[HN Gopher] xAI is looking more like a datacentre REIT than a fr...
___________________________________________________________________
xAI is looking more like a datacentre REIT than a frontier lab
Author : martinald
Score : 496 points
Date : 2026-06-08 15:13 UTC (14 hours ago)
(HTM) web link (martinalderson.com)
(TXT) w3m dump (martinalderson.com)
| hawkice wrote:
| They have developed an LLM, so they are an AI lab, but the
| quality of that model suggests they're not a frontier anything.
| beepbopboopp wrote:
| Or the model was a marketing expense to capitalize the data
| center model. Im not saying it was intentionally that, but its
| been an effective "that."
| bpodgursky wrote:
| Eh. It was a leading model for a few weeks, it was a real
| effort, but they never built a real revenue model around it.
| It wasn't SaaS, it wasn't for governments, it couldn't get
| B2C payments. Made it hard to justify the training cost to
| stay at the frontier.
| Qhemlomo wrote:
| So like the 4D Chess Trump is playing with us?
|
| Come on, the most logical thing is that Musk overestimated
| the compute he needs and got lucky with the secondary usage
| of it.
|
| As soon as the IPO is done and if it didn't fail, he will buy
| curser and try to push again if he hasn't given up on it.
|
| He also needs some compute for the robotics stuff and for
| Tesla in-car entertainment and for training FSD.
| bottlepalm wrote:
| Grok isn't at the front of the frontier, but they are there for
| sure.
| leetharris wrote:
| I have the pro account for ChatGPT, Claude, Gemini, and Grok.
|
| They all have various strengths and weaknesses. My favorite is
| still ChatGPT, then Gemini/Claude, then Grok.
|
| Grok often feels 1-2 generations behind the competition in
| general use, but it has three things that I love:
|
| 1. It seems to be the best at understanding current events.
| Maybe due to X integration, or some other tool call
| optimization in the backend? I don't know, but I often ask
| about things going on, and the other models have outdated info,
| give unhelpful answers, etc.
|
| 2. It is generally the least sycophantic for personal things.
| Anthropic is getting here too. ChatGPT and Gemini are working
| on this, but previous models in those families would almost
| never say anything negative about what I am doing. Sometimes I
| need career advice, personal advice, etc and I like the tone of
| how it responds. I think Claude will be caught up soon.
|
| 3. For professional work, there are certain topics that other
| models would refuse to engage with. At my last company we had
| an enormous amount of legal users. When a deposition would need
| a summary on certain topics, most models would refuse. Grok
| would not. I understand the need for safety and I don't blame
| the other model providers, but for some professional use cases
| you NEED a model that is capable of handling sensitive
| subjects.
| epolanski wrote:
| My SO works in audit/compliance and business Gemini
| definitely does not refuse to answer.
| e9 wrote:
| I recently worked with NRC dataset, specifically about
| nuclear reactor events and status reports(example:
| https://www.nrc.gov/reading-rm/doc-collections/event-
| status/...). Public data that just needed some cleaning.
| Several time Claude API would refuse to engage. Because of
| that I can't trust Claude to clean production data sets.
| Azantys wrote:
| Career and personal advice from LLMs, not sure if thats your
| best bet
| deaton wrote:
| All 4 of these still regularly insist that I am a genius and
| everything I say is brilliant. Grok definitely pushes back
| more than the others, but I don't like how sycophantic they
| all still are.
| pell wrote:
| I don't want to open up that whole can of worms but Grok on
| any vaguely philosophical or political topic is a scaredy
| cat and has a very hard time staying factual if it could
| make Musk or the conservative movement appear negatively.
| square_usual wrote:
| Opus 4.8 has made huge jumps in being less sycophantic. I see
| it pushing back on ideas a lot, and that's very helpful when
| you're evaluating options.
| lachlan_gray wrote:
| Almost too much so, it often feels like opus is pushing
| back for the sake of pushing back. The way old models used
| to add disclaimers to every message regardless of content
| NewJazz wrote:
| That's because it can't literally reason, it has just
| been manually steered into those reasoning speech cycles.
| emodendroket wrote:
| Yes, yes. Does everyone still find it interesting to go
| over this point every time about how it's not literally a
| person with human reasoning?
| NewJazz wrote:
| Uh, only when people don't seem to understand it, or try
| to personify it. Which is quite often.
| emodendroket wrote:
| People "personify" their cars but I don't think because
| they think cars have human cognition
| NewJazz wrote:
| Not in the same way.
| emodendroket wrote:
| That doesn't seem to be much more than special pleading
| without an explanation of how you think it's different.
| lmm wrote:
| 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.
| CamperBob2 wrote:
| What about when they ask how you can take gold at IMO and
| solve research-level math problems without reasoning?
| galkk wrote:
| It's more like Opus wants you to do its job for it. I feel
| that amount of time when I tell it "no, you do that"
| increases with each new version.
| nonethewiser wrote:
| What are you using it for? Im pretty surprised ChatGPT is
| your top model but maybe you arent using it for code.
| cactusplant7374 wrote:
| But in terms of agentic coding? Dead last.
| htx80nerd wrote:
| My favorite was ChatGPT, and I still use it often, but it
| becomes way too 'hair splitting' argumentative too often over
| very minor non controversial topics. Like it's always going
| out of its way to "well actually..."
|
| Grok used to be really really bad ~8 months ago or so, but
| it's gotten better.
|
| ChatGPT team needs to turn down the 'disagree just because'
| factor by a lot.
| selicos wrote:
| 1. It seeks to manipulate the information you see and your
| lens to the world. This is already partially true from
| independent and major publications.
|
| As soon as we hand over searching out information to social
| media algorithms and LLM tools, we abandon our ability to see
| reality outside our direct vision.
|
| Grok's ownership has already demonstrated capacity to
| influence major world elections and other events. You cannot
| trust it with this sort of information gathering and
| reporting.
| emodendroket wrote:
| > 1. It seems to be the best at understanding current events.
| Maybe due to X integration, or some other tool call
| optimization in the backend? I don't know, but I often ask
| about things going on, and the other models have outdated
| info, give unhelpful answers, etc.
|
| That makes sense, but occasionally you ask about an issue
| where it's clearly received political instruction from the
| commissar and it acts totally lobotomized. But it's true that
| Gemini will often blithely state that something could never
| happen and you'll say "what do you mean, that just happened"
| and then it comes back apologizing after running a Web
| search.
| timfsu wrote:
| We saw this too with Gemini specifically. My favorite
| example - we built a hallucination detector (given the
| input, does the output make any false claims) in Gemini,
| and after the Seahawks won the Superbowl in February, it
| would consistently flag that as "not possible".
| emodendroket wrote:
| I believe it was assuring me the Israelis would never
| invade southern Lebanon and declare a buffer zone inside
| it after that had already happened.
| fooker wrote:
| > the quality of that model
|
| I guess the benchmarks disagree, but whenever I need to find
| specific information that does not easily show up with a web
| search, I try chatgpt, gemini and grok. Grok surfaces what I
| was looking for more often than the others.
|
| Things like "find the github repo from 2017 that does
| $vague_thing".
| chatmasta wrote:
| Grok does seem to have the best searching capabilities, and
| not just for twitter. I wonder what search engine they're
| using on the backend.
| PixyMisa wrote:
| Good question. You can actually see the searches it runs
| (momentarily) so testing could determine if it's using
| public search engines or a private system.
| Azantys wrote:
| Isnt that more Perplexitys thing anyways?
| gowld wrote:
| Can you give a specific example (that doesn't violate any
| privacy you want to protect)?
| PixyMisa wrote:
| I find that too. I use Claude for coding but when I need to
| dig out something based on limited data I turn to Grok and it
| delivers.
| mbesto wrote:
| And they are planning (well "planning" if you believe Elon) to
| start building their LLM over from scratch, which means they
| need a HUGE ass training data center, i.e. not a data center
| for inference to do so.
| gowld wrote:
| I am also an "AI lab", but I look more like a corporate cog,
| because that's where most of my revenue comes from and how I
| spend the most my time.
| harrall wrote:
| But supposedly they're the cheapest for certain workloads,
| especially ones that have high tokens and can make use of
| caching.
|
| So they're cutting edge in that way.
| mandeepj wrote:
| or, could be they pivoted to cover the expenses?
| TSiege wrote:
| > 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?
| AznHisoka wrote:
| Someone gets bailed out and the cycle starts again. Isnt this
| how it works?
| downrightmike wrote:
| Hyperinflation to make the needed bailout money
| staplers wrote:
| That's done quietly behind the scenes so leaders can blame
| something else for inflation.
|
| See "M2SL" or "TOTBKCR" on tradingview if you want to see
| inflation live.
| drivebyhooting wrote:
| I don't understand how to read those charts.
| smallmancontrov wrote:
| Any time you see a price denominated in $, divide by that
| chart.
| stymaar wrote:
| The idea that inflation and the money supply are linked
| is one of the most dumb one in folk economics.
|
| Just look at these charts: they were declining when
| inflation was raging on in 2022-23 ...
| smallmancontrov wrote:
| Lagged processes are one of the most fundamental concepts
| in economics. If merely recognizing the possibility that
| one could be at play here is throwing you for a loop, you
| need the simplified monetary model more than most.
| stymaar wrote:
| Where's the hell is the lag on these graphs though!? The
| money supply grows both before, and after the
| inflationary spike. (And the fact that it stops
| increasing when inflation is high is not surprising at
| all, by the way, high inflation make the central bank
| raise interest rates, which reduce credit, which is where
| money comes from).
| smallmancontrov wrote:
| The lag is where you were complaining it was.
| stymaar wrote:
| Do you know what "lag" means?
| ryan_j_naughton wrote:
| > "The idea that inflation and the money supply are
| linked is one of the most dumb one in folk economics"
|
| "folk economics" implies it is by untrained people.
|
| Milton Friedman's famous quote of "inflation is always
| and everywhere a monetary phenomenon" shows that he
| deeply believed the relationship between inflation and
| money supply, and one certainly cannot call Friedman a
| "folk economist" considering he won the Nobel prize in
| economics and was a professor at the University of
| Chicago.
|
| Note: I am not saying he is right or supporting his
| belief. I am merely stating that such a belief is not a
| "folk economics" belief. This belief is still very
| prevalent in the freshwater schools of economics. [1]
|
| As a personal anecdote, at Ronald Coase's 100th birthday
| party, I personally got Gary Becker and Richard Posner
| debating a very related topic (whether and by what degree
| the velocity of money of fluctuates and whether
| helicopter drops of cash would have been better during
| the early days of the money supply collapse in 2008/2009
| than just giving money to the banks). In a room full of
| Nobel Prize winning economists in 2010, there was a very
| rigorous debate on the topic.
|
| [1] https://en.wikipedia.org/wiki/Saltwater_and_freshwate
| r_econo...
| stymaar wrote:
| > "folk economics" implies it is by untrained people.
|
| The problem is mostly its appropriation by untrained
| people though.
|
| > Milton Friedman's famous quote of "inflation is always
| and everywhere a monetary phenomenon" shows that he
| deeply believed the relationship between inflation and
| money supply
|
| Creationists theoreticians believe in creationism too.
| The problem arise when their theory reach the
| mainstream... (Influential people inside the Swedish
| Central bank making a fake Nobel prize to promote these
| ideas didn't help of course...)
| barrenko wrote:
| Banks not needing people's money is quite a bad thing.
| EDIT: M1 looks like a damn sigmoid.
| gruez wrote:
| >See "M2SL" or "TOTBKCR" on tradingview if you want to
| see inflation live.
|
| https://fred.stlouisfed.org/series/M2SL
|
| https://fred.stlouisfed.org/series/TOTBKCR
|
| And you would have been massively wrong. People have been
| complaining about quantitative easing since post GFC, and
| if you took the figures at face value, those would imply
| inflation was nearly 100% between the end of GFC and
| before the pandemic. Whatever you thought about the post-
| pandemic inflation, the period between GFC and pre-
| pandemic definitely did not see the level of inflation
| implied by those figures.
