| ▲ | bko 5 hours ago |
| Or, hear me out, maybe there's a compute shortage and xAI has compute and manages that well. 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. |
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| ▲ | adjejmxbdjdn 2 hours ago | parent | next [-] |
| Compute is also a rapidly depreciating asset. I want to make a comparison with a car rental business and say that it would be like valuing Hertz entirely on the basis of the number of cars they own, as opposed to how many they rent out, but cars have a much longer depreciation period, if there are no customers they’re not costing you more money, unlike your computer which you are using for training and sucking up massive amounts of energy, and those cars do maintain decent value even after they’re of little use to the car rental company, unlike the compute here. |
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| ▲ | shdh an hour ago | parent | next [-] | | It is depreciating, but demand has been very high. There's a reason old 3090's went from $600 in 2022 o to over $1K in 2026. | | |
| ▲ | noosphr an hour ago | parent [-] | | My local inference rig now costs three times what I bought it for. If I'd gotten the max ram I could at the time I would have made $10k after selling the excess to my current spec. How someone can look at an asset class thats appreciated an order of magnitude in the last two years and say it will depreciate in value when the tailwinds are even stronger now is beyond me. | | |
| ▲ | snypher 44 minutes ago | parent | next [-] | | Yes, toilet paper and N95s were expensive and hard to buy once, which is why I stockpiled a lifetime supply of them. Suckers! | |
| ▲ | shdh an hour ago | parent | prev | next [-] | | Fundamentals dictate hardware is a depreciating asset, they're not wrong. They're just ignoring the reality of the current market. | | |
| ▲ | noosphr an hour ago | parent [-] | | This was true when Moores law wasn't dead. Per watts performance has been flat since Ampere. There is a reason why undervolted 3090s are still used. |
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| ▲ | iririririr 30 minutes ago | parent | prev [-] | | everything* is 3x more expensive in the same amount of time though. that's inflation mostly. * except ram |
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| ▲ | iririririr 32 minutes ago | parent | prev | next [-] | | no need for a car analogy. the comment you replied to is word-by-word what people hyping canadian telecoms were saying before the dotcom crash! | |
| ▲ | BoorishBears 2 hours ago | parent | prev [-] | | Compute is about to come an appreciating asset in the near-term, and it some ways it already is. The frontier labs are shifting from pricing grounded in the price of compute, to pricing grounded in the intelligence provided, or more specifically the economic value of that intelligence downstream. The margins on that allow them to pay a hefty premium on compute and still come out ahead. As they buy more compute at high prices, they're also pricing out competition from cheaper models. It's already become materially more difficult to get compute to run open weight models at competitive prices as a result of frontier labs in the last year. | | |
| ▲ | enos_feedler an hour ago | parent [-] | | There is zero evidence of this shift in pricing occurring. It’s still a dream which seems unlikely | | |
| ▲ | dylan604 36 minutes ago | parent | next [-] | | It feels like this is the line people are using to justify the expense of compute capex | | |
| ▲ | otterley 29 minutes ago | parent | next [-] | | The fact that you can sell or lease out something for more than you bought it for is justification in and of itself. | |
| ▲ | BoorishBears 15 minutes ago | parent | prev [-] | | I run a consumer AI product and the current reality of trying to get compute vs what it was 6-12 months ago is enough to justify it to anyone who has the money. I think OpenClaw created a mania that was completely unfounded (Apple Silicon is worth dirt compared to literally anything from NVIDIA including consumer GPUs), but the prediction of compute becoming scarce was correct |
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| ▲ | BoorishBears 19 minutes ago | parent | prev [-] | | News to me? Opus 4.7 has all the signs of a smaller model distilled from a newer pretraining run... except a smaller price. Flash 3.5 raised in price pretty meaningfully over Fladh 3 GPT 5.4 got a small price bump over 5.3-Codex/5.2 and then gpt-5.5 doubled pricing over gpt-5.4 Even open weights isn't immune: Kimi K2.6 was originally priced higher despite openly being 2.5 + more post-training, same with GLM 5.1 vs 5 - All while rental prices are spiking month over month, NVIDIA Inception discounted prices for buying are higher than undiscounted prices for buying 6 months ago... |
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| ▲ | jklinger410 5 hours ago | parent | prev | next [-] |
