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Comment by alienreborn | Hacker News Reader

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?

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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

As weird as it seems I think this is Musk’s best shot at winning over Altman. He has personal vendetta.

xAI have (with some questionable ethics) managed to actually build a data centre, so they have a ton of compute but not much inference demand for their model which is second-tier.

Everyone else trying to build data centres is really struggling (turns out building physical things is not as easy as writing code, who knew).

So Anthropic have the model but they're compute starved because everyone else they've signed agreements with still mostly have piles of dirt and the GPUs are still in Nvidia's warehouse somewhere.

It's a bit of a win-win: xAI's financial numbers will be massively improved by the revenue using otherwise useless data centre capacity, Anthropic get the compute they desperately need albeit probably paying through the nose for it

Elon got rid of most of the core xAI researchers recently. It looked like firings and he said something like Grok needs to be rewritten because it was fundamentally built in a bad way. My guess - Grok was not one of the top two models and had no traction beyond users on Twitter - so investing in it did not make sense. Or maybe he needs time to build a new team and rebuild Grok, and while he’s doing that, he needs revenue to make up for all the GPUs they bought.

Either way, I doubt he has any ‘real’ advantage in this game. It’s OpenAI and Anthropic, and then everyone else including the open weight models.

Boy I’d love to have the sort of ‘no real advantage’ that got me $1.9bn in revenue per month from Anthropic.

Make no mistake - Elon’s charging premium pricing because he has something Anthropic realllly needs. In exchange, he will get significant revenues added to the balance sheet along with the cursor team right around IPO. It’s very good business for Elon and SpaceX.

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…

I mean. they're selling it to a competitor so it's not really an advantage

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

Could have (past tense). They now have rented the capacity out, presumably with a multi-year contract.

A rental deal, even at a premium price, actually makes great sense for Anthropic. Rather than building themselves, they are de-risked by renting instead, and they don't own the depreciating asset. They've also compute-starved X.ai as a potential competitor as a marginal added bonus.

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

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.

> a frontier ai lab

Wait, do people consider xAI a frontier AI lab?

They were briefly SOTA on some benchmarks, although there were suggestions there might have been some massaging of the results since real world usage showed lackluster performance compared to the benchmarks.

To the contrary - there’s so much demand that Dario needs Elon’s compute and is willing to pay premium month to month pricing for it.

I think any warning this provides is more about the ability to forecast demand. Obviously it was a giant leap of faith, that didn't pan out, for Must to build these data centers without having a product with a growth trajectory to more rationally justify it.

OpenAI and Anthropic (and their investors!) are obviously also out on a limb here, both with deals in place to 10x their available compute (roughly 1GW -> 10GW) over next few years. Maybe these growth estimates are a bit more grounded, but they have all sorts of assumptions baked in. I still would not be surprised to see OpenAI self-implode, and to see Google and Microsoft as the eventual winners here.

For sure. There’s also this kind of interesting meta strategy question: if you think you can float the huge capex with some internally valuable processes as a base case then you might just go really big. Dario and Elon’s temperaments come in to play here

Musk's goal with X.ai from the start seems to have been primarily to compete with OpenAI, and given that Grok itself isn't doing that (not even mentioned in competitive benchmark tables), and his data centers are therefore mostly sitting idle, this deal with Anthropic helps him achieve that goal by helping OpenAI's #1 competitor.

Note how the initial deal was only for the older Colossus #1 data center, and now after losing his lawsuit against OpenAI the Anthropic deal has been expanded to Colossus #2 also. Coincidence?

When did xAI have an advantage?

Advantage in training compute.

xAI advantage is that it's not censored, that's why people use Grok

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