| disgruntledphd2 wrote:
| I mean, it sortof did in assets, just not in the changes
| tracked by CPI.
| downrightmike wrote:
| That's because they take and modify what is tracked in
| the CPI at will
| gruez wrote:
| 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?
| VirusNewbie wrote:
| 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.
| gruez wrote:
| >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?
| VirusNewbie wrote:
| for _existing_ , well established renters, sure. For new
| renters, or people who move, or people who face housing
| insecurity, or people who want to buy homes, it's much
| higher and not accurately reflected in CPI.
| timacles wrote:
| We are basically dealing with the fallout of the 2008 GFC
| bailout to this day.
|
| The fiat economic system is irreparably broken, and we are
| circling the drain. Another bailout is _probably_ inevitable.
| But the cycle sure as hell isnt resetting and we are speeding
| towards something... what it is is unclear though, and when
| is also unclear.
|
| The part people cant wrap around is the scale of it and the
| time it takes to go through the super cycle. Theoretically,
| it all started with the Dot com bubble, which indirectly
| cause the housing bubble, which caused the GFC. Which caused
| whatever happened in 2019, which caused QE in 2022 under the
| guise of COVID, which is causing whatever the hell is
| happening now.
|
| Capitalism has become uncorked, and money is irreversibly
| flowing to the top at an increasing rate. The logical next
| stage is that like 75% of the world's population is literally
| not even part of any economy. And that doesnt really make any
| sense
| philipallstar wrote:
| Sigh, no. Money is not flowing; company valuation might be,
| but that's temporary and only works if the company keeps
| delivering insane amounts of value.
| fc417fc802 wrote:
| So the founders sell plenty of stock while the price is
| high and then when their valuation crashes sure they
| "lost" half their net worth but the other half is still
| there.
|
| I'm not saying that's what's happening, just making it
| clear that company valuation not being permanent is not a
| valid argument against money flowing to the top.
| azan_ wrote:
| You've made lots of (wild) claims, but provided zero
| support for them. Also didn't bottom income quartile see
| the largest growth in last few years?
| mannanj wrote:
| yeah I intuitively have felt something like this has been
| happening, too. And finding the evidence is such an immense
| task, and feels way out of my current energy level.
|
| When COVID was ongoing there was a term floating around I
| liked, "Psychosis" was it. The spell is like that of,
| denial? Terror & shock?
|
| Trauma might be better?
|
| Looking at trauma responses and how to detect it in humans
| is an interesting perspective to look at all this with.
| Personally, if I look at it from "people are afraid,
| traumatized, defending themselves" and use that to
| extrapolate how most people (the masses, the non-rich)
| would act and also the rich - that points me to why theres
| such a sudden hastening of action and pace of wealth up
| towards the top in the name of AI & war.
| shmel wrote:
| or, hear me out, we can try the Irish way? Just let them fail
| ffs
| vitally3643 wrote:
| Unfortunately, the entire US economy is being propped up on
| AI stocks. If they are allowed to crash, the consequences
| would be extreme all across the board. See the recent
| worming into index and pension funds. If they collapse now,
| a lot of regular people are going to get wiped out.
|
| Should the government bail them out or somehow stop the
| collapse? Arguable. Will they anyway? Almost certainly.
| These companies have engineered themselves into a position
| where being allowed to fail would wreak catastrophic damage
| to the national (and global) economy precisely so that the
| taxpayer will be left holding the bag if and when it all
| comes crashing down.
|
| Capitalism is rotten to the core and there's no fix for it.
| fc417fc802 wrote:
| > These companies have engineered themselves into a
| position where being allowed to fail would wreak
| catastrophic damage
|
| Where is this assumption of malicious intent coming from?
| This has all been fueled by a global AI hype that might
| or might not prove to be justified in the end. The
| overall economic situation looks (IMO) quite similar to
| that of the railroads in the US and those did ultimately
| fail and were nationalized(ish).
|
| The current situation is hardly limited to the US and
| capitalism. China also appears to be actively
| reorganizing their economy around AI.
| bpodgursky wrote:
| A lot of people are emotionally unprepared for a world where
| the music doesn't stop.
| raducu wrote:
| > A lot of people are emotionally unprepared for a world
| where the music doesn't stop.
|
| I've been wrong before. However, when was the last time this
| business model made sense -- that facebook, SpaceX and
| others, all just pivot from their market niche to general
| purpose AI datacenter providers.
|
| How on Earth does this make sense?
|
| What happens in a few years when DeepSeek runs on the chinese
| chips like the Huawei Ascend at a fraction of the cost ?
|
| These are all very high value added companies going into
| comodity AI hosting and they're all going to make a killing?
| treis wrote:
| >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.
| doctorwho42 wrote:
| So Nvidia will lose 94.5% of their market cap, and you
| think that will not effect anything beyond AI?
| trollbridge wrote:
| There's an assumption here that Nvidia will stop
| innovating.
| mlnj wrote:
| The only assumption I am making is that NVIDIA and others
| dig thier claws into western governments and make decade
| long contracts for even greater surveillance. Trillions
| of dollars worth.
| treis wrote:
| Not any more than when one company beats out another.
| johnsmith1840 wrote:
| Energy and datacenter scale.
|
| US is a near monopoly of this pairing. A crash will result
| in the removal of the fluff and ocerpricing of it all but
| the stance is beyond strong.
|
| Unless China outcompetes Nvidea AND TSMC AND magically gets
| 4x cheaper energy they are in a much weaker stance for the
| long haul.
| raducu wrote:
| > AND magically gets 4x cheaper energy they are in a much
| weaker stance for the long haul.
|
| By energy you mean electricity,the nuclear, solar and
| hydro-- the kind China has installed new 2TW capacity
| over the last decade while US installed 0.2TW capacity in
| the same time?
| tsunamifury wrote:
| Lines very rarely go straight for forever, but still often
| longer than expected.
| reducesuffering wrote:
| The level of denialism when faced to confront hard realities
| of the world around us never ceases to surprise me. Alas AI
| capabilities continue to rip through expectations and the
| next goalposts are moved.
| gopher_space wrote:
| Unprepared for a world that's replaced French peasantry with
| strapping an Xbox to your face.
| cgh wrote:
| "It's different this time"
| Qhemlomo wrote:
| At least Alphabet, Microsoft and Amazon can afford it.
|
| Nvidia is not losing anything if their stock falls.
|
| So whats left? The typical candidates of course: We poor
| people. 401k, ETF, etc. we pay the bill.
| TSiege wrote:
| If Alphabet can afford it why are they issuing $80B in new
| shares for fresh capital?
| skybrian wrote:
| It makes good financial sense for a company to sell shares
| when the price is high and do stock buybacks when it's low.
| I guess they think the price is on the high side?
|
| Also, selling shares puts them in a better position to
| survive a downturn (more cash, less debt).
| Analemma_ wrote:
| Google is also issuing a bunch of debt this year. It
| sounds like they need a lot of capital and want to keep a
| particular debt/equity ratio, rather than having a strong
| opinion on their share price.
| jorvi wrote:
| In a real competitive market it would never make
| financial sense to do stock buybacks because competition
| is so fierce you need to invest it all in R&D and sharp
| prices for your customers. See the Chinese EV market.
|
| Stock buybacks are also a tax trick.
|
| They're just holistically evil and should have never been
| made legal.
| Qhemlomo wrote:
| Just look at the net income of alphabet.
|
| Whatever financial games they play in the background,
| doesn't matter when you make that much per 2 quarters
| alone.
| matwood wrote:
| When money is cheap you take it. Google sees all the
| capital waiting to pour into these AI IPOs, and correctly
| assumed they could tap into that with little dilution.
| skybrian wrote:
| If the S&P 500 dropped 20%, that's about a year's growth.
| Long-term investors who bought before that would be poorer
| than they thought they were, but they're not worse off than
| they started and there wouldn't be any particular bill to
| pay. If they're a long term investor then they can wait for
| it to come back. (A similar argument could be made for larger
| drops.)
|
| The real suffering comes from whatever effect there is on the
| rest of the economy due to a recession, more layoffs, etc.
| Qhemlomo wrote:
| They can sit it out but that doesn't mean no one paid the
| bill.
|
| And some others might need to pull out when its down.
|
| Money doesn't appear out of thin air.
|
| Why would it lead to recession if a handful of big
| companies lose money they have?
|
| It will show that the USA is in a recession for sure, but
| otherwise
| somewhereoutth wrote:
| > Money doesn't appear out of thin air.
|
| In fact [fiat] money _does_ appear out of thin air (well,
| created by banks when they originate loans) - and has to
| to support a growing economy. Unfortunately, for various
| reasons, rather too much has been appearing, and has been
| funneled to the already wealthy.
| skybrian wrote:
| No, asset values are not like energy. There's no
| conservation rule.
|
| When stocks get bid up, market valuation goes up far more
| than the amount of money that changed hands. Most of the
| market cap appears "out of thin air." It's just what
| people think it's worth.
|
| And when the stock goes down again, it goes back where it
| came from.
|
| The investors who bought stock at too high a price lose
| some of the money they put in, but there are others who
| never paid that price.
| xiaoyu2006 wrote:
| I always think 401k is not fair at all. It kinda forces one
| to invest and pump the stock prices.
| brokencode wrote:
| With most 401k plans, you can choose what you invest in to
| an extent. You can put it in bonds or other investments if
| you want.
| idiotsecant wrote:
| This doesnt fix the systemic issue. Most people put their
| money in a target fund and leave it alone. Those target
| funds are at risk of being forced to buy these over-
| inflated assets. The incentive to do this is there
| _because_ those target funds and naive investors exist.
| JumpCrisscross wrote:
| > _Those target funds are at risk of being forced to buy
| these over-inflated assets_
|
| Target funds are diversely managed. This isn't a real
| concern.
| idiotsecant wrote:
| The diverse investment is the _reason_ that funds will be
| forced to buy these worthless stocks. It 's a direct
| transfer of money from the working class to the extreme
| capital class.
|
| If you're good with that, I'll send you my PayPal so you
| can get me my 5 bucks. It's a tiny fraction of your
| overall cash flow, whats the big deal?
| brokencode wrote:
| True, that's an argument against the typical passive,
| broad market, market cap weighted fund like VTI or SPY.
|
| But there are many funds that have different strategies,
| both passive and active. Such as by investing based on
| value, quality, dividends, etc.
|
| I get that the average person doesn't know this, but the
| 401k doesn't inherently force somebody into broad market
| funds.
| idiotsecant wrote:
| When you destroy pensions by crushing organized labor,
| create 401k incentives, and place your new captive
| audience by default into a certain investment class, a
| whole lot of people are going to leave it there. Whether
| the provider forces anyone to do anything is irrelevant,
| it creates second order impacts that ultimately lead to
| what is perhaps the greatest attempted fleecing in market
| history
| bluGill wrote:
| Until someone can come up with a better option though...
|
| Note that a pension plan that invests for you blindly is no
| better - either the returns are so bad that they are a
| scam, or they are investing in stocks anyway and so you get
| the same results but less control. Similar for things like
| social security, they are either worse options or you need
| to pump stocks.
| granra wrote:
| > Until someone can come up with a better option
| though...
|
| A welfare state maybe?
| Ray20 wrote:
| Eh? Like in North Korea?
| granra wrote:
| More like most European countries.
| nick__m wrote:
| Something like the CDPQ in Quebec ?
| SubmarineClub wrote:
| And the money to pay for all those retirees comes
| from...where?
| jdale27 wrote:
| You don't have to invest your 401k in stocks.
| hdndjsbbs wrote:
| This is what financial capitalism and "democratizing
| finance" has meant in practice. Rich people have access to
| different types of investments, and by the time those
| trickle down to common investors the juice has all been
| squeezed out. Whatever the trend is, by the time you hear
| about it the market has already been arbitraged by faster
| investors with more resources.
|
| We are not going to come up with a market-based solution to
| fix income inequality. The solution, as much as people in
| the dwindling middle class resist it, is a strong social
| safety net coupled with a hard reset on taxation and
| housing policies. Nobody should be homeless, nobody should
| be allowed to starve, but you might have to accept that
| your 401K goes down in exchange for a government guarantee
| of housing and food.
