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?
There are no dark GPUs. Compute translates directly to money for these frontier labs.
I think everyone is reading way too much into this. Sure there is some circular transactions that are sus, but this ain't it.
Let us pin this comment and see how it ages
It's very hard to know how much the deal actually increases SpaceX market cap, but unless Google exits their SpaceX position soon it doesn't even make much sense as a circular deal.
I am certain Anthropic spent less on building the next model this quarter if they make it to profitability due to the shear fact that they don't have enough compute.
Which solves the profitability problem with relative ease momentarily.
Also just to confirm, AI subscriptions are definitely being sold at a loss how big I don't know but these models are much harder to run.
API is definitely being sold at a decent profit.
So if you rate limit users and do usage billing + lower research costs which is a money pit temporarily.
(Proof is the fact that we don't have a new pre training run since 4.5 yet, they used to do one every 2 releases)
4.9 will probably be the same.
Next model Mythos doesn't seem to have a successor yet and was trained previous quarter most likely, they don't seem to have pre trained another one just improved Mythos if at all.
As much as I am into AI these attempts to show that there can be a profitable quarter seem like cooking the books, even if we assume no shady dealings otherwise.
Unless one of the Labs can say for certain training is going to stop they can't be profitable and I don't think training can stop because marginal gains is all they have.
8-12 months behind narrative for Chinese labs literally is going to kill the company that stops training first.
If we assume only a 3-6 month gap once China has more compute, then well then even if they keep training the lack of ability to arbitarily scale data centers in US, will kill them first.
DeepSeek V5 might actually just end the AI race for good.
Also given Mythos is atleast a 10x model compared to Opus, then it's pricing is likely going to be 10x as well so well token prices are likely never coming down, especially if these companies want to IPO.
I think there are accelerating returns: i.e. a models are still not good enough to be “drop in” remote workers, but once that threshold is passed, the value of each token of inference has a far higher multiplier.
This justifies the buildup. However not everyone agrees that model intelligence will continue scaling thus they assert that eventually the economics will hit a wall.
>Also given Mythos is atleast a 10x model compared to Opus, then it's pricing is likely going to be 10x as well so well token prices are likely never coming down, especially if these companies want to IPO.
I don't know why people say this when cost per unit of intelligence has been going down continuously over the past few years. When Opus 3 was first released, its API cost was $15.00 per million input tokens and $75.00 per million output tokens. Opus 4.8. which is significantly better, is $5.00 per 1 million input tokens and $25.00 per 1 million output tokens
In the case of Enron, people were obviously speculating in its stock, and that remains true regardless of why it collapsed later, or even whether it collapsed at all.
I say "first" because if you still can't agree that speculation in AI stocks even exists, then it's pointless to discuss what people might be doing to exploit or encourage it.
The fiat economic system is irreparably broken, and we are circling the drain. Another bailout is _probably_ inevitable. But the cycle sure as hell isnt resetting and we are speeding towards something... what it is is unclear though, and when is also unclear.
The part people cant wrap around is the scale of it and the time it takes to go through the super cycle. Theoretically, it all started with the Dot com bubble, which indirectly cause the housing bubble, which caused the GFC. Which caused whatever happened in 2019, which caused QE in 2022 under the guise of COVID, which is causing whatever the hell is happening now.
Capitalism has become uncorked, and money is irreversibly flowing to the top at an increasing rate. The logical next stage is that like 75% of the world's population is literally not even part of any economy. And that doesnt really make any sense
When COVID was ongoing there was a term floating around I liked, "Psychosis" was it. The spell is like that of, denial? Terror & shock?
Trauma might be better?
Looking at trauma responses and how to detect it in humans is an interesting perspective to look at all this with. Personally, if I look at it from "people are afraid, traumatized, defending themselves" and use that to extrapolate how most people (the masses, the non-rich) would act and also the rich - that points me to why theres such a sudden hastening of action and pace of wealth up towards the top in the name of AI & war.
See "M2SL" or "TOTBKCR" on tradingview if you want to see inflation live.
https://fred.stlouisfed.org/series/M2SL
https://fred.stlouisfed.org/series/TOTBKCR
And you would have been massively wrong. People have been complaining about quantitative easing since post GFC, and if you took the figures at face value, those would imply inflation was nearly 100% between the end of GFC and before the pandemic. Whatever you thought about the post-pandemic inflation, the period between GFC and pre-pandemic definitely did not see the level of inflation implied by those figures.
