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.

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.

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.

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.

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.

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.

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.

> 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.

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.

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.

Operating these datacenters is a pretty big cost that isn't factored here

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 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?

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.

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.

> 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?