|
| This is hard for people to accept because they currently
| have equity in their home or a 401K to save them from
| starving. But those are transient, individualistic
| solutions. You can lose your house. You can lose your 401K.
| Society should be taking care of each other in a broader
| way than letting everyone accumulate a little, private pile
| of money.
| throw-the-towel wrote:
| The middle class resists it because we know who will be
| taxed through the nose to fund this safety net. Hint:
| it's not the ultra rich.
| hdndjsbbs wrote:
| Why the fuck not? This is such a stupid perspective, "we
| shouldn't make things better because I imagined a way it
| could be bad".
| throw-the-towel wrote:
| It's you who is imagining things here, I'm speaking from
| my actual experience in an EU country.
| WarmWash wrote:
| >Rich people have access to different types of
| investments,
|
| You mean hedge funds and private equity/private credit
| that all under perform S&P500?
| hdndjsbbs wrote:
| The people who have private investments in SpaceX pre-IPO
| definitely have access to investments I don't have access
| to.
| WarmWash wrote:
| I didn't even mention venture capital because the win
| rate is so low. When you have billions already, then
| maybe you can buy $10M lotto tickets that get pitched to
| you. If you're a regular guy and want risk exposure like
| that, you can buy penny stocks.
|
| Everyone is so fixated on the winners, that they
| completely forget (or aren't even aware) that there a
| many many times more losers.
| Eisenstein wrote:
| I think people understand that there are losers. What
| they are complaining about is that the losers can dump
| $10M on a lotto ticket and not feel any pain when it
| disappears. If all those with money are are placing huge
| long-shot bets and cashing out when they win then what
| does that say about the state of the system, and markets
| in general? I don't know exactly, but I don't think it's
| good.
| SubmarineClub wrote:
| You do realize that basically all those fancy 'exotic
| asset' classes underperform the S&P 500, right?
| hdndjsbbs wrote:
| Why does anyone participate in VC funds or PE at all
| then?
| mschuster91 wrote:
| > I'm not a skeptic of AI/LLMs but this makes me deeply
| suspicious of these circular deals. What happens when the music
| stops?
|
| A financial crash that will make the 2007ff crisis look tame in
| comparison. That is why Anthropic, OpenAI and SpaceX (which xAI
| belongs to) are all going public soon and why NASDAQ bent the
| rules to include them... the current owners all want to raid
| pension savings worldwide [1] to get their payday before the
| bubble inevitably bursts.
|
| And when it bursts, you can bet that the vultures will use
| their fresh cash to buy up assets at fire-sale prices. For the
| truly rich, a boom-bust cycle is only one thing, an opportunity
| to achieve extraordinary profit.
|
| [1] https://news.ycombinator.com/item?id=48369391
| TSiege wrote:
| It's hard for me to see this being bigger than the great
| recession unless there's some vulnerabilities in the banking
| system we're not aware of. However, the amount of money
| that's being spent is going to demand a large return that I'm
| not sure will be made whole given the scale of investment in
| a time frame they want
| mschuster91 wrote:
| > It's hard for me to see this being bigger than the great
| recession unless there's some vulnerabilities in the
| banking system we're not aware of.
|
| The scenario I see is write-offs. At the moment there are
| hundreds of billions in IOUs being passed around, much more
| in liabilities than Lehman had back then in 2007.
| Compounding that is the frankly insane valuation - it's as
| clear as day that at least one of the major AI shops will
| go bust, they all run at a (huge) loss and sooner or later,
| one of them will run out of cash before achieving market
| dominance.
|
| Unfortunately, OpenAI and Anthropic are valued at almost 1
| trillion $ - backed by _nothing_ but the hope on the winner
| surviving and achieving the classic VC-backed near-
| monopoly. The staff can be poached, they don 't hold much
| in IP like patents, the servers and GPUs are mostly owned
| by third parties like AWS, Microsoft, Google or Oracle -
| once the cash runs out, they can't sell any assets for even
| some runway extension because there are no assets. Even the
| model weights and training data aren't worth much - all
| competitors already have training data sets of their own,
| it does not make sense to acquire further data, and model
| weights are being rendered obsolete by the constant churn
| of open-weight models particularly from China.
|
| SpaceX is valued even higher, but unlike the other two
| candidates, they still at least got a viable business even
| if the entire AI BS bubble collapses, Starlink is a money
| printer and there's no alternative in sight that matches
| SpaceX and their reusable rockets.
|
| Now, if either of the three even experiences a large drop
| in valuation for whatever reason, it's not just experienced
| VCs that can readily afford (and expect) investments to
| fail, but this time _a lot_ of "everyday" investment
| vehicles (such as pension funds) will have to issue write-
| off losses, and now that they are publicly traded, that may
| also trigger stop-loss cascade orders further dropping
| prices, and retail investors will probably join in on the
| mass panic. That's the #1 risk IMHO.
|
| The #2 risk is that after a collapse, the service providers
| (i.e. the ones owning the servers) will be sitting on a ton
| of hardware that has nowhere near recouped its cost. AWS,
| MS and Google can probably repurpose most of the hardware
| for their own use and rent out what remains, but they will
| have to eat significant accounting losses, provoking again
| a drop in their stock price, but this time with even more
| blast radius as all three of them are established stock
| index (and thus ETF) members that a looooot of people have
| exposure to. But someone like Oracle? They might actually
| get fried for good.
|
| And the #3 risk is further downstream, particularly
| relating to NVDA. They have enjoyed _years_ of insane
| profits because they are the only ones making high-
| performance AI chips. When demand for new chips collapses
| due to the event(s) I just described, they can easily shift
| their TSMC production slots back to GPU wafers and sell
| these to gamers - but at a far lower profit than before,
| which again can trigger stock price drops and write-offs.
|
| I won't go further downstream - TSMC and their suppliers
| are IMHO pretty safe because there is just so much pent up
| demand from everything not AI, and the construction
| companies building datacenters don't have too much of a
| blast radius when the big guns stop expansion projects.
|
| The concrete scenario I'm really, really afraid of: all
| three succeed with their IPOs, maybe they all survive a
| year and get included even in S&P 500. The existing
| shareholders and insiders all slowly dump a lot of their
| vested stock onto the public market, which in cleartext
| means into the dozens of billions of $ of retirement
| contributions. One day, the bubble bursts for whatever
| reason. The stock markets drop in a panic sell-off, either
| triggered by stop-loss orders or because retail investors
| are a herd of sheeple (just like in the 1st covid
| lockdown). Eventually, circuit breakers on the stock
| markets will trigger (just like they did in the GME post-
| apes collapse) and trading will pause, but it will resume
| until the markets have adjusted to the new valuation... and
| once the dust clears up, there will be a lot of blood on
| the floor. Possibly even riots, depending just how much
| retirement assets just got wiped out.
| treis wrote:
| 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.
| stefan_ wrote:
| Data center operators are in the business of selling
| electricity. They do not command large PE multiples. This is
| an even worse business, because xAI decided to also be the
| bagholder for the NVIDIA graphic cards. Not to mention they
| finance an unreasonable number of 20-somethings on way too
| large salaries with shitty opinions and no AGI delivered.
| chatmasta wrote:
| Datacenter operators who rent space are selling
| electricity. SpaceX is selling a fully built datacenter
| with compute designed for a specific purpose. They're
| operating at a higher level of the value chain and can
| charge accordingly.
| SecretDreams wrote:
| What's their novelty or moat to maintain the value chain?
| And why do we only see google, who already owns it,
| raising their hand to rent at these prices?
| Brybry wrote:
| Anthropic is also paying $1.25 billion a month for xAI
| datacenter compute (though Google does own ~14%? of
| Anthropic too).
|
| [1] https://www.businessinsider.com/spacex-ipo-anthropic-
| paying-...
|
| [2] https://www.nytimes.com/2025/03/11/technology/google-
| investm...
| SecretDreams wrote:
| I'm not a big fan of this level of circular financing and
| ownership. The transparency is severely obscured.
| chatmasta wrote:
| I'm not sure they need novelty or moat. AI compute
| resources are so scarce that inference providers will buy
| whatever is available. SpaceX sells inference hardware in
| bulk, with a proven track record of running inference and
| training workloads at scale.
| mlyle wrote:
| Without a moat, P settles to MC. No one makes significant
| profit.
| chatmasta wrote:
| xAI covers their cost of N-1 datacenter while running
| their own models in N and building out N+1.
| SecretDreams wrote:
| And they make all of their money from the N-1 data center
| they are renting which is sand moat.
|
| What point are you making?
| chatmasta wrote:
| What? They make money from their own inference and models
| too, which they can train effectively for free by funding
| their operations with rental income from their last gen
| datacenter.
| ralph84 wrote:
| SpaceX and Tesla used aggressive vertical integration,
| manufacturing simplification, and reuse to radically
| lower the cost of building rockets and EVs. It's not
| unreasonable to speculate they might be able to do the
| same for hyperscale compute.
| treis wrote:
| They're not any sort of bag holder. They're going to make
| back what they spent on these data centers in a year.
|
| It's a fairly sweet deal for everyone involved.
| Anthropic/Google get to sell more tokens and xAI gets a war
| chest for another bite at the apple. I don't have much
| confidence that they'll do anything with it but that
| doesn't mean these deals don't make sense for them.
| skybrian wrote:
| I thought it was mostly capital costs (chips), not
| operating costs (electricity).
| jtbayly wrote:
| There is a footnote in the article does the math. It
| concludes, "power is no more than about 1% of revenue."
| _alternator_ wrote:
| This take clearly has a bone to pick. But ignoring that,
| the first sentence is just not reflective of the reality
| here--xAI is making a killing on renting out its GPUs, way
| more than "just power". The dynamics that normally make
| infrastructure providers have slim margins don't apply when
| demand far outstrips supply; the situation right now is
| closer to monopoly pricing power.
|
| It will likely take a few years for supply to fully catch
| up, which means xAI will eat well for a while.
|
| I can see a world where a few data centers come on line
| this year and reduce margins a bit, but it's crazy to think
| the margins will go to "cost of electricity plus a few
| percent" anytime soon.
| alpha_squared wrote:
| > 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.
| PixyMisa wrote:
| In the article, it states that the two deals will cover
| the entire cost of SpaceX's AI buildout in 18 months.
| OpenAI and Anthropic would kill for that kind of
| cashflow.
| SecretDreams wrote:
| 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 in the American Northwest. In March 2000,
| its stock price reached $1,305 per share, but by 2002 the
| price had declined to $2.
|
| > Broadcast.com: A streaming media website that was acquired
| by Yahoo! for $5.9 billion in stock, making Mark Cuban and
| Todd Wagner multi-billionaires. The site is now defunct.
|
| > eToys.com: An online toy retailer whose stock price hit a
| high of $84.35 per share in October 1999. In February 2001,
| it filed for bankruptcy with $247 million in debt. It was
| acquired by KB Toys, which later also filed for bankruptcy.
|
| > GeoCities: Founded by David Bohnett, it was acquired by
| Yahoo! for $3.57 billion in January 1999[20] and was shut
| down in 2009.
|
| > MicroStrategy: After rising from $7 to as high as $333 in a
| year, its shares lost $140, or 62%, on March 20, 2000,
| following the announcement of a financial restatement for the
| previous two years by founder Michael J. Saylor.
|
| ** Some scams transcend time **
|
| Great link: https://en.wikipedia.org/wiki/List_of_companies_a
| ffected_by_...
| dluxem wrote:
| I am of the same mindset as you, but you also have to look
| at PE multiples of Cisco in 1999 and Nvidia today. One
| being the "ammunition" supplier in the battle for the
| Internet, and the other supplier in the battle for AI.
|
| Cisco was over 400 at one point and Nvidia is around 30.
| Not quite the same.
|
| Other players today: - Digital Realty 48x - Equinix 75x -
| CoreWeave (still losing money)
|
| There is likely a bubble of some type here, but I don't
| think this is the same as the Dotcom bubble.
