I think that's the datacenter with the gas turbine generators that operate without permits because they're "portable." Data centers have tremendous externalities but colossus is a particularly nasty offender, and not just due its size.
Have you considered that the march of progress requires human blood to grease the gears and mulched skulls to pave the (highly efficient) road? Really, when you take into account all of the future lives this will improve and save it's difficult to claim any cost now is too high. Would you stand in their way and delay the day that Mythos cures cancer?
I'm not saying human blood and mulched skulls are a renewable source of power, I'm just saying. Or maybe they can partner with SoulCycle to power computation with 24/7 spin classes?
I wonder what percentage of GDP expenditure will give us SkyNet.
Undoubtedly, it will find cures to all cancers… The ARR and stock appreciation will be amazing. Except the cures will be found long after it has wiped out all humans.
What's the tremendous externality of gas generators? People heat their own homes with natural gas and it's no big deal. How can a datacenter that is miles away be worse than that?
I dont know, Id say the enraging thing is that the government is so incompetent and unable to expand electricity supply that datacenters are forced into using loopholes to get power the only way they can.
Seems like selc's time would be better spent trying to close the loophole that allows for unpermitted turbine generators instead of going after one company for doing what they were allowed to do when they did it.
The newer location is about 3 miles southwest of the Memphis Airport (MEM), one of the world’s largest cargo airports and the center of FedEx operations (500 take-off and landings per day most concentrated in a 6 h FedEx window with lots of engines running on ramps and that produces about 2000 tons of NOx per year).
I live about 18 miles downwind of the new Colossus sites, the airport, and lots of truck logistics sites, and a large refinery.
I definitely will be getting 2x exposure to ozone and particulates from both Colossi when they are running full bore. Plus an extra dose of ultrafine particulate with my morning fresh air.
Yes, wouldn’t it be nice to be in Nashville instead with HCA, Oracle, many insurance and financial institutions, and the joy of country music.
As an avid Opus user I am in an ethical Nimby bind. We do need almost any investments we can get in Shelby County TN. I’ll take Anthropic in preference to Grok NOx. And it will be my NOx.
xAI’s turbines produce meaningful local/regional pollution (especially NOx in a vulnerable area) but represent a rounding error nationally and globally.
More signs that xAI might be giving up on the AGI race. xAI let Cursor train a model on Colossus 2, gave the entire Colossus1 to Anthropic, and is now giving compute in Colossus2 to Anthropic as well.
Elon lost his lawsuit with openAI and knows xAI isn't on the same trajectory. Might as well try to win the bet and flip off Sam by supporting the best competition. Also they are getting a head start on AI as a commodity. I'm sure there's plenty of money to be made for those that can leverage their capital to essentially rent capacity right now. If he's not making enough off of grok, might as well cover their expenses.
Bad read on the situation. xAI has too much compute and not enough customers using it. They have around half a million GPUs, some of which are stolen from Tesla, running at 11% utilization. xAI predicted more people would be using Grok, but Grok is not a SOTA model & users primarily want to use SOTA models. They have excess capacity and it makes sense to rent out GPUs to other customers while they improve their models.
What do you mean by etching? Google does also it's own chip design with TPUs, data centers, and models but afaik only TSMC Intel and Samsung do the actual semiconductor fabrication
That's Intel. Probably IBM too, though they've been doing mass manufacturing with TSMC (and GloFo before) for years instead of their fabs. I wouldn't be surprised if HP did similar things back in the 80s.
That's very doubtful given recent news that Colossus is running at 11% capacity and has hundreds of thousands of idle GPUs. xAI acquired too many GPUs and currently doesn't have enough customers to use them. That's why they are making compute deals with Anthropic and Cursor.
xAI is bleeding money and this compute deal with Anthropic will pay for all of xAI's capex ($25 billion) in 2 years.
Why is xAI giving up their advantage? Is this a signal that their frontier model improvements are plateauing and decided there is no value in hoarding all their compute?
What advantage? Has there ever been any indication they’re leading in any segment? Sure Elon has thrown a bunch of money at hardware, but to what end?
And frankly as bad as Altman is from a: if AI is really going to disrupt humanity do I want this guy in charge? Elon is 10x worse. So why would the best and the brightest ever work for him?
yes, but it's only advantage if one is compute-strained and the other isn't. if they both have lots then there's no advantage. if one doesn't fully utilise their compute then it's not an advantage either
Well, other than your ability to turn that into cash by renting it out for the highest price to someone who needs it, you can promise prospective employees that are supposed to use that infra to train models that they won’t be compute starved.
You can kick off more model training runs and experiments than your competitors.
