for people, like me, who aren't familiar with the acronym: REIT = real estate investment trust

> And Google is a major shareholder in SpaceX, so they certainly have incentive to juice the valuation of the IPO.

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?

AFAIK the Colossus data center was more or less "brute force" when it comes to building a datacenter fast -- ie it was very expensive and they cut some pretty ugly corners (their generators are "temporary" to get around regulations, but I don't see how they can possibly be "temporary" and they create a massive amount of pollution compared to other power sources). The reason I point that out is the article mentions that SpaceX is "better" at building huge datacenters. I think this might be an overstatement -- they're just more willing to throw massive amounts of money and bend as many rules as possible.

I’m not anti data center, but Colossus 1 is the posterchild for the anti data center crowd. The grievances with Colossus 1 might be a major cause why other data centers have such high opposition.

Polluting power generation, straining local power and broken promise after broken promise to fix the situation. And regulators caring more about helping xAI than mitigating the problems.

Writing this:

> In comparison, SpaceX/xAI are incredible at building datacentres on time. The original Colossus 1 datacentre was built in 122 days. Musk's empire does have a huge advantage in really understanding how to plan, build and execute enormous infrastructure projects quickly

Without even mentioning that it was done illegally and the air pollution they are creating with gas turbines is wildly irresponsible

So we know what they are renting these GPUs for. I'm really curious about the input costs of their power generation. Is there actually enough margin in these deals for xAI to cover their depreciation cost?

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?

Same idea expressed by a commenter here 2 days ago: https://news.ycombinator.com/item?id=48426082

It's not a datacenter REIT. Datacenter REITs don't sell compute. They sell space, power, and cooling in which compute lives.

I get the point the author is trying to make (in that SpaceX's most valuable asset is its compute capacity), but it's not quite the right analogy.

SpaceX is basically Elon's holding company for everything-but-Tesla at this point. If you're betting on SpaceX, you're betting on a conglomerate.

They have developed an LLM, so they are an AI lab, but the quality of that model suggests they're not a frontier anything.

Is this the inevitable outcome of frontier labs who own their hardware? the GPUs and datacenters are the major cost. The inference and training a higher tier value proposition, if the company gets nervous that the investment in hardware won't pay off - renting it becomes a major topic of conversation.

A frontier model team having to fight their board on whether to monetize the datacenters directly or continue to invest in AI work is going to have a hard time.

As far as business models go I think REIT for GPUs looks much more durable than Frontier Lab these days. The AI economy has a few big parts:

- Raw materials: Silicon, electricity

- Data centers: turn raw materials into compute

- Model vendors: turn compute into tokens

The frontier labs are competing in the idea that their tokens are worth more $/mtok than the others. If you look at the cost/quality Pareto curves, yes OpenAI and Anthropic are in the corner of expensive & good. But you need a log scale on price to look at these charts because the Chinese models are almost as good for a small fraction of the price. For this business model to be sustainable they need to keep innovating faster than everybody else AND for the quality difference to stay meaningful. Neither of those seem like sure things or frankly even likely to happen.

In contrast, further down the supply chain, folks supplying compute and raw materials both seem to be providing solid services that will be useful in the long term.

I suspect that this is the start of a play for SpaceX's orbital datacenter project - if they're really planning on launching as many satellites as they've said (and Starship is going to massively lower the cost of launch), they won't be able to fill them with Grok. So perhaps it's best to become the infrastructure provider to the other AI Labs.

Here is my take:

- roughly 1B revenue per month is a good look for SpaceX - provides some credibility to otherwise non-existent xAi business.

- pos. News for Google due to their share in SpaceX.

- can be interpreted as leasing versus building for Google, a nice Hedge on compute capacity.

- saves Capex for Google at time of horrendous GPU, memory costs.

It is only a bridge until 2029. What will be the value of the SpaceX data centers by then? Fine print matters on deal with Google. MS made billions up front payments to Coreweave. SpaceX has no upfront payments, has to stem Capex alone. Very favourable for Anthropic and Google.