| SecretDreams wrote:
| The circular financing aspects in the current era are
| really obscuring some of the financials. There are also
| very legitimate companies offering very real products.
| The big issue today is that things feel a lot more
| obscured and interconnected, which makes it hard to
| discern shit from gold. Does not help when the gold and
| shit are swimming in the same circles and shaking hands
| with all the same people.
| joxdosba wrote:
| Btw how much is MicroStrategy down since the year 2000?
| SecretDreams wrote:
| I was expecting this comment. You know the answer. A scam
| will keep scamming.
|
| There are also legitimate companies from the dotcom
| bubble era like amazon, microsoft, and intel. They all
| were vastly overpriced during the dotcom era. Probably
| also now lol.
| diab0lic wrote:
| 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.
| SlinkyOnStairs wrote:
| > the big providers are charging full freight for inference.
|
| Except they're not. Anthropic's claims of temporary
| profitability line up exactly with when SpaceX is giving them
| discounted compute, OpenAI's such a shitfest they threw the
| CFO off the glass cliff for daring to push back against the
| IPO. "Profitable on inference" is an unsubstantiated rumour.
|
| Just look at the copilot changes. Demand switching to other
| providers immediately when prices rise, and there's not even
| certainty that the new copilot prices cover costs.
|
| > They might not make back the money from training
|
| This is an understatement. With all the datacenter buildout,
| they need trillions. For the investors get their money back
| and the bubble to not implode, they functionally need to
| unemploy everyone in the US.
|
| If the AI dream is real, society just breaks.
| simonw wrote:
| > "Profitable on inference" is an unsubstantiated rumour.
|
| So is "unprofitable on inference".
|
| Thankfully we should find out for real as soon as those S-1
| documents arrive.
| davedx wrote:
| Don't count on it. They might not break out inference
| from training.
| treis wrote:
| The pricing on Open router is clear. Anthropic, OpenAI, and
| Google all garner a massive premium over deepseek and qwen.
| There's no other realistic explanation except that they're
| making bank.
| bootsmann wrote:
| I can sell the tomatoes in my garden for twice the price
| of those in the supermarket and still make massive loses.
| SlinkyOnStairs wrote:
| > There's no other realistic explanation except that
| they're making bank.
|
| If they were, they'd never shut up about it. Yet they
| keep quiet about the financials.
| treis wrote:
| They don't shut up about it. Profitable on inference has
| been the story for years.
| boarsofcanada wrote:
| And yet they are not profitable on an ongoing basis, and
| aren't even claiming to be.
|
| The supply is currently constrained because 50+% of data
| center plans were cancelled as a result of the
| impossibility of the buildouts happening in a timely
| fashion, and subscriptions are charging a small fraction
| of the actual cost of inference, leading them to all
| bleed money, hence the rush to IPO to get one last
| infusion, since many of the past investors have publicly
| stated they aren't putting any more money in until they
| see an ROI.
| treis wrote:
| They've stopped subscriptions for the most part.
| Companies are paying API rates for their employees.
| boarsofcanada wrote:
| Companies are hitting their budgeted limits for AI tokens
| less than half way through the year and reporting that
| they aren't seeing enough benefit to substantially
| increase that budget, and so they are scaling back use
| and asking people to be prudent rather than token
| maxxing.
|
| In the meantime subscriptions still exist in the form of
| chatbots and it's easy to exceed the inference cost of
| the provider by simply using your daily, weekly, and
| monthly limits.
|
| The reality is that we just don't seem to be at a point
| now where people are willing to pay full price for the
| perceived value. Perhaps we'll get there within another
| generation or two of hardware and software improvements.
| johnsmith1840 wrote:
| Why do you think Chinese companies can do that? It's
| government subsidising price they do it with literally
| every ibdustry.
|
| Home grow a bunch discount them federally, let them wipe
| the foreign markets.
|
| If AI is threatened by china why would US NOT do the
| same? If they did they're in a much stronger position to
| do so than china. Cheaper energy, more cash, stronger
| industries.
|
| Infrastrucure is thr kind of thing that only a foolish US
| admin would let fall apart to their advesary.
| treis wrote:
| It's not all Chinese companies. It's some western
| companies running Chinese models.
| podocarp wrote:
| This is just silly. Deepseek has published so much
| regarding speeding up and making cheaper inference and
| people are still harping on the government subsidies
| thing.
|
| So what's all the project Stargate stuff? Subsidies only
| work when China is doing it?
|
| Deepseek is actively sacrificing performance for cost,
| which is very clear in their latest model releases. They
| are not attempting to get to number 1 in benchmarks, and
| they say it clearly in their own publications.
|
| Furthermore, being open weight, anyone can sell qwen and
| deepseek compute, not just Ali and deepseek themselves.
| icepush wrote:
| Unemploying everyone was what openai described as their
| success condition when it was founded a decade ago. There
| was a q&a on their website that said "How will you know
| when you have reached AGI? When the system performs most or
| all economically valuable work." Lots of people thought
| they were joking, or it was marketing, but they were 100%
| serious from the first.
| WarmWash wrote:
| >For the investors get their money back and the bubble to
| not implode, they functionally need to unemploy everyone in
| the US.
|
| More like $75/mo per user for the next 5-10 years if they
| can get 5% of the global population to pay that.
| alfalfasprout wrote:
| > the big providers are charging full freight for inference
|
| They're not and it's not clear why you seem to believe that.
| The immense capex for buildouts, training costs, etc. are not
| rolled into inference costs. Moreover, companies are already
| rapidly starting to re-evaluate token spend.
| SecretDreams wrote:
| > What happens when the music stops?
|
| That's a problem for your kids to figure out ~ those currently
| getting enriched from these schemes.
| colechristensen wrote:
| >What happens when the music stops?
|
| Bubble bursts, somewhere between 2008 housing crisis and the
| dotcom bust.
|
| Really dependent on if there are any OTHER structural problems
| to compound a fast re-valuation of tech stocks. There's plenty
| of noise about banks holding large amounts of bad private
| credit debt. There could be a lot or only a little collapse.
| There's so much uncertainty and the combination of war, high
| oil prices, and uncertainty about tarriffs that the market
| struggles to value anything as international fear drives
| investment into the US and high prices confusing whether growth
| is growth or just inflation.
|
| Definitive peace in Iran combined with some sort of sobering AI
| news signaling the end to the infinite growth party could crush
| the markets.
| ToucanLoucan wrote:
| The post-information age has never felt so well-named as it
| does lately. Investors dumping billions into completely
| unproven and, largely, undesired tech. Why? Because the
| Valley doesn't have anything else to sell, seemingly.
|
| Either way, as always, we'll do it the American Way:
| Privatize the profits, socialize the losses.
| colechristensen wrote:
| >The post-information age has never felt so well-named as
| it does lately. Investors dumping billions into completely
| unproven and, largely, undesired tech. Why?
|
| Eh. There's too much money. Covid response involved
| printing a lot of money and it all ended up somewhere. The
| chaos of the current administration has made everything
| considerably harder to price and the coincidental rise of
| the LLM has put us in strange situation that is
| legitimately difficult to price things correctly.
| SlinkyOnStairs wrote:
| > There's plenty of noise about banks holding large amounts
| of bad private credit debt.
|
| This is still only big enough to cause funny banking
| collapses not actual 2008 scale financial disasters. Banks
| hold a lot of bad debt, but it's isolated from consumer
| accounts. Might not want to hold equity in SoftBank though.
|
| > There's so much uncertainty and the combination of war,
| high oil prices, and uncertainty about tarriffs that the
| market struggles to value anything as international fear
| drives investment into the US and high prices confusing
| whether growth is growth or just inflation.
|
| The big concern lies in what the Trump admin will do. Things
| could end up merely a bad recession, like the Dotcom and
| Telecom bubble.
|
| Or they can attempt to keep the bubble going once it
| collapses, crashing interest rates, and doom the US economy.
| Ekaros wrote:
| On other hand private corporate credit freezing might take
| down lot of business that need credit lines to operate
| regularly. Even the not so bad zombie companies. Tightening
| up and not being able to revolve credit anymore could lead
| to bankruptcies.
| colechristensen wrote:
| >This is still only big enough to cause funny banking
| collapses not actual 2008 scale financial disasters. Banks
| hold a lot of bad debt, but it's isolated from consumer
| accounts. Might not want to hold equity in SoftBank though.
|
| Banks are lending to these private funds that are packaging
| questionable loans into securities (as opposed to banks
| giving loans or companies issuing bonds). This is the
| post-2008 place for people to get highly leveraged loans
| and they probably need to be better regulated.
|
| But yes it doesn't _seem_ like private credit alone will
| cause problems, the concern I 'm trying to outline is a few
| of these things happening at the same time causing a kind
| of collapse.
|
| TACO uncertainty is strangely propping up asset values as
| there's always a credible thought that whatever is
| happening is pretend or going to be reversed soon. And the
| expectation that the fed isn't independent any more and
| will make decisions to prolong the bubble resulting in a
| bigger crash ambiguously far into the future. Few want to
| start shorting because they have no concept of how long the
| market can stay irrational or if 20% inflation might be
| around the corner instead of a popped bubble.
| ozgrakkurt wrote:
| I don't think current AI is anywhere near the value of
| internet and it will probably not be for decades.
|
| Also the current president of US is Trump and they are in a
| war that is pumping the energy prices.
|
| Why not bigger than dotcom burst?
| ethagnawl wrote:
| > There's plenty of noise about banks holding large amounts
| of bad private credit debt.
|
| This and auto loans. I have NO IDEA how people are affording
| $770 per month car payments _on top of_ $4.50+ per gallon
| gasoline.
| malfist wrote:
| Some of us are paying $770 on a car, but it's an EV.
| gowld wrote:
| Answering that question requires determining how much of the
| valuation is predicated on growth in AI spending from
| Google->xAI, but not counted as a forecasted expense for
| Google, and similar for other deals.
|
| Circular deals aren't bad; what's potentially bad is if those
| deals are misinterpreted by active investores.
| tcp_handshaker wrote:
| The awkward silence at this critical point of this interview...
|
| https://youtu.be/sL9hq7Qj1qc?t=252
|
| shows why the boat is about to go down.
|
| The sci-fi SpaceX S1 talks about asteroid mining and other
| imaginary chimeric stuff like space data centers... while 80 to
| 90 of the case is about AI. But their AI case is like BMW
| bragging about their thriving auto business...while renting all
| their car factories to Toyota.
| appplication wrote:
| It's funny because that is a guy with enough sense to both
| see what is going on and also not short it, because he knows
| that none of this actually matters with regard to stock
| performance for a properly frothy investor class.
| alfalfasprout wrote:
| It's not just that there's a circular deal it's that they're
| prevalent. And worse, with frontier labs IPOing seeking
| astronomical valuations that means a lot of the public is now
| exposed too (even if they don't all get fast-tracked into eg;
| the SP500).
|
| The problem is the valuations assume astronomical growth...
| that is likely impossible for all of them to simultaneously
| achieve. Which means something's got to give.
| nonethewiser wrote:
| What's circular?
| nemomarx wrote:
| Google rents from SpaceX enough to show profitability, so
| that SpaceX can IPO and make googles early shares worth more
| than enough to pay for the renting they're doing.
|
| Great deal for Google but they end up basically just paying
| spacex to pay them back, right?
| irishcoffee wrote:
| 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.
| olyjohn wrote:
| Since when is leasing capacity in a datacenter considered
| investing?
| irishcoffee wrote:
| Why does one lease something? To provide value equal or
| better to the cost, no?
| fwip wrote:
| If I lease an apartment for two years, that's not an
| investment.
| dmix wrote:
| In accounting terms it's not an investment it's an
| operating expense or in your example a personal expense,
| but if you leased a property and operated a business (ie
| an AirBnB for an apartment) it could be considered as
| part of an investment as it's a means to make a profit.
| nemomarx wrote:
| that would be an investment in your own business, not in
| your landlord right?
| dmix wrote:
| The landlords business is the rent, your business goal
| would be making a profit more than the lease. This is
| pretty simple stuff
| phil21 wrote:
| 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.
