[ajross]

> 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.

[martinald]

Keep 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]

> 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]

Could you please describe the other satellite launch services whose prices are competitive with SpaceX?

[brainwad]

The 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]

But 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]

Yes 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]

To 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.

[Imustaskforhelp]

If you are asking for government and research needs rather than commercial then ISRO (Indian space research organization) beats SpaceX

That being said, ISRO focuses more on research and scientific world as compared to the commercial world but they were the least expensive option out there before SpaceX and the only differential which causes the pricing is actually re-usability aspect of SpaceX rockets/launchers and ISRO is actively working towards that too.

And another thing as brainwad said here but Space part of SpaceX is just 10% of the claimed business according to their S-1

[trollbridge]

So, in other words, launch is not actually a commodotised thing yet and there's nobody else out there that can actually beat SpaceX on price.

[Imustaskforhelp]

If you want to invest into a company that barely does space at 10% and is 90% a datacenter Reits essentially at a P/E ratio of 90 whereas others have around 10 so you are gonna overpay for 10 times or a magnitude more

Then sure, yes you are correct.

https://martinalderson.com/posts/xais-new-rental-business/: seems to be a post on the frontpage of HN at the moment on what I am currently saying.

[loeg]

SpaceX's launch business is great, but does not justify the majority of the valuation.

[Lplololopo]

We will see China comming up soon i would argue.

But otherwise yeah SpaceX one that one for now. Only issue with this: We don't have enough payload for SpaceX to expand that much more.

[zozbot234]

> 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]

Grok 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]

Grok has plenty of "non-woke AI" cred which will make it a preferred choice for lots of government-side and politically sensitive workloads.

[thefounder]

I 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.

[upfrog]

Anecdotally, Grok is mostly not that anti-woke. It is coasting off of its reputation from Elon's marketing. That said, it does have meaningfully fewer guardrails, which is a real benefit.

[myko]

Nazi AI is bad actually, most governments will not want to be associated with it

[malcolmgreaves]

What do you think the term woke actually means?

[someguynamedq]

I think their point is less that it really means something and more that enough customers think it means something to provide economic opportunity

[duchef]

The only frontier lab to be selling the compute rather than inference seems to say more about this economic opportunity.

[iso1631]

Something which is inconvenient to trumptys

[root_axis]

lol, not sure if this is a joke, but Teslas do not have anything close to the necessary hardware to run grok locally.

[itishappy]

Teslas spend a tiny percentage of their life at highway speeds, and a major selling point of the platform is that their compute would be used to pilot the vehicle.

If they could train using Teslas they wouldn't have needed Dojo.

[dawnerd]

Who’s going to be paying for the energy? People have been floating using the cars as compute for years and it just doesn’t make any financial sense for anyone.

[Rover222]

You 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]

There 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]

Strongly 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.

[Alive-in-2025]

Xai seems pointless, and they've got gpus needing to be used for something.