  Provider     Compute Sold    Valuation
  --------     ------------    ---------
  Nebius       ~$46.4B         ~$55.3B
  CoreWeave    $99.4B          ~$55.8B
  SpaceX       ~$70+B          ?

Is this HN user runako’s comment[1] from 2 days ago turned into an article?

I guess it’s very possible multiple people are coming up with the same idea at the same time but given this was submitted by the author it seems kinda rude not to mention it.

[1] https://news.ycombinator.com/threads?id=runako#48426082

Face it, nobody serious is using Grok for anything, they may as well sell the compute

Sure, but it's very different from a regular datacenter REIT. It's supply and demand: a regular datacenter REIT competes with tons of other datacenter REITs. xAI has something to offer that basically nobody else can: datacenter capacity ready to use for LLM inference. When you are a monopoly you can charge exorbitant prices. There's no shame in being "just a datacenter REIT" when you can charge 10x what it costs you to run that datacenter.

Makes sense, instead of competing in the never ending race of frontier models they go for a different layer which these models can run on

Except GPUs are not real estate but depreciating assets and are priced with extreme scarcity pricing currently.

So DCA into the space–mining/military–contractor/REIT stock as soon as you can afford to and hold through the AI crash into the AI spring?

Is the SpaceX 1.7 trillion IPO on Friday some kind of psychological anchoring?

Say it goes down 50%, then it suddenly appears cheap, when in reality that would still be way overpriced.

It’s a vertical company they did compute very good , their top model bounce between top tier and -1 -2 gen. They were top tier only once though on paper briefly . If tomorrow thy will hit top tier , that do have know how to expand . They can even buy back from Google or anthropic if they agree.

I started doing some numbers around the scale of tokens per second we can generate with figures like 300 million watts and I really don't understand the destination anymore. I see that Anthropic is somehow constrained in the news, but that doesn't line up with headlines. Everything seems off by 3-4 orders of magnitude here. I realize there are some users of AI who can burn a million tokens like it's nothing, but these facilities can produce trillions (10^12) per day.

I feel like there is some use case planned here that isn't to be known about until it's way too late to do something about it. Or this is a very serious bubble. One of the two or some really horrible blend.

Weren't we just talking about how SpaceX is valued based on some profits from starlink + tons of speculation?

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.

I’m so confused by conflicting headlines and studies. One set says gpus sit idle most of the time, then there are apparent capacity problems with Anthropic. So what’s the deal?

I don't think this is good news for the AI industry.

If they can't build enough capacity where their best option (and they're signing multi-BILLION dollar contracts) is an unproven 'datacenter in space' technology, we are toast.

- near term costs will go up (demand is greater than supply) - tokens shift from all you can eat (TOKENMAXXX) to ROI-driven - engineers with real orchestration skills rule and shift to lower cost optimization (deep seek) - Frontier AI unit economics collapse

Sounds like a sound strategy to actually profit in during the AI craze, no?

or, could be they pivoted to cover the expenses?

Technology has a very short life. The difference is that a REIT might contain an office buildings that can be used for any business, but a data center is filled with carcasses that start rotting and stinking from the day of installation.

Basically xAI is pulling a Palantir. They try to reposition datacenter capacity lease revenue to have a multiplier of fast growing frontier lab.

So it's Coreweave?

xAI sells AI services. Not sure why the author chose to link xAI to the compute rental part.

The compute rental is driven by SpaceX AI likely driven by SpaceX side of the business.

It is not xAI.

Elon is controversial, and I know the popular mood is to dunk on this IPO, but in the end he gets a lot right. I think it's very likely the Tesla deal happens, and I further thing that regardless what Google and Anthropic do long-term — SpaceX/Tesla will likely have an awful lot of Optimus robots, and those robots will need an awful lot of compute. I'd be very surprised if Elon lets some frontier lab be the intelligence layer of his robotics stack when he has all the raw materials himself. And in fact, rather than introduce model COGS, he will have had the frontier labs paid for all the CapEx he'll need to run robotic inference using his own models.

Pretty smart if that's what happens.

There is a lawsuit against xAI about those datacenters. They have a strong case that Musk is clearly flouting environmental laws. If they are able to get a preliminary injunction against the datacenters, then they are dead in the water. That's the only reason why they build them so quickly.

