4 ms·
Google renting infra from xAI, I did not see that coming. My understanding of what computers are doing, what companies are doing and what governments are doing
by comboy 4mo ago
Google renting infra from xAI, I did not see that coming. My understanding of what computers are doing, what companies are doing and what governments are doing seems to be getting worse day by day.
- ACCount37 4mo agoThey're struggling. The future needs more AI compute. No one has enough AI compute. Memory chip vendors are betting hard on this being a temporary state of affairs that doesn't last, and doesn't warrant commissioning a shitton of new memory foundries. Musk is betting hard on this staying that way, and is putting the next Colossus into the last place not corrupted by NIMBYs... SPACE!
- ajross 4mo ago> Google renting infra from xAI, I did not see that coming. Actually that seems to be fairly logical? Hardware is what xAI has, and it's in great demand. So sell what makes you money. The real story here is that that xAI hardware is going to be running Gemini and not Grok. Which is to say: Grok basically failed as a frontier AI and they need to pivot to a business model which makes money. Obviously not everything Musk did was wrong. xAI bought a ton of compute when it was possible to get it. But the product they were going to build with it failed and so now they're deciding to be a landlord. This IPO is just insane. No way do you justify a $trillion+ valuation based on what amounts to a bunch of commoditized rent seeking endeavors. Datacenters are buildings and chips, and everyone can build those. Starlink is just an ISP with lots of competition at scale (they have the high bandwidth mobile market cornered, but that's a very small market!). Mars is at best a grift on public funding. Even satellite launch services are commoditized and competetive these days.
- zozbot234 4mo ago> Which is to say: Grok basically failed as a frontier AI and they need to pivot to a business model which makes money. They can just run Grok as a local AI inside Tesla cars. It's actually really efficient as a compute platform because the Tesla cars are in motion at highway speeds, which gives you lots of free airflow for shedding waste heat via the car radiator. Way more efficient than trying to run AI on space satellites.
- thefounder 4mo agoGrok is just DOA. No need to beat a dead horse. Even Musk got that thus the reason why he is renting the stuff it planned for Grok.
- zozbot234 4mo agoGrok has plenty of "non-woke AI" cred which will make it a preferred choice for lots of government-side and politically sensitive workloads.
- malcolmgreaves 4mo agoWhat do you think the term woke actually means?
- someguynamedq 4mo agoI think their point is less that it really means something and more that enough customers think it means something to provide economic opportunity
- duchef 4mo agoThe only frontier lab to be selling the compute rather than inference seems to say more about this economic opportunity.
- iso1631 4mo agoSomething which is inconvenient to trumptys
- thefounder 4mo agoI am pretty sure the gov gets an uncensored /heretic version of the AI models instead of the nanny stuff we get so Grok really doesn’t have a “killer” feature. Even for multi model passes(I.e used purely as a contrarian gate) it’s not really that great due the high rate of hallucinations.
- Rover222 4mo agoYou make it sound like they’ve given up on Grok, which I don’t think is accurate. I think it’s been mentioned the Grok 5 1.5T model is currently training on Colossus 2. And their recent deal with cursor is part of being able to eventually compete with Anthropic for agentic coding.
- pqtyw 4mo agoThere is no evidence they can deliver anything competitive based on their past performance, though. Even if their model is competitive or even surpasses e.g. Deepseek (which is far from given) how would that justify a huge valuation?
- senordevnyc 4mo agoStrongly agree with all of this, except that charging rent for the use of an asset you own is not what economic "rent-seeking" means. I blame the dumbass economists who named it this, forever polluting the discussion to be had about regulatory capture and legalized political bribery.
- martinald 4mo agoKeep in mind Google also rents GPUs via GCP, so they could be just reselling these to GCP customers? Thing is though, Anthropic was really against the wall with lack of compute pre xAI deal. And tbh, Gemini reliability has been abysmal which probably points to real compute shortages. And nearly _every_ major DC project is really up against it with massive delays, etc. Stargate UAE has been badly affected by the Iran conflict. So maybe long term this isn't a great business, but _right now_ I'm not convinced it's all financial engineering. There is a enormous shortage of compute and xAI has a load of it _available now_.