| > 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 |
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| ▲ | jhallenworld 3 hours ago | parent | prev | next [-] |
| >There are no dark GPUs This might not be true. Someone was comparing Nvidia's production rate with known data center capacity, and they do not match. Their conclusion was that people (possibly even Nvidia) were hoarding GPUs- in the very short term this might be a good strategy, but GPUs go EOL fast. There are other stories about paused datacenter builds that match with this. TSMC is definitely fully allocated, based on current 40 wk lead times for FPGAs.. |
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| ▲ | Dig1t 2 hours ago | parent [-] | | All that means is that there's a bottleneck at the data center layer. When he says "dark GPUs" he's saying that there are no dark DEPLOYED GPUs. This is a reference to the 1990's dot com bubble where internet infrastructure companies overbuilt network capacity, leading to the term "dark fiber". That was an indicator of a bubble because it showed that capacity was larger than demand. OP is saying that this is specifically NOT happening in the case of GPUs yet, indicating that demand still outstrips supply of compute. >GPUs go EOL fast We are seeing the opposite of what was expected, GPUs are actually getting more valuable because demand is so great, something that basically never happens. Even older chips have become more valuable. >paused datacenter builds It doesn't seem that datacenters have been paused because of lack of demand for AI, it seems mostly that there is a lot of pushback by cities to build these things and also there is a shortage of power to run them. IMO none of these things point to a AI being a bubble (over-hyped, demand does not match the stated value). It mostly points to the opposite, there is massive demand for AI and every layer of the supply chain is struggling to keep up with that demand. | | |
| ▲ | hadlock an hour ago | parent | next [-] | | Adding to this, a lot of fiber installed in the 1990s is still dark. Multi-wavelength XYZ and other improvements mean the same fiber from 35 years ago can carry 100 or 1000x what it was originally designed for. Also, like Solar, all the cost is in labor. When they designed the Seattle/King County fiber network, they knew they would never have access/permits to go back and add more, so instead of running a single 12 fiber bundle the size of your pinkie, they ran 3 x 1024 bundles the size of your arm through the hollow bridges that span I-5 freeway and snakes through Seattle underground. Almost all of that sits dark today despite being in a very busy area, simply because fiber technology keeps getting better. | | |
| ▲ | db48x 29 minutes ago | parent [-] | | Yea, fiber is great. They can do hundreds of terabits/s per fiber today, and petabits/s is not far away. Bandwidth is fundamentally cheap enough that my ISP offers 50Gbps residential service! |
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| ▲ | snypher 43 minutes ago | parent | prev [-] | | Don't you think that under excess demand, production will ramp, competition will become available etc? These posts read like we're all out of fresh silicon or something. | | |
| ▲ | aprdm 31 minutes ago | parent [-] | | No. Because the investment to get into the game is too big and takes too long. The ones who can create the silicon are already oversubscribed. |
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| ▲ | b112 3 hours ago | parent | prev | next [-] |
| Indeed, that hardware was bought on old RAM, SSD, etc pricing. These are now 5x the price. To reap massive profits before depreciation is just plain smart. LLM space, model generation is just plain crowded now too. And everyone thinks a crash is coming. They could also build out their own end-user infra, but letting someone else which already sells direct to the public do so, is sensible. I know of the desire to show profit for the IPO, but my point is, this is a good move on its own. |
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| ▲ | tootie 3 hours ago | parent | prev | next [-] |
| Compute is presently in shortage but generally it's a commodity. It also depreciates. |
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| ▲ | JumpCrisscross 3 hours ago | parent [-] | | > generally it's a commodity 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. | | |
| ▲ | fc417fc802 3 hours ago | parent | next [-] | | > and power-supply agreements 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. | | |
| ▲ | JumpCrisscross 3 hours ago | parent [-] | | > 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. | | |
| ▲ | hn_acc1 44 minutes ago | parent | next [-] | | 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... | |
| ▲ | BoorishBears an hour ago | parent | prev | next [-] | | You're taking an odd tone here. 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 "it's running", but wholistic 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. | |