You can kick off a $1-2t IPO claiming you are going to capture a large portion of the largest TAM the world has ever seen.
They have neither the most resources nor the best models. They are mediocre at everything except the CSAM generation market, they've got that one cornered
I see this as a huge warning sign. If a frontier ai lab is in this position of renting their own capacity, imagine how much overcapacity there is in the system.
Outside of VC money, and circular financing, the only external money coming into ai are into open-ai, and anthropic via their subscriptions and APIs.
Here's a probably stupid question - if someone were unbounded by ethics and conceivably had enough power and connections to power to shield themselves from many consequences of their actions - and that person owned these DCs, could they in theory observe all the streams of tokens coming in and out of these models, and even exfiltrate copies of these models wholesale to have their own teams do what they will with them in the pursuit of building their own competitive models?
Or is there something fundamental in the way these models get deployed (encryption or something or than legal contracts?) at this scale that prohibits the owners of the infra from gaining this level of insight / access?
There's accusations that the Chinese labs have done essentially that to OpenAI and Anthropic and exfiltrated their models without having DC access, so if you had DC access, yes, you could do that. If you had DC access though you could just copy the model onto an SSD.
1) The situation you described would be covered under the contract between Anthropic and xAI, and that any violation of that would be subject to financial penalties and legal proceedings. The US has a robust corporate legal system, and disputes do get resolved through the court system, although in a slow and costly manner.
The contract can stipulate a penalty at a high enough amount to discourage this behavior.
2) Output from models & intra-datacenter communications can be encrypted if customers truly cared.
3) There is no reason do this, because there are far better ways to exfiltrate data from Anthropic models. Chinese companies are already doing this at an industrial scale where they are reselling Claude tokens for 10-20% of the cost while retaining the data to train their own models. https://www.chinatalk.media/p/how-to-buy-cheap-claude-tokens...
If we look at Deepseek V4-pro, created by Deepseek who Anthropic formally accused of harvesting Claude tokens at scale, it performs the same as Claude did 6 months prior.
xAI had a lot of negotiating power here because Anthropic had ~0 comparable options and ultimately desperately needed the compute now. So, it wouldn't surprise me if data sharing was an explicit part of the agreement
I don't see a scenario where it really makes sense to be a frontier lab long term. Eventually model quality will plateau then you distill and get 90% for 10% or less cost.
General AI is that scenario. The investor dream is that their horse hits general AI first, patents it (or otherwise somehow stops the competition from hitting it), and then reaps the massive benefits.
I'm not saying it's a likely scenario, but I genuinely believe a big percentage of AI investment revolves around that (or similar) scenarios.
This might come down to when you expect plateau to happen. You could have said similar about transistor density many decades ago.
(I'm not denying it could happen next year for all we know. But we simply don't know, and from what I hear from researchers the breadth of ideas we've tried are still small)
Fake __AI__ revenue. Maybe Hetzner should build Colossus4, rent it out and book it as AI revenue instead of hardware rental revenue and get a P/E of 100.
Anthropic this quarter will have revenue of $10.9B, up from $4.8B last quarter[0]. They're paying SpaceX $1.25B per month for compute[1] - which is more than what SpaceX earn on space. SpaceX spent about $30-40B in capex on Colossus 1 & 2.
This is all real revenue, real spend, real usage.
Hetzner just aren't at this scale. Not even close. If they wanted to get into this business - first, they're late. Second, it's at a scale of ~10x of their total lifetime datacenter buildout. Third, they'd need to change their business to being one that is debt fronted.
xAI have proven out that being able to deploy compute is a very viable business (and difficult to pull off)
At some point AI cynicism clashes with reality, it must be exhausting maintaining it.
Jesus Christ, the Hetzner example is obviously an example of booking revenue as AI revenue (where investors assume it is generated by Grok subscriptions) vs. hardware rental revenue, which traditionally not valued as highly.
Nowhere does the hypothetical state that Hetzner, an example for hardware rental, has the funding or the capabilities to execute the sarcastic example.
But ok, now hardware rentals have a P/E of 100 or more.
Investors aren’t dumb. These numbers are being reported and the fact that the data centers are being rented out is publicly disclosed everywhere. Investors know full well that the revenue is from the data center rental. No (non-retail) investor is going to see the jump in revenue and think “I better buy up because grok must be kicking ass!”
And yes, if hetzner built a massive AI hyper scale datacenter and rented it out for billions, with the expectation that they would keep building more, they would also see massive PE ratios because it’s expected that their revenue would be going up.
I think that's the datacenter with the gas turbine generators that operate without permits because they're "portable." Data centers have tremendous externalities but colossus is a particularly nasty offender, and not just due its size.