| nemomarx wrote:
| Buying the 5 percent stake is investing, but is paying
| them to be sure they can IPO normal? It reminds me more
| of Microsoft paying apple or Google paying Firefox or
| something.
| elorant wrote:
| When the music stops we could start buying hardware again at
| rational prices.
| NetOpWibby wrote:
| This is what I'm looking forward to
| ryandrake wrote:
| I can't wait until these datacenters go bust and bulk DDR5
| RAM and GPUs are sold on pallets by the kilogram rather
| than by the gigabyte.
| undersuit wrote:
| So little of that is going to happen.
|
| The DDR5 will be registered DIMMs. The GPUs will be 600W
| paperweights with a custom form factor. Similarly the
| NICs and other PCI-E accelerators. The motherboards also
| adopt custom form factors to fit in racks. The hard
| drives will be using SAS connectors. The flash will be in
| E1.S form factors.
|
| The server CPUs that you want for a home desktop or small
| server, high clock SKUs, will be in high demand.
|
| Any savings for someone willing to build a system from
| second-hand server hardware will be eaten by using
| adapters or sourcing a rack.
|
| I'm not saying you won't be able to make a slightly
| outdated frankenserver with more compute than you need,
| I'm saying that's not going to bring down prices for
| Grandma's machine that she needs working to check on her
| retirement account.
| idiotsecant wrote:
| I dont think so. These entities and the hardware they own
| would be bought for legitimate AI use long before they'd hit
| the open market. AI is very useful, and even profitable at
| the inference level. It's just an open question whether this
| _monumental_ amount of spend for research is worth it.
| xiaoyu2006 wrote:
| These companies are too big to fail. I'm afraid the tax payers
| will be the ultimate consequences bearer.
| tsunamifury wrote:
| The question you should be asking is who prints the money that
| materializes those valuations.
|
| And who gets stuck with the bonds.
| atleastoptimal wrote:
| 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)
| Terr_ wrote:
| That's like saying "nobody is speculating in Enron stock"
| simply because there was electrical power that was sold for
| real revenue and consumed.
| atleastoptimal wrote:
| 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?
| suggala wrote:
| Circular dealing or round tripping is a form of cooking
| books and sometimes results in accounting fraud.
| Especially when circular revenue is booked without cash
| flow growth. Do you see cash flow growth on any side of
| these transactions.
| Terr_ wrote:
| Please address the primary point first: Selling some
| product does _not_ disprove speculation.
|
| In the case of Enron, people were obviously speculating
| in its stock, and that remains true regardless of _why_
| it collapsed later, or even _whether_ it collapsed at
| all.
|
| I say "first" because if you still can't agree that
| speculation in AI stocks _even exists_ , then it's
| pointless to discuss what people might be doing to
| exploit or encourage it.
| atleastoptimal wrote:
| Speculation exists for every security. However wrt
| revenue numbers, Anthropic/OpenAI's revenues are largely
| made of companies/individuals purchasing tokens. Enron's
| was accounting which stated future potential revenue as
| current earnings. They are not the same. Enron pulled off
| a lot of shady schemes to hide their accounting
| practices. All of the "circular deals" AI labs are doing
| are publicly known and clear to see, so its not like
| anyone who knows what a circular deal simply knows
| something everyone doesn't.
|
| Also to be more specific about our point of disagreement,
| I think we are referring to speculation in different
| domains. When I brought it up, I am referring to the fact
| that any companies whose _revenue_ is driven by a
| speculative bubble (like what precipitated the 2008
| crisis) would be at risk of massive losses "if the music
| stops". Anthropic/OpenAI aren't flipping assets. It is
| true that VC funding is based on speculation, but their
| core business model is producing massive revenue growth
| on selling tokens.
| fc417fc802 wrote:
| It's an interesting point that the token revenue will
| presumably survive a crash in stock prices. But (IIUC)
| much of the new infrastructure is funded using stock is
| it not? So it seems like token revenue theoretically
| surviving doesn't address the risk to the rest of the
| economy here. And if the economy takes a large enough hit
| then presumably so will token spend because someone has
| to pay for that after all.
|
| Sure their actual immediate revenue is driven by concrete
| numbers but when the rest of the economy is reorganizing
| itself based on their projected future revenue is the
| former observation still relevant?
| atleastoptimal wrote:
| That is true, if all the new data centers don't produce
| revenue then there will be a crash. However you'd have to
| bet that the models won't stop getting better, or if they
| still keep getting better, that somehow better models
| does not translate to increased productivity. Would it be
| wise to look at how AI has progressed over the last 5
| years and make that bet?
| fc417fc802 wrote:
| It's possible to question the accuracy of the projections
| without disputing that the numbers are expected to go up.
| It's not that the new data centers wouldn't produce _any_
| revenue but rather that those numbers are where unfounded
| speculation could be happening. If and when those numbers
| fail to materialize (or when investors revise their
| projections) would presumably be the point at which the
| music stops.
|
| Recall that the exchange earlier called into question the
| similarity or difference to enron. Sure, the current
| revenue numbers don't appear to be cooked but if the
| future revenue numbers are unrealistic and everyone is
| using those future numbers to make their decisions then
| isn't the end result roughly analogous? Blatant fraud not
| withstanding of course.
|
| Note that I'm not claiming the above to be the case.
| Merely illustrating the commonality and acknowledging the
| possibility.
| minraws wrote:
| 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 subscriptions are definitely
| being sold at a loss how big I don't know but these
| models are much harder to run.
|
| API is definitely being sold at a decent profit.
|
| So if you rate limit users and do usage billing + lower
| research costs which is a money pit temporarily.
|
| (Proof is the fact that we don't have a new pre training
| run since 4.5 yet, they used to do one every 2 releases)
|
| 4.9 will probably be the same.
|
| Next model Mythos doesn't seem to have a successor yet
| and was trained previous quarter most likely, they don't
| seem to have pre trained another one just improved Mythos
| if at all.
|
| As much as I am into AI these attempts to show that there
| can be a profitable quarter seem like cooking the books,
| even if we assume no shady dealings otherwise.
|
| Unless one of the Labs can say for certain training is
| going to stop they can't be profitable and I don't think
| training can stop because marginal gains is all they
| have.
|
| 8-12 months behind narrative for Chinese labs literally
| is going to kill the company that stops training first.
|
| If we assume only a 3-6 month gap once China has more
| compute, then well then even if they keep training the
| lack of ability to arbitarily scale data centers in US,
| will kill them first.
|
| DeepSeek V5 might actually just end the AI race for good.
|
| Also given Mythos is atleast a 10x model compared to
| Opus, then it's pricing is likely going to be 10x as well
| so well token prices are likely never coming down,
| especially if these companies want to IPO.
| atleastoptimal wrote:
| Why would V5 kill the AI race? Do you believe that there
| are diminishing returns on model intelligence when
| applied to real-world tasks?
|
| I think there are accelerating returns: i.e. a models are
| still not good enough to be "drop in" remote workers, but
| once that threshold is passed, the value of each token of
| inference has a far higher multiplier.
|
| This justifies the buildup. However not everyone agrees
| that model intelligence will continue scaling thus they
| assert that eventually the economics will hit a wall.
|
| >Also given Mythos is atleast a 10x model compared to
| Opus, then it's pricing is likely going to be 10x as well
| so well token prices are likely never coming down,
| especially if these companies want to IPO.
|
| I don't know why people say this when cost per unit of
| intelligence has been going down continuously over the
| past few years. When Opus 3 was first released, its API
| cost was $15.00 per million input tokens and $75.00 per
| million output tokens. Opus 4.8. which is significantly
| better, is $5.00 per 1 million input tokens and $25.00
| per 1 million output tokens
| supern0va wrote:
| >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 the biggest driver of enterprise adoption is
| accelerating, and it's tied to their biggest profit
| vector, you find it suspect that their profits are
| increasing significantly?
|
| Also, can you clarify what you mean by "slowing down
| research" exactly? Do you mean they're not doing big
| pretraining runs? Less compute available for researchers?
| Scaled back RL?
|
| >Also just to confirm, AI subscriptions are definitely
| being sold at a loss how big I don't know but these
| models are much harder to run.
|
| Maximum usage of AI subscriptions is a loss, but do we
| actually know how that nets out? Has anyone done any
| research to try to figure that out?
| fc417fc802 wrote:
| > 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).
| zamalek wrote:
| > 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.
| bigbuppo wrote:
| Remember when nvidia asked us to stop calling them enron
| because unlike enron they actually admit to doing all the
| things enron did so it's not illegal?
| mohamedkoubaa wrote:
| 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?
| crystal_revenge wrote:
| It's not interesting to say "this is a bubble!" I've heard
| that about virtually everything (and in many cases it's
| likely true). What _is_ interesting is pointing out the
| mechanics that make the bubble pop.
|
| This is precisely what makes the movie the Big Short
| interesting: we see that people did identify, within a
| reasonable time frame, when people would start defaulting and
| how that would cascade into a true crisis.
|
| It's pretty clear that while the fruits of AI are quite
| useful, the entire thing is rife with very questionable
| financial engineering... but I still don't know what it is
| that makes all of this break. For example, it's obvious that
| the SpaceX IPO is a massive wealth transfer program, but it's
| not obvious that it will immediately end in a crash. Given
| how irrational the stock market has been, I don't see a
| reason it can't continue to be irrational for long after the
| bag has been handed over to the retail investors and
| retirement funds.
| PixyMisa wrote:
| Also, SpaceX is a rocket and communications company with a
| secondary AI play, where Anthropic and OpenAI are pure AI
| companies.
|
| And it is far and away the world leader in satellite launch
| capacity and satellite internet.
|
| Does that justify the massive valuation? Probably not. But
| it's a factor.
| noncoml wrote:
| If you sum the valuations of the company from its
| individual parts, no one sane would value it more than
| half a billion. But look at TSLA a P/E still at 370.
|
| Who is the smart and who is the idiot?
|
| The one who invested in it $40 or the one who was saying
| that even at $40 it was already too expensive?
| rvz wrote:
| A bubble waiting to burst.
| sedawkgrep wrote:
| Elon?
| weregiraffe wrote:
| It's a new paradigm, duh!
| bko wrote:
| 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.
| jklinger410 wrote:
| > 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
| oblio wrote:
| > I think everyone is reading way too much into this. Sure
| there is some circular transactions that are sus, but this
| ain't it.
|
| Alphabet/Google profits:
|
| Q1 2025: $34.54 billion
|
| Q2 2025: $28.20 billion
|
| Q3 2025: $34.98 billion
|
| Q4 2025: $34.46 billion
|
| <<Q1 2026: $62.58 billion>>
|
| Amazon profits:
|
| Q1 2025: $17.1 billion
|
| Q2 2025: $18.16 billion
|
| Q3 2025: $21.2 billion
|
| Q4 2025: $21.19 billion
|
| <<Q1 2026: $30.3 billion>>
|
| Both Alphabet/Google and Amazon have invested recently into
| Anthropic and are doing all sorts of financial chicanery.
|
| https://www.youtube.com/watch?v=-bjNrGFiAI4
|
| Nah, man, it's all fine, they're just going to take down the
| entire global financial system doing this crap, and by
| global, I mean <<everyone's>> pensions are going to take a
| hit, even "fully funded" pension systems.
| JumpCrisscross wrote:
| > _Both Alphabet /Google and Amazon have invested recently
| into Anthropic and are doing all sorts of financial
| chicanery_
|
| bko didn't say there isn't circular financing going on.
| They're just saying _this_ isn't an example of it. They're
| right.
|
| It's a potential conflict of interest. And if the agreement
| is fake--if Google cancels without paying the cash--it
| could be market manipulation. But the influencer space
| likes to latch onto jargon, and the one it's overapplying
| right now is circular financing.
| oblio wrote:
| Did I say it was circular financing? I said "financial
| chicanery". I even included a link to a video explaining
| said financial chicanery.
|
| What are you even going on about?
