> 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?
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.
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.
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.
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.
When the music stops, all the AI companies fall, except Google. Google remains the world's largest advertiser and a cloud provider. They actually make money, own their own hardware, etc. They can survive a stock market bust and still come out victorious, because they still have a product people want to buy (ads). The rest don't.
Given all the rules changes related to IPOs that also just went I to effect, I can only assume their hope is that the public is holding the bag when the music stops and that they think it is going to happen quick.
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.
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?
As an investor it's really important for me to see this kind of bearish sentiment widely. It's actually a positive for the stock in my opinion, not a negative.
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.
> 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.
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.
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.
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.
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.
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)
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.
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.
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.
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.
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).
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.
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.
I think the right comparison would be a vertically integrated Neocloud like Oracle (insofar as they own some/most of their own datacenters, unlike a CoreWeave).
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.
> 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
77 comments
[ 2.6 ms ] story [ 64.7 ms ] threadGoogle 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?
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.
Maybe we've come to celebrate unethical behavior and its become so normalized that we forget to ask ourselves what should be allowed.
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'.
"To big to fail" + money printing going brr-r-r-r
When these companies get in to the index and into the pensions, their share price will become a political problem.
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?
if the bubble doesn't burst until then...
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.
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.
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)
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.
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.
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.
Google's parent company owns shares in SpaceX
SpaceX about to do an IPO making it the biggest grift/loss in history
Google's parent company uses Google under the pretext google needs compute (hahha) to prop up their SpaceX investment
It's not more complicated than circular investments on a planetary scale and the shamelessness and greed of everybody involved.
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).
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!"
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
Because the GPUs go out of date.
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.
> 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