Edit: They did it with Colossus and now they're doing the exact same thing with Colossus2. https://www.selc.org/news/xai-built-an-illegal-power-plant-t...
Yup, and now Anthropic is complicit in the environmental damage and health problems for local residents that these data centers are causing.
But hey, number must go up, right?
Have you considered that the march of progress requires human blood to grease the gears and mulched skulls to pave the (highly efficient) road? Really, when you take into account all of the future lives this will improve and save it's difficult to claim any cost now is too high. Would you stand in their way and delay the day that Mythos cures cancer?
This is a joke. Read it in a mocking tone.
I loled
I'm not saying human blood and mulched skulls are a renewable source of power, I'm just saying. Or maybe they can partner with SoulCycle to power computation with 24/7 spin classes?
And people called the matrix’s human batteries far-fetched.
Always felt like it would've made more sense if it was using part of the peoples' brains to do their computation, as super energy efficient computers.
https://www.newyorker.com/cartoon/a16995
When do we start building pyramids and doing the Sardaukar blood letting ritual?
When the 10-year yield hits 6%. Basic macroeconomics.
Not Anthropic, but Sam Altman - AI will solve climate change and cure all diseases.
Per sanguinem ad astra
I wonder what percentage of GDP expenditure will give us SkyNet.
Undoubtedly, it will find cures to all cancers… The ARR and stock appreciation will be amazing. Except the cures will be found long after it has wiped out all humans.
Some of you may die, but it’s a sacrifice that I am willing to make.
A superintelligent AI will be safe though, because it learnt its morality from us.
Do you think Boris cares about people getting cancer and dying from these data centers? No, he cares about becoming rich as fuck.
Given how much our EPA has been gutted by the current administration, I don’t think relief is very likely.
What's the tremendous externality of gas generators? People heat their own homes with natural gas and it's no big deal. How can a datacenter that is miles away be worse than that?
The gas furnace in my basement don't have a massive jet turbine emiting high frequency noise
I wouldn't call noise pollution a "tremendous externality". The gas turbines should just be placed far enough from where people live.
I dug into this topic in some detail on my blog and it's both enraging and depressing.
https://poiesic.com/posts/pattern-recognition
This is a really great watch from Benn Jordan on the topic https://www.youtube.com/watch?v=_bP80DEAbuo
Some wild things happening with those, and infrasound. Colossus is shown 4 mins in
This was debunked: https://blog.andymasley.com/p/contra-benn-jordan-data-center...
I dont know, Id say the enraging thing is that the government is so incompetent and unable to expand electricity supply that datacenters are forced into using loopholes to get power the only way they can.
Seems like selc's time would be better spent trying to close the loophole that allows for unpermitted turbine generators instead of going after one company for doing what they were allowed to do when they did it.
The newer location is about 3 miles southwest of the Memphis Airport (MEM), one of the world’s largest cargo airports and the center of FedEx operations (500 take-off and landings per day most concentrated in a 6 h FedEx window with lots of engines running on ramps and that produces about 2000 tons of NOx per year).
I live about 18 miles downwind of the new Colossus sites, the airport, and lots of truck logistics sites, and a large refinery.
I definitely will be getting 2x exposure to ozone and particulates from both Colossi when they are running full bore. Plus an extra dose of ultrafine particulate with my morning fresh air.
Yes, wouldn’t it be nice to be in Nashville instead with HCA, Oracle, many insurance and financial institutions, and the joy of country music.
As an avid Opus user I am in an ethical Nimby bind. We do need almost any investments we can get in Shelby County TN. I’ll take Anthropic in preference to Grok NOx. And it will be my NOx.
Your math is way wrong. The airport is and will be far, far worse. You didn't even mention all of the lead
xAI’s turbines produce meaningful local/regional pollution (especially NOx in a vulnerable area) but represent a rounding error nationally and globally.
Does an expansion of computing power on this scale imply that computing capital is displacing model architecture as the true moat in AI competition?
More signs that xAI might be giving up on the AGI race. xAI let Cursor train a model on Colossus 2, gave the entire Colossus1 to Anthropic, and is now giving compute in Colossus2 to Anthropic as well.
Elon lost his lawsuit with openAI and knows xAI isn't on the same trajectory. Might as well try to win the bet and flip off Sam by supporting the best competition. Also they are getting a head start on AI as a commodity. I'm sure there's plenty of money to be made for those that can leverage their capital to essentially rent capacity right now. If he's not making enough off of grok, might as well cover their expenses.