| JumpCrisscross wrote:
| The comment you're responding to and the comment above it
| are about circular financing. It's reasonably to assume
| that's the same chicanery you're talking about; expecting
| everyone to watch a random video to understand your
| comment is unreasonable.
| oblio wrote:
| I listed a bunch of data points that make no sense
| (profits spiking 50% in a non-Christmas quarter for
| companies) and weren't directly tied[1] to the circular
| financing.
|
| [1] They're indirectly tied to it.
| JumpCrisscross wrote:
| > _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
| up being positive due to tax effects.) It's a risk
| factor, of course, but far from making no sense.
|
| None of which is particularly relevant to the deal at
| hand other than in raising a potential conflict of
| interest among related parties.
| oblio wrote:
| > 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 laws are written in blood (or massive
| bankruptcies).
| tootie wrote:
| Compute is presently in shortage but generally it's a
| commodity. It also depreciates.
| JumpCrisscross wrote:
| > _generally it 's a commodity_
|
| The NVIDIA GPUs, HBM, land-use permits and power-supply
| agreements xAI nailed down are absolutely not commodities.
|
| I think xAI is a mess. But let's call a spade a spade, they
| speculated on AI compute and they are currently right.
| fc417fc802 wrote:
| > and power-supply agreements
|
| Don't you mean gas turbine purchases and questionably
| legal operation? But yeah I feel exactly the same way.
| The AI part of xAI looks like a mess but it seems that
| they still managed to score a massive win.
| JumpCrisscross wrote:
| > _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.
| XorNot wrote:
| The point is they're in a business no one would claim is
| particularly profitable but claiming a valuation like
| they're in a totally different business - one where
| they're not even top 3.
|
| Its not that there isn't value in that business, but it's
| not the AI business either. Its the one where Oracle is
| laying off staff to try and avoid a revenue crash on
| future commitments.
|
| Both Google and Anthropic would be trying to can this
| sort of rental arrangement as fast as possible since it's
| a mind bogglingly expensive way to get something you
| already do in house.
| fc417fc802 wrote:
| It isn't _normally_ particularly profitable but given
| their lucky timing they appear to temporarily be doing
| quite well. When their tenants eventually vacate either
| they make a move to reenter the race for the cutting edge
| and get lucky or else they revert to a "boring" cloud
| rental business with near cutting edge hardware. That
| seems like an extremely favorable mode of failure to me.
| BoorishBears wrote:
| 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 waited to get permanent
| power.
| hn_acc1 wrote:
| Sure, they brought in artillery and a small freelance
| militia to shoot at the unionized workers, but the point
| is, the survivors are back working the mines...
| BoorishBears wrote:
| This feels highly revisionist: they bet on becoming a
| frontier lab and were aiming for AGI.
|
| If they were speculating on compute, it seems highly
| unlikely they'd have spent the operating costs for the
| last 3 years of model development and deployment instead
| of just getting even more compute.
| grogers wrote:
| My read is that xAI built a lot of compute for their own
| use, but they didn't get any adoption so they are
| reselling the unused capacity to recoup at least some of
| the costs. So calling it a good bet is kind of misleading
| mirekrusin wrote:
| "Some" of the cost? More like 120%-200% recovery during
| shortage and it's still going to be an asset after that
| period.
| b112 wrote:
| Indeed, that hardware was bought on old RAM, SSD, etc
| pricing. These are now 5x the price.
|
| To reap massive profits before depreciation is just plain
| smart. LLM space, model generation is just plain crowded now
| too. And everyone thinks a crash is coming.
|
| They could also build out their own end-user infra, but
| letting someone else which already sells direct to the public
| do so, is sensible.
|
| I know of the desire to show profit for the IPO, but my point
| is, this is a good move on its own.
| jhallenworld wrote:
| >There are no dark GPUs
|
| This might not be true. Someone was comparing Nvidia's
| production rate with known data center capacity, and they do
| not match. Their conclusion was that people (possibly even
| Nvidia) were hoarding GPUs- in the very short term this might
| be a good strategy, but GPUs go EOL fast. There are other
| stories about paused datacenter builds that match with this.
|
| TSMC is definitely fully allocated, based on current 40 wk
| lead times for FPGAs..
| Dig1t wrote:
| 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 specifically
| NOT happening in the case of GPUs yet, indicating that
| demand still outstrips supply of compute.
|
| >GPUs go EOL fast
|
| We are seeing the opposite of what was expected, GPUs are
| actually getting more valuable because demand is so great,
| something that basically never happens. Even older chips
| have become more valuable.
|
| >paused datacenter builds
|
| It doesn't seem that datacenters have been paused because
| of lack of demand for AI, it seems mostly that there is a
| lot of pushback by cities to build these things and also
| there is a shortage of power to run them.
|
| IMO none of these things point to a AI being a bubble
| (over-hyped, demand does not match the stated value). It
| mostly points to the opposite, there is massive demand for
| AI and every layer of the supply chain is struggling to
| keep up with that demand.
| hadlock wrote:
| 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 fiber bundle the size of
| your pinkie, they ran 3 x 1024 bundles the size of your
| arm through the hollow bridges that span I-5 freeway and
| snakes through Seattle underground. Almost all of that
| sits dark today despite being in a very busy area, simply
| because fiber technology keeps getting better.
| db48x wrote:
| 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!
| podocarp wrote:
| Can I ask where do you stay? Korea? 50G is insane, is it
| on qsfp? Also what's the pricing on that?
| snypher wrote:
| 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.
| aprdm wrote:
| 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.
| LearnYouALisp wrote:
| > ...GPUs are actually getting more valuable because
| demand is so great, something that basically never
| happens. Even older chips have become more valuable.
|
| Huh, anybody want to buy a GTX 680? Or even a formerly-
| SLI'd pair?
| baq wrote:
| > IMO none of these things point to a AI being a bubble
| (over-hyped, demand does not match the stated value).
|
| I agree the demand is there, but hyperscaler capex is
| what now? 3% GDP? This is an absurd amount of money and
| people who question whether the ROI is there have a point
| just because of the order of magnitude of this spend
| number.
| adjejmxbdjdn wrote:
| 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 massive amounts of energy, and those cars do
| maintain decent value even after they're of little use to the
| car rental company, unlike the compute here.
| BoorishBears wrote:
| 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 high prices, they're also
| pricing out competition from cheaper models. It's already
| become materially more difficult to get compute to run open
| weight models at competitive prices as a result of frontier
| labs in the last year.
| enos_feedler wrote:
| There is zero evidence of this shift in pricing
| occurring. It's still a dream which seems unlikely
| dylan604 wrote:
| It feels like this is the line people are using to
| justify the expense of compute capex
| otterley wrote:
| The fact that you can sell or lease out something for
| more than you bought it for is justification in and of
| itself.
| adgjlsfhk1 wrote:
| Not necessarily. The GPU leases Spacex has made are month
| to month, so they are taking on all of the risk. If
| demand goes down, they're the ones stuck with the assets.
| BoorishBears wrote:
| I run a consumer AI product and the current reality of
| trying to get compute vs what it was 6-12 months ago is
| enough to justify it to anyone who has the money.
|
| I think OpenClaw created a mania that was completely
| unfounded (Apple Silicon is worth dirt compared to
| literally anything from NVIDIA including consumer GPUs),
| but the prediction of compute becoming scarce was correct
| BoorishBears wrote:
| News to me?
|
| Opus 4.7 has all the signs of a smaller model distilled
| from a newer pretraining run... except a smaller price.
|
| Flash 3.5 raised in price pretty meaningfully over Flash
| 3
|
| GPT 5.4 got a small price bump over
| gpt-5.3-Codex/gpt-5.2, then gpt-5.5 _doubled_ pricing
| over gpt-5.4
|
| Even open weights isn't immune: Kimi K2.6 was originally
| priced higher despite openly being 2.5 + more post-
| training, same with GLM 5.1 vs 5
|
| -
|
| All while rental prices are spiking month over month, and
| NVIDIA Inception discounted prices for buying are higher
| than undiscounted prices for buying 6 months ago...
| koolala wrote:
| Dream? It is a nightmare that computers aren't getting
| significantly more efficient anymore.
| shdh wrote:
| 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.
| noosphr wrote:
| 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.
| shdh wrote:
| Fundamentals dictate hardware is a depreciating asset,
| they're not wrong. They're just ignoring the reality of
| the current market.
| noosphr wrote:
| 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.
| codechicago277 wrote:
| GPUs do have a life expectancy. They don't run forever,
| especially at high temperatures and full utilization.
| noosphr wrote:
| You undervolt them because the last 50% of power adss 10%
| of compute.
| baq wrote:
| 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 hardware longevity
| (otherwise they'd buy instead of rent).
| fragmede wrote:
| Performance goes way up if you use liquid nitrogen to
| cool the chips. Maybe finally someone's willing to pay
| for that.
| snypher wrote:
| Yes, toilet paper and N95s were expensive and hard to buy
| once, which is why I stockpiled a lifetime supply of
| them. Suckers!
| dpark wrote:
| "Graph go up to the right. Graph stop at edge of paper.
| Must go up forever!"
| iririririr wrote:
| everything* is 3x more expensive in the same amount of
| time though. that's inflation mostly.
|
| * except ram
| mlyle wrote:
| Will it continue to appreciate to infinity? Maintain its
| value forever? Or will something else happen?
|
| The same argument you've made would work for tulip bulbs,
| dotcom prices, or whatever. Prices go up until they
| don't. Exponentials don't last forever and the intrinsics
| of technology assets depreciate: things wear out and are
| also replaced with better things.
| iririririr wrote:
| 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!
| nl wrote:
| > 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 (!!)
| RealityVoid wrote:
| > That's the default assumption but in the new GPU+Memory
| constrained age isn't true.
|
| Is it an age or a temporary situation?
| frognumber wrote:
| 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
| < cost of human being doing the same work, what rational
| reason is there to employ a human being?
|
| 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 progress in models,
| and of the tooling around them:
|
| - Plateau: Old silicon obsoletes in due course
|
| - Rise quickly: Old silicon maintains value for a long
| time
| paulhebert wrote:
| > 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?
| fluidcruft wrote:
| What I don't understand is if nobody has jobs, who's
| paying the machines to do anything?
|
| So okay cool you don't need people to design and build
| cars. Who's going to buy the cars and where exactly are
| they finding money?
|
| But see also the "radiologists driving to work" meme for
| why I think tech in general is currently getting high off
| their own farts.
| mikepurvis wrote:
| 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?
| baq wrote:
| Everything is a temporary situation on long enough
| timeframes, especially if it's exponentially growing.
| Moore's law which dictates that compute depreciates
| quickly has been slowing down a lot in the last few
| years, coupled with the explosion in demand we've found
| ourselves in a prolonged shortage situation. The bubble
| will pop, but if you predict when correctly, you will be
| a rich man.
| latchkey wrote:
| "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.
| scionaura wrote:
| it's more like if you were to value Hertz as if they were a
| self-driving car company, only to find they're a car rental
| company
| Spooky23 wrote:
| xAI lets companies like Google move fast and hurt people at
| arms length.
|
| Google itself has a good reputation as a facilities operator.
| SpaceXAI is operating gas turbines emitting exhaust at ground
| level.
| seltzered_ wrote:
| Google has also tried to hide things like water consumption
| data, see:
|
| - https://cloud.sustainability.watch/explore-
| issues/example-go...
|
| - https://www.sfgate.com/national-parks/article/mount-hood-
| wat...
|
| They also seemingly dropped their net-zero climate goal:
|
| https://www.tomshardware.com/tech-industry/google-quietly-
| re...
| AtlasBarfed wrote:
| 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.
| podocarp wrote:
| Source for capital drying up in one year? Not trying to be
| snarky but that's super big if true.
| AtlasBarfed wrote:
| - 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
| epsteingpt wrote:
| correct
|
| but it's really bad news for the industry capacity if your
| best option is unproven space datacenters.
| baq wrote:
| > There are no dark GPUs.
|
| There are actually lots of GPUs in storage somewhere waiting
| for data center megawatts to put them in.