Just look at these charts: they were declining when inflation was raging on in 2022-23 …
"folk economics" implies it is by untrained people.
Milton Friedman's famous quote of "inflation is always and everywhere a monetary phenomenon" shows that he deeply believed the relationship between inflation and money supply, and one certainly cannot call Friedman a "folk economist" considering he won the Nobel prize in economics and was a professor at the University of Chicago.
Note: I am not saying he is right or supporting his belief. I am merely stating that such a belief is not a "folk economics" belief. This belief is still very prevalent in the freshwater schools of economics. [1]
As a personal anecdote, at Ronald Coase's 100th birthday party, I personally got Gary Becker and Richard Posner debating a very related topic (whether and by what degree the velocity of money of fluctuates and whether helicopter drops of cash would have been better during the early days of the money supply collapse in 2008/2009 than just giving money to the banks). In a room full of Nobel Prize winning economists in 2010, there was a very rigorous debate on the topic.
[1] https://en.wikipedia.org/wiki/Saltwater_and_freshwater_econo...
Maybe we've come to celebrate unethical behavior and its become so normalized that we forget to ask ourselves what should be allowed.
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.
https://youtu.be/sL9hq7Qj1qc?t=252
shows why the boat is about to go down.
The sci-fi SpaceX S1 talks about asteroid mining and other imaginary chimeric stuff like space data centers... while 80 to 90 of the case is about AI. But their AI case is like BMW bragging about their thriving auto business...while renting all their car factories to Toyota.
If it looks like a bubble and waddles like a bubble and quacks like a bubble what is it?
This is precisely what makes the movie the Big Short interesting: we see that people did identify, within a reasonable time frame, when people would start defaulting and how that would cascade into a true crisis.
It's pretty clear that while the fruits of AI are quite useful, the entire thing is rife with very questionable financial engineering... but I still don't know what it is that makes all of this break. For example, it's obvious that the SpaceX IPO is a massive wealth transfer program, but it's not obvious that it will immediately end in a crash. Given how irrational the stock market has been, I don't see a reason it can't continue to be irrational for long after the bag has been handed over to the retail investors and retirement funds.
Nvidia is not losing anything if their stock falls.
So whats left? The typical candidates of course: We poor people. 401k, ETF, etc. we pay the bill.
Note that a pension plan that invests for you blindly is no better - either the returns are so bad that they are a scam, or they are investing in stocks anyway and so you get the same results but less control. Similar for things like social security, they are either worse options or you need to pump stocks.
A welfare state maybe?
We are not going to come up with a market-based solution to fix income inequality. The solution, as much as people in the dwindling middle class resist it, is a strong social safety net coupled with a hard reset on taxation and housing policies. Nobody should be homeless, nobody should be allowed to starve, but you might have to accept that your 401K goes down in exchange for a government guarantee of housing and food.
This is hard for people to accept because they currently have equity in their home or a 401K to save them from starving. But those are transient, individualistic solutions. You can lose your house. You can lose your 401K. Society should be taking care of each other in a broader way than letting everyone accumulate a little, private pile of money.
You mean hedge funds and private equity/private credit that all under perform S&P500?
The real suffering comes from whatever effect there is on the rest of the economy due to a recession, more layoffs, etc.
And some others might need to pull out when its down.
Money doesn't appear out of thin air.
Why would it lead to recession if a handful of big companies lose money they have?
It will show that the USA is in a recession for sure, but otherwise
Also, selling shares puts them in a better position to survive a downturn (more cash, less debt).
Whatever financial games they play in the background, doesn't matter when you make that much per 2 quarters alone.
Except they're not. Anthropic's claims of temporary profitability line up exactly with when SpaceX is giving them discounted compute, OpenAI's such a shitfest they threw the CFO off the glass cliff for daring to push back against the IPO. "Profitable on inference" is an unsubstantiated rumour.
Just look at the copilot changes. Demand switching to other providers immediately when prices rise, and there's not even certainty that the new copilot prices cover costs.
> They might not make back the money from training
This is an understatement. With all the datacenter buildout, they need trillions. For the investors get their money back and the bubble to not implode, they functionally need to unemploy everyone in the US.