It was kinda obvious when SpaceX "acquired" it. Elon rewarded xAI investors/prevented lawsuits by giving them SpaceX equity, and that was that.
Bad read on the situation. xAI has too much compute and not enough customers using it. They have around half a million GPUs, some of which are stolen from Tesla, running at 11% utilization. xAI predicted more people would be using Grok, but Grok is not a SOTA model & users primarily want to use SOTA models. They have excess capacity and it makes sense to rent out GPUs to other customers while they improve their models.
Grok is also tuned to align with Musk's personal beliefs. I wouldn't touch it with a 10 foot pole.
Very possible Elon is doing this to make give Anthropic better chances against OAI while he attempts to reshape xAI.
Also possible he sees infra as the future of xAI if he really believes in the value of space compute.
Hard to see this any of this as anything other than a bearish sign for Grok though.
Right, also Anthropic has been having difficult time getting more GPUs
We could see the first company vertically integrated from etching to chip to data center
What do you mean by etching? Google does also it's own chip design with TPUs, data centers, and models but afaik only TSMC Intel and Samsung do the actual semiconductor fabrication
Assume he's referring to SpaceX's https://en.wikipedia.org/wiki/Terafab
That's Intel. Probably IBM too, though they've been doing mass manufacturing with TSMC (and GloFo before) for years instead of their fabs. I wouldn't be surprised if HP did similar things back in the 80s.
That's very doubtful given recent news that Colossus is running at 11% capacity and has hundreds of thousands of idle GPUs. xAI acquired too many GPUs and currently doesn't have enough customers to use them. That's why they are making compute deals with Anthropic and Cursor.
xAI is bleeding money and this compute deal with Anthropic will pay for all of xAI's capex ($25 billion) in 2 years.
Why is xAI giving up their advantage? Is this a signal that their frontier model improvements are plateauing and decided there is no value in hoarding all their compute?
What advantage? Has there ever been any indication they’re leading in any segment? Sure Elon has thrown a bunch of money at hardware, but to what end?
And frankly as bad as Altman is from a: if AI is really going to disrupt humanity do I want this guy in charge? Elon is 10x worse. So why would the best and the brightest ever work for him?
In a compute starved world, big ass data centers are an advantage.
yes, but it's only advantage if one is compute-strained and the other isn't. if they both have lots then there's no advantage. if one doesn't fully utilise their compute then it's not an advantage either
Well, it appears all their competitors are compute starved so…
can you elucidate what that advantage is, that isnt renting it out for the highest price to somebody that really needs it?
Well, other than your ability to turn that into cash by renting it out for the highest price to someone who needs it, you can promise prospective employees that are supposed to use that infra to train models that they won’t be compute starved.
You can kick off more model training runs and experiments than your competitors.
You can kick off a $1-2t IPO claiming you are going to capture a large portion of the largest TAM the world has ever seen.
They have neither the most resources nor the best models. They are mediocre at everything except the CSAM generation market, they've got that one cornered
Training a model that is larger than your competitor's.
No other LLM has made as much child porn as grok so there is that...
The datacenter advantage, obviously
As weird as it seems I think this is Musk’s best shot at winning over Altman. He has personal vendetta.
I would guess it's purely because Grok isn't nearly in-demand enough to produce meaningful revenue. And they want to juice the numbers for IPO
And I'm sure it's a bonus point for Musk that it goes to OpenAI's most relevant competitor
When did xAI have an advantage?
I think they overestimated the demand for Grok, which is mostly useless, and now they have too much compute on hand.
I see this as a huge warning sign. If a frontier ai lab is in this position of renting their own capacity, imagine how much overcapacity there is in the system.
Outside of VC money, and circular financing, the only external money coming into ai are into open-ai, and anthropic via their subscriptions and APIs.
Here's a probably stupid question - if someone were unbounded by ethics and conceivably had enough power and connections to power to shield themselves from many consequences of their actions - and that person owned these DCs, could they in theory observe all the streams of tokens coming in and out of these models, and even exfiltrate copies of these models wholesale to have their own teams do what they will with them in the pursuit of building their own competitive models?
Or is there something fundamental in the way these models get deployed (encryption or something or than legal contracts?) at this scale that prohibits the owners of the infra from gaining this level of insight / access?
There's accusations that the Chinese labs have done essentially that to OpenAI and Anthropic and exfiltrated their models without having DC access, so if you had DC access, yes, you could do that. If you had DC access though you could just copy the model onto an SSD.
1) The situation you described would be covered under the contract between Anthropic and xAI, and that any violation of that would be subject to financial penalties and legal proceedings. The US has a robust corporate legal system, and disputes do get resolved through the court system, although in a slow and costly manner.
