That is wild. What if there is a huge break-through in LLM models where they can reduce compute by 90%? All of those data centers would suddenly crater (many customers cancel) and go bankrupt. I feel it could go either way.
Surely the thing the AI giants fear the most in this respect must be the possibility that competitive open models and locally available hardware reach the point of viability for most people. If that happens then where is the moat for the giants?
If progress with frontier models doesn't continue at the same pace then the investments and funny money deals might start to look very fragile.
If progress does continue then that progress might be towards smaller models more than quantum steps up in quality or capability that would increase the risk of the scenario above.
All of this is set against a backdrop of public hostility and political problems that I can only imagine increasing in the near term as well.
This feels like an unusually high stakes game of poker. I don't think I'd want to bet on Big AI right now if I had a few billion lying around. Then again - maybe that's why I don't have a few billion lying around!
That's already happened. It's one reason prices have dropped so much lately (n.b. in the quarter that's not in their S-1, I think!) They've been able to improve model efficiency a lot through better algorithms and training models to be less verbose.
The question is, how're those datacenters build outs coming along? two reasons for Anthropic to cancel those contracts. A) They don't need the capacity because they have capacity elsewhere, or b) they don't need the capacity because no one is using Claude. (I guess c) they don't need the capacity because theyre running Claude more efficiently is also technically possible.) For B to happen, they've got the demand in the form of contracts, and models don't really seem like they're shrinking, though there's a lot of non-public info, Astra > insize than sol, and Opus > insize than a Sonnet. So then we're looking at situation A), and the think to look at is SpaceX has the vertical integration to be able to plonk down datacenters and get them powered with literal jet/rocket engines/turbines that they make from scratch because they're a space rocket company when no on else can. So, personally, I don't think it's that big a risk to SpaceX's revenue. Or rather, is cancelable in 90 days, but smart money is going to see those cancelations coming from a lot longer away, if you're tracking datacenter construction. (Disclaimer, I picked up some SPCX; not financial advice, etc)
Not the whole turbine, but they are manufacturing turbine blades in bastrop texas. The turbines are available right away, but the blades are 12-18 month lead time, so Elon built a foundry. From what i heard they've only gotten a couple proto's out of the foundry/ no idea the grain quality. But they are doing it.
> "SpaceX has the vertical integration to be able to plonk down datacenters and get them powered with literal jet/rocket engines/turbines that they make from scratch"
At this point, you can get the chips you just can't get the power. So in typical elon fashion, he just "solves" the bottleneck. Long term, no, that is not the strat. Thus the pivot to space.
I'd imagine all of the vendors have an incentive to keep their main customer a float, while there might be penalties etc. for missed targets - it doesn't make sense for any of these vendors to ride the contract into chapter 11.
This is so important in analyzing these commitments. Anthropic's commitments will make them a Top 10 customer at many of their vendors. (Even at Google/Amazon, how many other customers do they have with $100B+ committed?)
Those vendors would very much like to retain as much of that business as possible. If the space goes sideways, I would very much expect some kind of renegotiation/work out.
You're right, SpaceX will be cancelable within 90 days after March 2027.
SpaceX was the only one mentioned as cancelable. These are listed under "Infrastructure Service Arrangements" on page 170.
That is wild. What if there is a huge break-through in LLM models where they can reduce compute by 90%? All of those data centers would suddenly crater (many customers cancel) and go bankrupt. I feel it could go either way.
Surely the thing the AI giants fear the most in this respect must be the possibility that competitive open models and locally available hardware reach the point of viability for most people. If that happens then where is the moat for the giants?
If progress with frontier models doesn't continue at the same pace then the investments and funny money deals might start to look very fragile.
If progress does continue then that progress might be towards smaller models more than quantum steps up in quality or capability that would increase the risk of the scenario above.
All of this is set against a backdrop of public hostility and political problems that I can only imagine increasing in the near term as well.
This feels like an unusually high stakes game of poker. I don't think I'd want to bet on Big AI right now if I had a few billion lying around. Then again - maybe that's why I don't have a few billion lying around!
2 replies →
That's already happened. It's one reason prices have dropped so much lately (n.b. in the quarter that's not in their S-1, I think!) They've been able to improve model efficiency a lot through better algorithms and training models to be less verbose.
The question is, how're those datacenters build outs coming along? two reasons for Anthropic to cancel those contracts. A) They don't need the capacity because they have capacity elsewhere, or b) they don't need the capacity because no one is using Claude. (I guess c) they don't need the capacity because theyre running Claude more efficiently is also technically possible.) For B to happen, they've got the demand in the form of contracts, and models don't really seem like they're shrinking, though there's a lot of non-public info, Astra > insize than sol, and Opus > insize than a Sonnet. So then we're looking at situation A), and the think to look at is SpaceX has the vertical integration to be able to plonk down datacenters and get them powered with literal jet/rocket engines/turbines that they make from scratch because they're a space rocket company when no on else can. So, personally, I don't think it's that big a risk to SpaceX's revenue. Or rather, is cancelable in 90 days, but smart money is going to see those cancelations coming from a lot longer away, if you're tracking datacenter construction. (Disclaimer, I picked up some SPCX; not financial advice, etc)
SpaceX does not make turbines that can run for tens of hours producing megawatts of power. A turbopump is a different beast.
Not the whole turbine, but they are manufacturing turbine blades in bastrop texas. The turbines are available right away, but the blades are 12-18 month lead time, so Elon built a foundry. From what i heard they've only gotten a couple proto's out of the foundry/ no idea the grain quality. But they are doing it.
> "SpaceX has the vertical integration to be able to plonk down datacenters and get them powered with literal jet/rocket engines/turbines that they make from scratch"
Is that really a viable path? (Honest question)
At this point, you can get the chips you just can't get the power. So in typical elon fashion, he just "solves" the bottleneck. Long term, no, that is not the strat. Thus the pivot to space.
2 replies →
all Anthropic contracts are cancelable if the intent is to stick public shareholders with a bag
I'd imagine all of the vendors have an incentive to keep their main customer a float, while there might be penalties etc. for missed targets - it doesn't make sense for any of these vendors to ride the contract into chapter 11.
This is so important in analyzing these commitments. Anthropic's commitments will make them a Top 10 customer at many of their vendors. (Even at Google/Amazon, how many other customers do they have with $100B+ committed?)
Those vendors would very much like to retain as much of that business as possible. If the space goes sideways, I would very much expect some kind of renegotiation/work out.
This is always the intent for all recent IPOs I can remember.