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
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.
> 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.
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.
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.
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.
> "backlash" is the poorest residents one of the poorest large cities in America trying to fight for their right to clean air
Sorry, I'm referring to the national pushback against datacenters being built in peoples' backyards. xAI didn't face backlash. At least not organised enough to stop them. Their competitors, today, are facing backlash sufficiently powerful to stop new datacenters from being put down.
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...
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.
And while there's no challenging the underlying proposition "AI has value", right now 95% of corporate users are still at the "throw everything at the wall and see what sticks" level in terms of model usage compute.
It's sheer brute force, tons of waste, seems like very little thought going in to fitting the implementation to the problem.
The value of compute can drop significantly in the event of users figuring out how to optimise for their particular need. And yep, there are wasteful applications that can burn whatever compute is available, but how much demand for that is there when it's properly priced?
Extreme example. Generating novel 4K VR video on demand. I'm certain there's a market for it, at $10/hour probably quite a healthy one, at $100/hour not so much.
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.