| EA-3167 wrote:
| Retail investors are currently being set up to hold that bag,
| and presumably the companies themselves will get government
| bailouts, so the taxpayer gets hit coming and going.
|
| It's not even subtle at this point, what with the attempt at
| S&P rules changes, the insane valuation, the attempt to change
| the trade-through rule, and more.
| redox99 wrote:
| You seem to imply that with this deal their shares are worth
| 88B but without it they're worthless.
|
| It's very hard to know how much the deal actually increases
| SpaceX market cap, but unless Google exits their SpaceX
| position soon it doesn't even make much sense as a circular
| deal.
| Retric wrote:
| 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.
| redox99 wrote:
| 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.
| panopticon wrote:
| > _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.
| redox99 wrote:
| That's a good point
| brikym wrote:
| They're worthless to the S&P 500 which requires four quarters
| of profitability. SpaceX is running at a $5B loss. Google
| 'buys' $10B of compute every year...
| xyst wrote:
| > What happens when the music stops?
|
| Government hands Wall Street another bailout to the tune of
| trillions of dollars. Wall Street executives and hedge funds
| use funds to enrich themselves as usual. Main Street and tax
| payer get fisted again. These massive data centers go bust. Get
| gutted during bankruptcy and foreclosure proceedings Public
| deals with the fallout with no help from government.
| mannanj wrote:
| Someone told me this isn't "fraud". (Was in another one of
| these hacker news thread where a guy called all this Brilliant
| Financial Engineering). How is this not unethical at least, it
| befuddles me.
|
| Maybe we've come to celebrate unethical behavior and its become
| so normalized that we forget to ask ourselves what _should_ be
| allowed.
| mikeryan wrote:
| Google also just announced a new equity raise of $80B. I have
| no idea if doing this via equity vs debt is trying to suck some
| of the wind out of the IPO Market for Anthropic and OpenAI but
| it's going to be interesting to see how the markets deal with
| all the new equity being floated. Someone isn't going to hit
| their raise targets and the later IPOs may be the ones holding
| the bag.
| kccqzy wrote:
| The $80B of equity raise is nothing compared to its previous
| share buyback programs.
| cyanydeez wrote:
| we should all be asking where the downstream ROI suppose to
| come from, because it sure as shit isnt in any of these AI
| endevours.
| bluegatty wrote:
| It's very healthy to be skeptical but there's nothing weird
| specifically about this.
|
| It gets weird when people stop looking at the books and ignore
| the circularity.
|
| It also increase risk by reducing resiliency.
|
| It's also 'cleaner' then the Nvidia style deals with OAI who
| are customers.
|
| 'Google Finance' is investing in a company.
|
| Just so happens that company leases something to Google. Not so
| bad.
|
| Nvidia invests in OAI so that money comes right back as sales
| <- much more conspicuous, looks like 'vendor financing'.
| coliveira wrote:
| 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.
| shitlord wrote:
| When the music stops, this type of trade simply stops being
| profitable. It only works because of SpaceX's insane P/E.
| HoldOnAMinute wrote:
| Technology has a very short life. The difference is that a REIT
| might contain an office buildings that can be used for any
| business, but a data center is filled with carcasses that start
| rotting and stinking from the day of installation.
| skybrian wrote:
| No, that's silly. Chips don't rot like produce. Some components
| will go bad and will need to be replaced. The owner can choose
| how fast to replace them depending on how prices look in a few
| years. The rest of the building (including things like power)
| will still be useful.
| chasd00 wrote:
| i think what op meant is they're instantly out of date.
| You're not going to be able replace every GPU in your
| datacenter on every new release from Nvidia and customers are
| going to go to whoever has the highest performing gear.
| JumpCrisscross wrote:
| > _customers are going to go to whoever has the highest
| performing gear_
|
| This is where we lack data. I'm skeptical of the claim. If
| anything will force retirement of old chips, it will be
| power efficiency, not customers being picky amidst a chip
| shortage.
| joefourier wrote:
| Demand is so high and supply so low customers will go to
| anyone that has any gear, period. Anthropic is paying xAI
| for GPUs from 2022, not the latest Nvidia release.
| megaman821 wrote:
| The idea that the AI data centers would depreciate in just a
| few years is plain wrong. The argument was that new chips would
| be so much more powerful and efficient that it would be cheaper
| to buy and operate the new chips than to just operate the old
| chips. Except that demand is significantly outpacing new chip
| manufacturing, and until it catches up years and years from
| now, the efficiency argument doesn't matter at all.
| LearnYouALisp wrote:
| I was wondering, with the "10k" price tag quoted here for
| some earlier (!) units, how much of that is R&D + cost, and
| how much is just gouging the companies?
| 9cb14c1ec0 wrote:
| So we know what they are renting these GPUs for. I'm really
| curious about the input costs of their power generation. Is there
| actually enough margin in these deals for xAI to cover their
| depreciation cost?
|
| Edit: from the footnotes: > Colossus actually runs largely on its
| own on-site gas turbines, which comes out even cheaper: at a
| simple-cycle heat rate of ~10,000 Btu/kWh and Henry Hub gas at
| ~$3.50/MMBtu, the fuel bill is only around $90mn a year.
|
| OK, that's crazy. How can I get into renting GPUs to
| hyperscalers?
| eqmvii wrote:
| I think the hard part is acquiring the GPUs, first at all, then
| at any reasonable price.
| trenchgun wrote:
| Yes, and then you need to have the datacenter. Do you get a
| permit? How long does it take to build it?
| wongarsu wrote:
| Getting somebody who actually knows how to design and build
| a data center also seems to be a bit of an issue right now
| joquarky wrote:
| Simple solution: just put them in space!
| xnx wrote:
| Same idea expressed by a commenter here 2 days ago:
| https://news.ycombinator.com/item?id=48426082
| aurareturn wrote:
| I'll add that I said xAI seems to be dropping out of the AGI
| race: https://news.ycombinator.com/item?id=48214042
|
| Makes sense. Very difficult to catch OpenAI and Anthropic now
| since their flywheel of generate revenue, use revenue to buy
| more compute, train a smarter model with more compute, made it
| hard to compete.
|
| Being able to supply compute makes more sense for SpaceXAI if
| you can't compete in SOTA LLMs anymore.
| xnx wrote:
| How long until Meta figures this out?
| aurareturn wrote:
| I don't think Meta has to. They have far bigger
| distribution than X.com. I think they'll be able to make
| use of their data centers better than xAI.
| deaton wrote:
| It makes sense. They've long since fallen behind the big 3 in
| quality of their models. There's no good reason at this point to
| keep burning money on Grok rather than making back some of that
| money renting out their Colossus data center.
| hmontazeri wrote:
| > While this doesn't include opex[2] and depreciation, if the
| deals continue for 18 months, xAI recoups all the capex they
| spent and still has many hundreds of MW of GPUs available. With
| the giant compute shortages likely to persist into the medium
| term, even older H100s are likely to be extremely useful even 18
| months out.
|
| if the bubble doesn't burst until then...
| john_strinlai wrote:
| for people, like me, who aren't familiar with the acronym: REIT =
| real estate investment trust
| throwaway5752 wrote:
| xAI is more than half of SpaceX revenue with the Google sublease.
| _SpaceX_ is looking like a datacenter REIT.
|
| Moreover they're leasing compute - the actual infra around it is
| much less important - and how long does anyone expect heavily
| utilized GPUs to run? How likely is SpaceX to be able to re-lease
| this compute capacity? It will be broken down or out of date in
| 2-3 years.
|
| This should be essentially ignored in the long term for SpaceX
| business prospects, and is low margin business that barely
| justifies a 10x _earnings_ multiple let along a 100 revenue
| multiple for the xAI unit.
| trothamel wrote:
| 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.
| 542458 wrote:
| 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.
| rcpt wrote:
| I think the only way it makes sense is if local busybodies
| succeed in banning data centers from the ground.
| Tycho wrote:
| The idea is that eventually the power demand for AI compute
| will be too great to satisfy by terrestrial means.
| JumpCrisscross wrote:
| > _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. 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.
| zoogeny wrote:
| If xAI is a datacenter REIT, it is a special kind that has a
| promise that no other datacenter provider could dream of: LEO
| datacenters. As far-fetched as that may sound, the biggest profit
| center for SpaceX in my understanding was Starlink. xAI already
| has extremely high-bandwidth connections from Earth to LEO
| available. Connecting that to solar powered orbital datacenters
| seems doable in realistic timeframes, especially once Starship
| comes online and gives them a significant boost in launch
| capacity.
|
| If that ends up being viable and profitable, there is no
| realistic competition for decades. In this view, xAI earning a
| reputation as a reliable AI hyperscaler is just another tactic in
| that strategy.
| martinky24 wrote:
| You're hand waving the whole "data center" part away. Comms is
| one thing. That's probably 1% of the challenge.
| zoogeny wrote:
| Sure, but considering the size of the challenge it makes
| sense to figure out the parts that can be studied on the
| surface first. Challenges like procuring, challenges like
| setting up relationships with potential customers. You
| probably want to figure out everything you can so that when
| you move on to the hard part you aren't distracted by the
| rest.
|
| Consider the alternative. SpaceX figures out how to build the
| datacenter in space thing but fails at the rest. That would
| be an expensive mistake.
| LearnYouALisp wrote:
| Cost per pound? Then $/Watts/TFLOPS minus cost per pound?
|
| Out of curiosity (since I basically never saw $/lb mentioned in
| any replies anywhere on this, which is hilarious; like talking
| about having your grain mill at 10,000ft/in the mountains since
| sunlight is better there): Have you ever tried a forSpace
| Program?
|
| (And not only 100mi or more above, they're 17,500 mph faster--
| Mach 22 Datacenters in an oxygen-free, higher-radiation,
| insulated environment with absolutely no resources)
| nonethewiser wrote:
| Weren't we just talking about how SpaceX is valued based on some
| profits from starlink + tons of speculation?
|
| Yet when we learn of this new $26B in yearly revenue (2.2B/month
| from Google and Anthropic)the conversation does not return to
| that discussion. It transforms into:
|
| "xAI's tech sucks"
|
| "Google/SpaceX is Structurally Bad for the Economy"
|
| etc
|
| This is called motivated reasoning. We get new information and
| instead of the obvious thing, updating prior conclusions, we just
| find a different way to react negatively. The negative reaction
| will be achieved. The narrative here is completely polluted by
| people who dislike Elon/SpaceX.
| chris_money202 wrote:
| Think two things can be true at once. They should be using
| their capital to achieve their speculative price. Instead, they
| are using their capital to achieve a modest ROI, thus
| invalidating the speculation AND proving they have tech issues
| in what the speculation is around.
| bpodgursky wrote:
| They are making $24B/yr on datacenters they built in < 2
| years for $2-3B. To call that a "modest ROI" is... quite a
| statement.
| throwaway5752 wrote:
| There is a shortage, they are short lived assets. It's a
| blip and unrelated to their long term profitability and
| valuation. They can't make a long lived business of
| building and renting out compute at those margins.
|
| It was definitely a smart business move. It should be
| troubling to any shareholder than xAI is unable to utilize
| this infrastructure as renting it out to competitors.
| gunapologist99 wrote:
| 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.
| chris_money202 wrote:
| T1 companies have longer depreciation cycles, they have
| customers that will use the dated hw for non-frontier
| work. They can make the capex more justifiable and have
| flexibility to be more creative about its use. A frontier
| lab really needs the best hw available at full capacity.
| throwaway5752 wrote:
| 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 improvements over
| generations.
|
| 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.
|
| I use AI all the time. I hope AI isn't short lived. It
| might be if they can't figure this shit out, or if IPOs
| like spacex poison public opinion against them first.
| phil21 wrote:
| > 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.
| chris_money202 wrote:
| Operating these datacenters is a pretty big cost that isn't
| factored here
| qaq wrote:
| Where did you get 2-3B from? Colosus 2 GPU's alone were 18B
| Total cost including construction, power and water
| treatment facility might be close to 25-30B.
