? The answer is greed. Make as much as you can, as fast as you can, before the next guy does.

All this investment is completely driven by the companies leading the pack. OpenAI and Anthropic have been telling everyone they need to spend hundreds of billions in a few years. Of course they don't, they could do this over 10-15 years and still be profitable. But they're terrified they won't be able to dominate the market. So to dominate the market, they've estimated they need this growth to beat China (and each other). And the US technically has the capital to make this happen, but there's only so much money available to spend. By growing too fast, they spend money faster than they can make it, and the bills are so big that the investors go bankrupt.

That's what happened in the panic of 1873 (railroads instead of AI). That's what's going to happen here in the next 2-4 years.

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

#525

Post by danielmarkbruce »

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.

But this doesn't sound exciting to folks who like a good conspiracy theory. The google/xai deal is the least interesting thing at spacex.

"you have compute, i need compute, i'll pay you for some compute.".

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

#526

Post by sethops1 »

doctorwho42 wrote: post #172
treis wrote: post #41

Earlier quoted context omitted.

>What happens in a few years when DeepSeek runs on the chinese chips like the Huawei Ascend at a fraction of the cost ? Nvidia goes back to being a 100 billion dollar business and everyone else reaps the benefits of cheap tokens.

So Nvidia will lose 94.5% of their market cap, and you think that will not effect anything beyond AI?

A few thousand recently minted millionaires might become former-millionaires if they decide to HODL. Construction at these Manhattan-sized data centers might slow or stop. The tech industry might go back to solving problems for real people. I'm not really seeing a substantial downside.

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

#527

Post by redsocksfan45 »

lmm wrote: post #400
emodendroket wrote: post #325

Earlier quoted context omitted.

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

People are weird about their cars and make major errors in judgement as a result (e.g. we tolerate incredibly high rates of people getting killed because they were "hit by a car", as though the driver had nothing to do with it). Pushing back on that is absolutely worthwhile.

[dead]

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

#528

Post by __blockcipher__ »

williamdclt wrote: post #495
nl wrote: post #404

Earlier quoted context omitted.

Memory is unlikely to drop in price before mid-2027 when new capacity starts to come online. The GPU shortage looks to be even longer lived.

So, temporary situation then. That's a pretty short period with no paradigm shift, just a delay in capacity.

It’s gonna take a lot longer than mid 2027. 2029 earliest IMO. Hyperscaler spend is basically already spoken for the next 2 years.

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

#529

Post by killerstorm »

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.

Presumably from internal all-hands presentation in Google: “Now we must double every 6 months… the next 1000x in 4–5 years.” reported by CNBC in November 2025, attributed to Amin Vahdat, Google Cloud VP / AI infrastructure lead.

Sundar Pichai at Q4 2025 earnings call: “We’ve been supply-constrained".

Satya Nadella, 2026: Microsoft would increase total AI capacity by over 80% in the year and roughly double total datacenter footprint over two years.

Microsoft CFO, 2026 earnings call: “We’ve been short now for many quarters. I thought we were going to catch up. We are not. Demand is increasing.”

So yeah, either top management of hyperscalers are doing a 'bit' for the last few years, or Aschenbrenner 'Situational Awareness' is going roughly as predicted and hyperscalers are desperate to acquire compute even at higher cost.

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

#530

Post by _alternator_ »

imtringued wrote: post #444
alpha_squared wrote: post #226

Earlier quoted context omitted.

> xAI is making a killing on renting out its GPUs, way more than "just power" What's your evidence for this? Because from the S-1, SpaceX is largely an internet service provider that happens to launch rockets and own xAI.

xAI is a failure of an AI company from a consumer perspective. They invested a large amount of money into owning their own infrastructure, while driving away consumers with their right-wing or "alt right"-ish branding and having a reputation of X users abusing the AI services. Turns out there was another company with a much better reputation for which the compute is a better fit. Now that the data centers are being p…

That story roughly tracks the one I hold. One piece that's missing is that grok's / X's image also made it radioactive to the best researchers. 'Aligned AGI' is an easier sell to the best engineers than 'abusive neo-Nazi chatbot with a porn problem'.
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