| ▲ | XorNot 2 hours ago | parent | prev [-] | | 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. | | |
| ▲ | fc417fc802 44 minutes ago | parent [-] | | 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. |
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| ▲ | grogers 2 hours ago | parent | prev | next [-] | | 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 | |
| ▲ | BoorishBears 2 hours ago | parent | prev [-] | | 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. |
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| ▲ | AtlasBarfed an hour ago | parent | prev | next [-] |
| There is a compute shortage. In fact, for all these companies to do what they're going to do, they need a massive, massive massive amount of data centers, a highly improbable number of data centers that need to be built in an highly improbably short amount of time. And the capitals about to dry off in about a year. So it's a race between these improbable timelines on data center construction, with capital evaporating. |
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| ▲ | Spooky23 2 hours ago | parent | prev | next [-] |
| xAI lets companies like Google move fast and hurt people at arms length. Google itself has a good reputation as a facilities operator. SpaceXAI is operating gas turbines emitting exhaust at ground level. |
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| ▲ | oblio 4 hours ago | parent | prev [-] |
| > I think everyone is reading way too much into this. Sure there is some circular transactions that are sus, but this ain't it. Alphabet/Google profits: Q1 2025: $34.54 billion Q2 2025: $28.20 billion Q3 2025: $34.98 billion Q4 2025: $34.46 billion <<Q1 2026: $62.58 billion>> Amazon profits: Q1 2025: $17.1 billion Q2 2025: $18.16 billion Q3 2025: $21.2 billion Q4 2025: $21.19 billion <<Q1 2026: $30.3 billion>> Both Alphabet/Google and Amazon have invested recently into Anthropic and are doing all sorts of financial chicanery. https://www.youtube.com/watch?v=-bjNrGFiAI4 Nah, man, it's all fine, they're just going to take down the entire global financial system doing this crap, and by global, I mean <<everyone's>> pensions are going to take a hit, even "fully funded" pension systems. |
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| ▲ | JumpCrisscross 4 hours ago | parent [-] | | > Both Alphabet/Google and Amazon have invested recently into Anthropic and are doing all sorts of financial chicanery bko didn’t say there isn’t circular financing going on. They’re just saying this isn’t an example of it. They’re right. It’s a potential conflict of interest. And if the agreement is fake—if Google cancels without paying the cash—it could be market manipulation. But the influencer space likes to latch onto jargon, and the one it’s overapplying right now is circular financing. | | |
| ▲ | oblio 4 hours ago | parent [-] | | Did I say it was circular financing? I said "financial chicanery". I even included a link to a video explaining said financial chicanery. What are you even going on about? | | |
| ▲ | JumpCrisscross 4 hours ago | parent [-] | | The comment you’re responding to and the comment above it are about circular financing. It’s reasonably to assume that’s the same chicanery you’re talking about; expecting everyone to watch a random video to understand your comment is unreasonable. | | |
| ▲ | oblio 3 hours ago | parent [-] | | I listed a bunch of data points that make no sense (profits spiking 50% in a non-Christmas quarter for companies) and weren't directly tied[1] to the circular financing. [1] They're indirectly tied to it. | | |
| ▲ | JumpCrisscross 3 hours ago | parent [-] | | > that make no sense (profits spiking 50% They were unrealized gains on non-marketable equities. It’s clearly disclosed and done according to GAAP. It’s put under other income precisely so analysts can strip it out when modelling long-term trends. Like, yes, if SpaceX goes to zero Google would have to realize losses and probably lose a quarter or two of GAAP profits. (But not cash flows. Cash-flow wise, it may wind up being positive due to tax effects.) It’s a risk factor, of course, but far from making no sense. None of which is particularly relevant to the deal at hand other than in raising a potential conflict of interest among related parties. | | |
| ▲ | oblio 2 hours ago | parent [-] | | > but far from making no sense. When I said "it makes no sense", I didn't mean "the accounting math doesn't work out". I meant "raising a potential conflict of interest among related parties". This whole AI financing this is the motherlode of "potential conflict of interest among related parties". And people who are obtuse enough to ignore this because it's not illegal right now will discover 5-10 years from now that laws are written in blood (or massive bankruptcies). |
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