If the AI dream is real, society just breaks.
More like $75/mo per user for the next 5-10 years if they can get 5% of the global population to pay that.
Home grow a bunch discount them federally, let them wipe the foreign markets.
If AI is threatened by china why would US NOT do the same? If they did they're in a much stronger position to do so than china. Cheaper energy, more cash, stronger industries.
Infrastrucure is thr kind of thing that only a foolish US admin would let fall apart to their advesary.
If they were, they'd never shut up about it. Yet they keep quiet about the financials.
The supply is currently constrained because 50+% of data center plans were cancelled as a result of the impossibility of the buildouts happening in a timely fashion, and subscriptions are charging a small fraction of the actual cost of inference, leading them to all bleed money, hence the rush to IPO to get one last infusion, since many of the past investors have publicly stated they aren’t putting any more money in until they see an ROI.
So is "unprofitable on inference".
Thankfully we should find out for real as soon as those S-1 documents arrive.
It will likely take a few years for supply to fully catch up, which means xAI will eat well for a while.
I can see a world where a few data centers come on line this year and reduce margins a bit, but it's crazy to think the margins will go to "cost of electricity plus a few percent" anytime soon.
[1] https://www.businessinsider.com/spacex-ipo-anthropic-paying-...
[2] https://www.nytimes.com/2025/03/11/technology/google-investm...
It's a fairly sweet deal for everyone involved. Anthropic/Google get to sell more tokens and xAI gets a war chest for another bite at the apple. I don't have much confidence that they'll do anything with it but that doesn't mean these deals don't make sense for them.
They're not and it's not clear why you seem to believe that. The immense capex for buildouts, training costs, etc. are not rolled into inference costs. Moreover, companies are already rapidly starting to re-evaluate token spend.
* LLMs are useful
* Company valuations around LLMs are not realistic
Both can be true, much like they were during the Dotcom bubble. The internet turned out to be a pretty real thing. A couple examples below might feel familiar in the next couple months/years.
> Blucora (then InfoSpace): Founded by Naveen Jain, at its peak its market cap was $31 billion and was the largest Internet business in the American Northwest. In March 2000, its stock price reached $1,305 per share, but by 2002 the price had declined to $2.
> Broadcast.com: A streaming media website that was acquired by Yahoo! for $5.9 billion in stock, making Mark Cuban and Todd Wagner multi-billionaires. The site is now defunct.
> eToys.com: An online toy retailer whose stock price hit a high of $84.35 per share in October 1999. In February 2001, it filed for bankruptcy with $247 million in debt. It was acquired by KB Toys, which later also filed for bankruptcy.
> GeoCities: Founded by David Bohnett, it was acquired by Yahoo! for $3.57 billion in January 1999[20] and was shut down in 2009.
> MicroStrategy: After rising from $7 to as high as $333 in a year, its shares lost $140, or 62%, on March 20, 2000, following the announcement of a financial restatement for the previous two years by founder Michael J. Saylor.
** Some scams transcend time **
Great link: https://en.wikipedia.org/wiki/List_of_companies_affected_by_...
There are also legitimate companies from the dotcom bubble era like amazon, microsoft, and intel. They all were vastly overpriced during the dotcom era. Probably also now lol.
Cisco was over 400 at one point and Nvidia is around 30. Not quite the same.
Other players today: - Digital Realty 48x - Equinix 75x - CoreWeave (still losing money)
There is likely a bubble of some type here, but I don't think this is the same as the Dotcom bubble.
It's not even subtle at this point, what with the attempt at S&P rules changes, the insane valuation, the attempt to change the trade-through rule, and more.
The problem is the valuations assume astronomical growth... that is likely impossible for all of them to simultaneously achieve. Which means something's got to give.
Circular deals aren't bad; what's potentially bad is if those deals are misinterpreted by active investores.
Great deal for Google but they end up basically just paying spacex to pay them back, right?
Circular investing is a thing that is happening with all of these companies related to language models. Google hoping for a ROI isn't a great example of that.
I've been wrong before. However, when was the last time this business model made sense -- that facebook, SpaceX and others, all just pivot from their market niche to general purpose AI datacenter providers.
How on Earth does this make sense?