| guywithahat wrote:
| I'm not OP but that was the cost of the initial facility
| if I remember correctly when it was first up and running,
| what you're describing I believe is the full cost after
| all expansions/etc
| adammarples wrote:
| It's right in the article, there were 40bn of disclosed
| costs. It's still a good return, it pays for itself in 18
| months, but if you build and rent data centres, then that's
| your business, and you're not likely to 100x in 3 years,
| which is the wild projection behind their valuation.
| EdwardDiego wrote:
| Also moves spend from capex to opex for your competitors
| - their access to your GPUs so don't have to wait to buy
| so many of their own, and I'm going to take a stab that
| those puppies are going to depreciate hard.
|
| But better to make some money with it while trying to
| catch up than none money hoping you _can_ catch up.
| wmf wrote:
| Elon says Grok models are being trained right now. (Unless I
| missed an update.) For whatever reason these training runs
| are not using xAI's full GPU capacity. Short of a miracle or
| time machine it sounds like there is nothing more they can do
| to advance their mission.
| jmye wrote:
| > he narrative here is completely polluted by people who
| dislike Elon/SpaceX.
|
| Hard disagree. It's polluted by Elon in general (pro and con),
| just like Tesla's idiotic valuation.
|
| But in this case, a pivoted business model fundamentally
| changes the value proposition, and I'm not clear why "this
| space company making money on space things is now pretending to
| be a compute reseller and that's a good thing" is the narrative
| _you_ think is preferable.
|
| It's also beyond lame to essentially subtweet a "narrative"
| instead of responding to it directly. Who is "we", aside from a
| transparently dishonest way to pretend consensus exists?
| emodendroket wrote:
| Well, perhaps, but those concerns seem different enough that it
| seems fairly plausible different people have them. It seems
| hard to argue the basic point that Grok is not as good as its
| competition if you spend time using both. That may or may not
| matter from a business perspective.
| pseudosavant wrote:
| I think the point is, that although at least xAI is monetizing
| their GPUs/datacenters, they are doing so at a REIT/rental
| multiplier instead of a frontier lab multiplier.
|
| Clearly, xAI thinks this is the best way for them to extract
| value out of their assets.
|
| Also, it is clear that Google and Anthropic both think they can
| extract more value out of those assets than they will pay in
| rent to SpaceX.
| EdwardDiego wrote:
| I got approached by a recruiter to directly train Grok on
| coding, so it seems like they're still trying to build a
| model that's better at coding than shitposting at least?
| EdwardDiego wrote:
| I just don't like the clever corporate shell games Musk has
| been playing with his related party businesses to juice
| revenues and keep share prices up - e.g., SpaceX buying $131
| million worth of Cybertrucks from Tesla, or SpaceX buying xAI.
|
| It's clever business perhaps, but it's terrible governance.
|
| But then Musk will always control the majority of voting rights
| in SpaceX, so not like the shareholders are able to vote to
| remove him from the board. Being fair, it's the same share
| structure Zuckerberg uses to retain control over Meta, in case
| I give the impression that I think only Musk is doing this.
|
| Which is why I'd never buy shares in either of them, the
| directors are supposed to act in the best interests of all
| shareholders, and well, if you can't vote on director
| appointments, you can't do anything when they decide to act in
| the best interests of a few shareholders.
| qaq wrote:
| Basically xAI is pulling a Palantir. They try to reposition
| datacenter capacity lease revenue to have a multiplier of fast
| growing frontier lab.
| Nuzzerino wrote:
| Elon is brilliant when it comes to hardware. But unfortunately
| with xAI, he went on a firing spree, PayPal Mafia style, just
| like with Twitter when he bought it, shortly before doing another
| hiring drive, and failing to hire software engineers at scale.
|
| The datacenter deals came after. But now, the man who promised
| the world an AI system that defends free speech and is "pro-
| human", is instead selling to his competitors and lowering the
| daily app usage limits of his own Grok by an order of magnitude
| (really).
|
| If you're dealing with the world's richest man, you can predict
| that money will come before other concerns despite other
| rhetoric. Interesting strategy though!
|
| Edit: To be fair, they did decide that hardware was "the
| bottleneck" according to an interview I saw last year. But I
| firmly believe they underestimated the software problem (and
| their app was/is riddled with them).
| top_sigrid wrote:
| > Elon is brilliant when it comes to hardware.
|
| What shall that even mean?
| cooper_ganglia wrote:
| Tesla, Falcon 9, Starlink, Mechazilla, SolarCity, Colossus,
| Neuralink, Starship, Optimus...
| winfredJa wrote:
| Optimus seriously.
| jayd16 wrote:
| Tesla is the only profitable example in that list?
| tpetry wrote:
| SolarCity pretty much failed. Wasnt there an article
| recently that their projects per year is super low?
| missedthecue wrote:
| Every product adoption success he's had since PayPal has been
| hardware.
| CamperBob2 wrote:
| He didn't go on a firing spree at xAI. A lot of talented people
| who could go anywhere else and work with anyone else in the AI
| field did just that.
| bluegatty wrote:
| Space X is a bet on AI, which is not 'data centre leasing' - it's
| a short term profitability bump and foregoing the entire AI
| dream.
|
| Not a good look.
|
| But the short term numbers may oddly provide the emotive juice
| necessary to fuel the gig "hey, look at their massive revenues!"
| karl_gluck wrote:
| Is this HN user runako's comment[1] from 2 days ago turned into
| an article?
|
| I guess it's very possible multiple people are coming up with the
| same idea at the same time but given this was submitted by the
| author it seems kinda rude not to mention it.
|
| [1] https://news.ycombinator.com/threads?id=runako#48426082
| outside1234 wrote:
| EDIT: A data center REIT where 1/5th of the datacenter falls
| apart each year and needs to be rebuilt _. (aka "not a good REIT
| investment")
|
| _ Because the GPUs go out of date.
| joefourier wrote:
| And yet Anthropic is paying xAI over a billion dollars a month
| for those out of date GPUs in their first datacentre (H100s
| being nearly 4 years old at this point).
|
| Even A100s are still barely available on the major clouds
| despite being 6 years old.
| redox99 wrote:
| And I expect blackwells to hold value even more (already very
| LLM optimized, and semiconductor processes will slow down).
| LearnYouALisp wrote:
| Eye-watering. Who are Anthropic's main consumers?
| maxdo wrote:
| It's a vertical company they did compute very good , their top
| model bounce between top tier and -1 -2 gen. They were top tier
| only once though on paper briefly . If tomorrow thy will hit top
| tier , that do have know how to expand . They can even buy back
| from Google or anthropic if they agree.
| otterley wrote:
| 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.
| georgeburdell wrote:
| Not that my feelings or opinion matter, but I'm going to be
| devastated if this xAI grift takes down SpaceX. I am reminded
| that the 90s Boy Band groups Backstreet Boys and N*SYNC were the
| side projects of a Ponzi Scheme.
| protocolture wrote:
| I hope that Backstreet Boys grift didnt take down the Ponzi
| scheme.
| blactuary wrote:
| Writing this:
|
| > In comparison, SpaceX/xAI are incredible at building
| datacentres on time. The original Colossus 1 datacentre was built
| in 122 days. Musk's empire does have a huge advantage in really
| understanding how to plan, build and execute enormous
| infrastructure projects quickly
|
| Without even mentioning that it was done illegally and the air
| pollution they are creating with gas turbines is wildly
| irresponsible
| notyourwork wrote:
| It's easy when you skirt regulations.
| bobsomers wrote:
| It's easy to deliver things fast when you don't care at all for
| the local communities or residents whose lives you ruin in the
| process.
|
| https://www.youtube.com/watch?v=_bP80DEAbuo (@ 4:08)
| root_axis wrote:
| Interesting that Anthropic doesn't feel that leasing an
| illegally powered data center is a risk to their business
| operations or brand.
| mattas wrote:
| So it's Coreweave?
| credit_guy wrote:
| Sure, but it's very different from a regular datacenter REIT.
| It's supply and demand: a regular datacenter REIT competes with
| tons of other datacenter REITs. xAI has something to offer that
| basically nobody else can: datacenter capacity ready to use for
| LLM inference. When you are a monopoly you can charge exorbitant
| prices. There's no shame in being "just a datacenter REIT" when
| you can charge 10x what it costs you to run that datacenter.
| overgard wrote:
| AFAIK the Colossus data center was more or less "brute force"
| when it comes to building a datacenter fast -- ie it was very
| expensive and they cut some pretty ugly corners (their generators
| are "temporary" to get around regulations, but I don't see how
| they can possibly be "temporary" and they create a massive amount
| of pollution compared to other power sources). The reason I point
| that out is the article mentions that SpaceX is "better" at
| building huge datacenters. I think this might be an overstatement
| -- they're just more willing to throw massive amounts of money
| and bend as many rules as possible.
| frankacter wrote:
| Cheap. Fast. Good. Pick two.
|
| Colossus is the world's largest single, unified GPU cluster,
| all GPUs acting as one coherent supercomputer rather than
| fragmented pools or multi-site setups. They spun it up in a
| fraction of the time by all estimates. It's not something you
| can just throw money at and reproduce the results.
|
| Per Jensen Huang:
|
| "As far as I know, there's only one person in the world who
| could do that; Elon is singular in his understanding of
| engineering and construction and large systems and marshaling
| resources; it's just unbelievable. A supercomputer that you
| would build would take normally three years to plan and then
| they deliver the equipment and it takes one year to get it all
| working."
|
| ..."it took 19 days to get Colossus from hardware installation
| to beginning training, the fastest by far anyone's been able to
| do that."
|
| https://www.businessinsider.com/jensen-huang-elon-musk-super...
|
| Regarding on site generators. Meta, OpenAI (Microsoft/Oracle)
| and others are also using on-site gas turbines, generators, and
| "behind-the-meter" power plants to keep up with the power
| demand. This has become an industry-wide strategy driven by
| grid constraints, with natural gas as a fast-deploy option.
|
| It would be great if the grids could keep up with demand, if
| other options would be considered capable of producing the
| ongoing demands (ie. more renewable, nuclear, etc) but they're
| not, and companies are not going to just wait because then
| they're as good as done.
| JumpCrisscross wrote:
| Yeah, maybe the thing xAI gets is perfect is the enemy of
| good (enough).
| pants2 wrote:
| Colossus took an old manufacturing plant where they made
| rangetops and stoves and turned it into a functioning
| 100,000-GPU datacenter in 122 days. That's a truly insane
| turnaround time!
| noobcoder wrote:
| Makes sense, instead of competing in the never ending race of
| frontier models they go for a different layer which these models
| can run on
| exabrial wrote:
| I'm so confused by conflicting headlines and studies. One set
| says gpus sit idle most of the time, then there are apparent
| capacity problems with Anthropic. So what's the deal?
| throwawaypath wrote:
| Sounds like a sound strategy to actually profit in during the AI
| craze, no?
| hsgwveeheu wrote:
| If it is a craze then no. You want to sell shovels, not buy
| overpriced land during a gold rush.
|
| That said details matter. Can the DCs be reused for other in-
| demand things?
| chopete3 wrote:
| 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.
| epsteingpt wrote:
| I 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
| blindriver wrote:
| There is a lawsuit against xAI about those datacenters. They have
| a strong case that Musk is clearly flouting environmental laws.
| If they are able to get a preliminary injunction against the
| datacenters, then they are dead in the water. That's the only
| reason why they build them so quickly.
| mrcwinn wrote:
| Elon is controversial, and I know the popular mood is to dunk on
| this IPO, but in the end he gets a lot right. I think it's very
| likely the Tesla deal happens, and I further thing that
| regardless what Google and Anthropic do long-term -- SpaceX/Tesla
| will likely have an awful lot of Optimus robots, and those robots
| will need an awful lot of compute. I'd be very surprised if Elon
| lets some frontier lab be the intelligence layer of his robotics
| stack when he has all the raw materials himself. And in fact,
| rather than introduce model COGS, he will have had the frontier
| labs paid for all the CapEx he'll need to run robotic inference
| using his own models.
|
| Pretty smart if that's what happens.
___________________________________________________________________
(page generated 2026-06-09 06:00 UTC)