Space X is a bet on AI, which is not 'data centre leasing' - it's a short term profitability bump and foregoing the entire AI dream.

Not a good look.

But the short term numbers may oddly provide the emotive juice necessary to fuel the gig "hey, look at their massive revenues!"

EDIT: A data center REIT where 1/5th of the datacenter falls apart each year and needs to be rebuilt. (aka "not a good REIT investment")

Because the GPUs go out of date.

It makes sense. They've long since fallen behind the big 3 in quality of their models. There's no good reason at this point to keep burning money on Grok rather than making back some of that money renting out their Colossus data center.

> While this doesn't include opex[2] and depreciation, if the deals continue for 18 months, xAI recoups all the capex they spent and still has many hundreds of MW of GPUs available. With the giant compute shortages likely to persist into the medium term, even older H100s are likely to be extremely useful even 18 months out.

if the bubble doesn't burst until then...

Not that my feelings or opinion matter, but I'm going to be devastated if this xAI grift takes down SpaceX. I am reminded that the 90s Boy Band groups Backstreet Boys and N*SYNC were the side projects of a Ponzi Scheme.

xAI is more than half of SpaceX revenue with the Google sublease. SpaceX is looking like a datacenter REIT.

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.

what if superintelligence is a myth? There is no mathematical reason why it should exist. The exploitablity of the environment is finite. Humans seek utility not intelligence as it own end. It is entirely possible we have overinvested in compute to the point of cargo cult.

Selling shovels during the gold rush.

Except there is no gold. Or arguably that "gold" is prohibitively expensive to use (not just store, it deprecates fast) so the entire rush is being subsidized. Let's go! /s

If xAI is a datacenter REIT, it is a special kind that has a promise that no other datacenter provider could dream of: LEO datacenters. As far-fetched as that may sound, the biggest profit center for SpaceX in my understanding was Starlink. xAI already has extremely high-bandwidth connections from Earth to LEO available. Connecting that to solar powered orbital datacenters seems doable in realistic timeframes, especially once Starship comes online and gives them a significant boost in launch capacity.

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.

Elon is brilliant when it comes to hardware. But unfortunately with xAI, he went on a firing spree, PayPal Mafia style, just like with Twitter when he bought it, shortly before doing another hiring drive, and failing to hire software engineers at scale.

The datacenter deals came after. But now, the man who promised the world an AI system that defends free speech and is “pro-human”, is instead selling to his competitors and lowering the daily app usage limits of his own Grok by an order of magnitude (really).

If you’re dealing with the world’s richest man, you can predict that money will come before other concerns despite other rhetoric. Interesting strategy though!

Edit: To be fair, they did decide that hardware was "the bottleneck" according to an interview I saw last year. But I firmly believe they underestimated the software problem (and their app was/is riddled with them).

Elon doesn't need the GPUs for macrohard?

https://www.cnbc.com/2026/03/11/musk-unveils-joint-tesla-xai...

Anthropic deal is 1.25B a month for half a gigawatt, with it rising up to 1g.(total deal size 2-2.5B a month) add on this google $900m a month and you get 3.4B a month. Starship cost is probably something like (y = (400m - 20m(0.85)^t + 20m, where t is times starship is launched. At 30 launches, they are close to their target of $20m. A single nvidia NVL72 rack's peak performance is around 135w so 1gw (1,000,000 kW /135 kW per rack‚ is 7,407. each rack weighs around 1.47 metric tons. so you have 7407/1.47t = 10,888.29t+ 15,243.606 (plus 15,243.606 is for an additional 140% for foldable radiator and solar panels... so 26,131.9t to orbit for 1gw of compute. each starship can do 100T, so 26,131.9t/100 gives us 261.32 starships. given the cost curve earlier: Total Cost = ∫₀²⁶¹ (380 0.85ᵗ + 20) dt

  Total Cost = F(261) - F(0) 
             ≈ 5,220.00 - (-2,338.19) 
             ≈ 7,558.19

Holy F*ck.... SpaceX is going to be the most valuable company of all time by a long shot.