What happens in a few years when DeepSeek runs on the chinese chips like the Huawei Ascend at a fraction of the cost ?
These are all very high value added companies going into comodity AI hosting and they're all going to make a killing?
US is a near monopoly of this pairing. A crash will result in the removal of the fluff and ocerpricing of it all but the stance is beyond strong.
Unless China outcompetes Nvidea AND TSMC AND magically gets 4x cheaper energy they are in a much weaker stance for the long haul.
Nvidia goes back to being a 100 billion dollar business and everyone else reaps the benefits of cheap tokens.
That's a problem for your kids to figure out ~ those currently getting enriched from these schemes.
Bubble bursts, somewhere between 2008 housing crisis and the dotcom bust.
Really dependent on if there are any OTHER structural problems to compound a fast re-valuation of tech stocks. There's plenty of noise about banks holding large amounts of bad private credit debt. There could be a lot or only a little collapse. There's so much uncertainty and the combination of war, high oil prices, and uncertainty about tarriffs that the market struggles to value anything as international fear drives investment into the US and high prices confusing whether growth is growth or just inflation.
Definitive peace in Iran combined with some sort of sobering AI news signaling the end to the infinite growth party could crush the markets.
This and auto loans. I have NO IDEA how people are affording $770 per month car payments _on top of_ $4.50+ per gallon gasoline.
Also the current president of US is Trump and they are in a war that is pumping the energy prices.
Why not bigger than dotcom burst?
Either way, as always, we'll do it the American Way: Privatize the profits, socialize the losses.
Eh. There's too much money. Covid response involved printing a lot of money and it all ended up somewhere. The chaos of the current administration has made everything considerably harder to price and the coincidental rise of the LLM has put us in strange situation that is legitimately difficult to price things correctly.
This is still only big enough to cause funny banking collapses not actual 2008 scale financial disasters. Banks hold a lot of bad debt, but it's isolated from consumer accounts. Might not want to hold equity in SoftBank though.
> There's so much uncertainty and the combination of war, high oil prices, and uncertainty about tarriffs that the market struggles to value anything as international fear drives investment into the US and high prices confusing whether growth is growth or just inflation.
The big concern lies in what the Trump admin will do. Things could end up merely a bad recession, like the Dotcom and Telecom bubble.
Or they can attempt to keep the bubble going once it collapses, crashing interest rates, and doom the US economy.
And who gets stuck with the bonds.
A financial crash that will make the 2007ff crisis look tame in comparison. That is why Anthropic, OpenAI and SpaceX (which xAI belongs to) are all going public soon and why NASDAQ bent the rules to include them... the current owners all want to raid pension savings worldwide [1] to get their payday before the bubble inevitably bursts.
And when it bursts, you can bet that the vultures will use their fresh cash to buy up assets at fire-sale prices. For the truly rich, a boom-bust cycle is only one thing, an opportunity to achieve extraordinary profit.
The scenario I see is write-offs. At the moment there are hundreds of billions in IOUs being passed around, much more in liabilities than Lehman had back then in 2007. Compounding that is the frankly insane valuation - it's as clear as day that at least one of the major AI shops will go bust, they all run at a (huge) loss and sooner or later, one of them will run out of cash before achieving market dominance.
Unfortunately, OpenAI and Anthropic are valued at almost 1 trillion $ - backed by nothing but the hope on the winner surviving and achieving the classic VC-backed near-monopoly. The staff can be poached, they don't hold much in IP like patents, the servers and GPUs are mostly owned by third parties like AWS, Microsoft, Google or Oracle - once the cash runs out, they can't sell any assets for even some runway extension because there are no assets. Even the model weights and training data aren't worth much - all competitors already have training data sets of their own, it does not make sense to acquire further data, and model weights are being rendered obsolete by the constant churn of open-weight models particularly from China.
SpaceX is valued even higher, but unlike the other two candidates, they still at least got a viable business even if the entire AI BS bubble collapses, Starlink is a money printer and there's no alternative in sight that matches SpaceX and their reusable rockets.
Now, if either of the three even experiences a large drop in valuation for whatever reason, it's not just experienced VCs that can readily afford (and expect) investments to fail, but this time a lot of "everyday" investment vehicles (such as pension funds) will have to issue write-off losses, and now that they are publicly traded, that may also trigger stop-loss cascade orders further dropping prices, and retail investors will probably join in on the mass panic. That's the #1 risk IMHO.