The contract can stipulate a penalty at a high enough amount to discourage this behavior.
2) Output from models & intra-datacenter communications can be encrypted if customers truly cared.
3) There is no reason do this, because there are far better ways to exfiltrate data from Anthropic models. Chinese companies are already doing this at an industrial scale where they are reselling Claude tokens for 10-20% of the cost while retaining the data to train their own models. https://www.chinatalk.media/p/how-to-buy-cheap-claude-tokens...
If we look at Deepseek V4-pro, created by Deepseek who Anthropic formally accused of harvesting Claude tokens at scale, it performs the same as Claude did 6 months prior.
xAI had a lot of negotiating power here because Anthropic had ~0 comparable options and ultimately desperately needed the compute now. So, it wouldn't surprise me if data sharing was an explicit part of the agreement
I don't see a scenario where it really makes sense to be a frontier lab long term. Eventually model quality will plateau then you distill and get 90% for 10% or less cost.
Over the past 6 months, Anthropic has made more waves as a product company than a frontier lab.
Cant wait to see their books once they IPO
General AI is that scenario. The investor dream is that their horse hits general AI first, patents it (or otherwise somehow stops the competition from hitting it), and then reaps the massive benefits.
I'm not saying it's a likely scenario, but I genuinely believe a big percentage of AI investment revolves around that (or similar) scenarios.
This might come down to when you expect plateau to happen. You could have said similar about transistor density many decades ago.
(I'm not denying it could happen next year for all we know. But we simply don't know, and from what I hear from researchers the breadth of ideas we've tried are still small)
https://x.com/nottombrown/status/2057194829986300375?s=20
I predict SpaceX will subsume Anthropic at some point.
Too bad Enron is still not around. They'd have some real fun with today's electrical markets.
Related:
SpaceX S-1
https://news.ycombinator.com/item?id=48213933
Musk said Anthropic Claude was woke DEI until he said it wasn't. It must be hard for Musk fans to keep up.
I though Claude is too woke. Musk has posted that at least 50 times in the last year.
But booking outrageous rental fees as fake AI revenue ahead of the SpaceX IPO apparently takes precedence.
The eternal truth: money talks, bullshit walks
Musk will buy Anthropic and fix the wokeness. It was done before.
Don’t put it past Dario to buy spaceX
Elon will never sell SpaceX. And he controls 86% of votes.
Anthropic is paying real cash, how is it fake revenue?
Fake __AI__ revenue. Maybe Hetzner should build Colossus4, rent it out and book it as AI revenue instead of hardware rental revenue and get a P/E of 100.
If Hetzner could build that, they would.
Anthropic this quarter will have revenue of $10.9B, up from $4.8B last quarter[0]. They're paying SpaceX $1.25B per month for compute[1] - which is more than what SpaceX earn on space. SpaceX spent about $30-40B in capex on Colossus 1 & 2.
This is all real revenue, real spend, real usage.
Hetzner just aren't at this scale. Not even close. If they wanted to get into this business - first, they're late. Second, it's at a scale of ~10x of their total lifetime datacenter buildout. Third, they'd need to change their business to being one that is debt fronted.
xAI have proven out that being able to deploy compute is a very viable business (and difficult to pull off)
At some point AI cynicism clashes with reality, it must be exhausting maintaining it.
[0] https://www.wsj.com/tech/ai/mind-blowing-growth-is-about-to-...
[1] https://www.wired.com/story/spacex-ipo-anthropic-compute-fin...
Jesus Christ, the Hetzner example is obviously an example of booking revenue as AI revenue (where investors assume it is generated by Grok subscriptions) vs. hardware rental revenue, which traditionally not valued as highly.
Nowhere does the hypothetical state that Hetzner, an example for hardware rental, has the funding or the capabilities to execute the sarcastic example.
But ok, now hardware rentals have a P/E of 100 or more.
I think you're low at 100. TSLA has 370 PE, and SpaceX is targeting 250+.
Investors aren’t dumb. These numbers are being reported and the fact that the data centers are being rented out is publicly disclosed everywhere. Investors know full well that the revenue is from the data center rental. No (non-retail) investor is going to see the jump in revenue and think “I better buy up because grok must be kicking ass!”
And yes, if hetzner built a massive AI hyper scale datacenter and rented it out for billions, with the expectation that they would keep building more, they would also see massive PE ratios because it’s expected that their revenue would be going up.
He talked with the Anthropic team, and his concerns lessened. It's actually a good thing to be able to change one's mind.
Anthropic is gross for this. The grandstanding about principles and values is intolerable.
Cool. Can they make Claude not absolute dogwater then?