- ajross 4mo ago> So maybe long term this isn't a great business, but _right now_ Exactly! "Maybe not a long term great business" is exactly the opposite of what you want to buy in an IPO. This is a "private equity can squeeze out a ton of cash from this asset portfolio" situation, and very much not a "in a few years this will be a trillion dollar business competing with the biggest companies in the world" bet.
- trollbridge 4mo agoCould you please describe the other satellite launch services whose prices are competitive with SpaceX?
- deleted 4mo ago[deleted]
- brainwad 4mo agoThe whole of the space part of SpaceX is like 10% of the claimed business according to their S-1. And most of that is Starlink, not launches for third parties.
- tgsovlerkhgsel 4mo agoBut building a Starlink competitor is essentially impossible without also building a space company, and the main competitor doing that just turned their only launchpad into a crater and is out of the game for a year or so.
- brainwad 4mo agoYes but 90% of the value is supposed to come from xAI, where you decidedly don't need to be a space company to compete. The space part of SpaceX literally doesn't matter, it's an AI company according to its financials. If you need to care about the space parts, the company is overvalued by an order of magnitude or more.
- tgsovlerkhgsel 4mo agoTo be overvalued by an order of magnitude, it'd have to have a fair valuation of under $180 B. At ~5 billion per year in profit, Starlink alone would justify a 100 B valuation at a P/E ratio of 20 (i.e. assuming a non-growth company). If you account for the fact that this is very much a growth company, the valuation of the space part alone is well above these $180B. And they do happen to have the launch and AI businesses on top of it, which (as usual for growth companies) may not be obscenely profitable but aren't worthless. If 90% of the value is from the AI business, it's grossly undervalued.
- Alive-in-2025 4mo agoXai seems pointless, and they've got gpus needing to be used for something.
- hellojimbo 4mo agoI thought elon hates demis
- Alive-in-2025 4mo agoDemis? Democrats or something else? Elon likes money and power.
- dekhn 4mo agoDemis Hassabis - head of Google DeepMind.
- Imustaskforhelp 4mo agoThanks for the comment but then commenting to the GP (@Hellojimbo) that sure Elon might hate Demis But nobody denies a 920M$ per deal for an unprofitable company's like SpaceX at this point, last line to somehow become profitable after this deal. The scale at this money & influence operates, although I feel like people project to the general public that they lean a particular side and sometimes they do but what they lean the most is towards money and whatever response is the most convenient for them at that time.
- genxy 4mo agoThat checks out, Demis is everything that Musk wanted to be.
- deleted 4mo ago[deleted]
- raincole 4mo agoFinancial shenanigans aside, xAI seems to be buying hardware at breakneck speed. So why not? https://techcrunch.com/2026/05/20/musks-xai-is-being-sued-over-its-data-center-generators-now-its-buying-2-8b-more/ https://techcrunch.com/2026/05/20/musks-xai-is-being-sued-ov...
- Lplololopo 4mo agoThe original batch was probably Musks "AI will solve everything, i have a small dick, i want to buy all the hardware and be the first" which became "Ah shit Grok doesn't need all the compute, we can't sell it properly our IPO is coming soon we need better numbers. And "Shit why did we agree to buy so much hardware if i can't even use the current one fully?" to "Ah fuck it, who cares if i indirectly pivot to selling this compute. It brings money and my Fanboys probably think its some magic smartness and not just ignorance"
- matthewdgreen 4mo agoBecause hardware depreciates quickly, datacenter rentals are a competitive business with much lower profit margins than the IPO prospectus requires (even if there is a temporary bottleneck now) and there's no real moat.
- nrmitchi 4mo agoIIRC the large majority of their hardware (at least one tranche, they might have gotten more later) was Elon effectively stealing it from Tesla for xAI, saying “I’m personally doing Tesla a favor, since they can’t fully utilize it currently”, and is now renting that (stolen) compute to subsidize SpaceX.
- TheJoeMan 4mo agoI’m more confused what they’re going to do with all the infra? What could all those GPU’s be doing? Just inference?
- polski-g 4mo agoIt means that there's no memory to buy at any price. There's no GPUs. There's no power. Elon had the foresight to buy all that in advance and now Google, the datacenter company, has to rent datacenter space. MU went 1000% in one year and it's still one of the cheapest companies on the NASDAQ.