The #2 risk is that after a collapse, the service providers (i.e. the ones owning the servers) will be sitting on a ton of hardware that has nowhere near recouped its cost. AWS, MS and Google can probably repurpose most of the hardware for their own use and rent out what remains, but they will have to eat significant accounting losses, provoking again a drop in their stock price, but this time with even more blast radius as all three of them are established stock index (and thus ETF) members that a looooot of people have exposure to. But someone like Oracle? They might actually get fried for good.
And the #3 risk is further downstream, particularly relating to NVDA. They have enjoyed years of insane profits because they are the only ones making high-performance AI chips. When demand for new chips collapses due to the event(s) I just described, they can easily shift their TSMC production slots back to GPU wafers and sell these to gamers - but at a far lower profit than before, which again can trigger stock price drops and write-offs.
I won't go further downstream - TSMC and their suppliers are IMHO pretty safe because there is just so much pent up demand from everything not AI, and the construction companies building datacenters don't have too much of a blast radius when the big guns stop expansion projects.
The concrete scenario I'm really, really afraid of: all three succeed with their IPOs, maybe they all survive a year and get included even in S&P 500. The existing shareholders and insiders all slowly dump a lot of their vested stock onto the public market, which in cleartext means into the dozens of billions of $ of retirement contributions. One day, the bubble bursts for whatever reason. The stock markets drop in a panic sell-off, either triggered by stop-loss orders or because retail investors are a herd of sheeple (just like in the 1st covid lockdown). Eventually, circuit breakers on the stock markets will trigger (just like they did in the GME post-apes collapse) and trading will pause, but it will resume until the markets have adjusted to the new valuation... and once the dust clears up, there will be a lot of blood on the floor. Possibly even riots, depending just how much retirement assets just got wiped out.
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.
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.
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?
They all have various strengths and weaknesses. My favorite is still ChatGPT, then Gemini/Claude, then Grok.
Grok often feels 1-2 generations behind the competition in general use, but it has three things that I love:
1. It seems to be the best at understanding current events. Maybe due to X integration, or some other tool call optimization in the backend? I don't know, but I often ask about things going on, and the other models have outdated info, give unhelpful answers, etc.
2. It is generally the least sycophantic for personal things. Anthropic is getting here too. ChatGPT and Gemini are working on this, but previous models in those families would almost never say anything negative about what I am doing. Sometimes I need career advice, personal advice, etc and I like the tone of how it responds. I think Claude will be caught up soon.
3. For professional work, there are certain topics that other models would refuse to engage with. At my last company we had an enormous amount of legal users. When a deposition would need a summary on certain topics, most models would refuse. Grok would not. I understand the need for safety and I don't blame the other model providers, but for some professional use cases you NEED a model that is capable of handling sensitive subjects.
As soon as we hand over searching out information to social media algorithms and LLM tools, we abandon our ability to see reality outside our direct vision.
Grok's ownership has already demonstrated capacity to influence major world elections and other events. You cannot trust it with this sort of information gathering and reporting.
Grok used to be really really bad ~8 months ago or so, but it's gotten better.
ChatGPT team needs to turn down the 'disagree just because' factor by a lot.
I guess the benchmarks disagree, but whenever I need to find specific information that does not easily show up with a web search, I try chatgpt, gemini and grok. Grok surfaces what I was looking for more often than the others.
Things like "find the github repo from 2017 that does $vague_thing".
Come on, the most logical thing is that Musk overestimated the compute he needs and got lucky with the secondary usage of it.
As soon as the IPO is done and if it didn't fail, he will buy curser and try to push again if he hasn't given up on it.
He also needs some compute for the robotics stuff and for Tesla in-car entertainment and for training FSD.
So they’re cutting edge in that way.
Having a positive set of beliefs annoys people and and can make them feel judged, but at least it provides a vector that points somewhere definite in possibility space.
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?
Makes sense. Very difficult to catch OpenAI and Anthropic now since their flywheel of generate revenue, use revenue to buy more compute, train a smarter model with more compute, made it hard to compete.
Being able to supply compute makes more sense for SpaceXAI if you can't compete in SOTA LLMs anymore.
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.
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.