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points by smallmancontrov 3 days ago | 0 comments

Isn't the SpaceX contract cancelable with 90 day notice? How many of the others are too?

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.

[–] throwaway2037 3 days ago

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.

[–] Silhouette 3 days ago

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!

[–] BlobberSnobber 3 days ago

Well, they are ensuring that hardware prices stay extremely high by buying all the flash memory at a premium, so at least they've got that aspect kinda under control?

[–] Silhouette 3 days ago

I've made that same point myself in the past. It's more of an accidental moat though - and not one they can defend for very long if they're no longer getting value out of those components themselves.

I saw an interesting observation the other day that Jensen Huang has played this game the best because his company is the one actually selling real products and making real money in return. If all the AI giants are buying up huge amounts of hardware speculatively because they assume they will need those data centres in the future and then the bottom falls out of the market then it's the AI companies left holding the baby. And if we do get to a point where local models are competitive then the OpenAIs and Anthropics of the industry might face real difficulties but it would just be a different market for Nvidia to also be selling real hardware and still in exchange for real money.

[–] mike_hearn 3 days ago

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.

[–] vlovich123 2 days ago

Training costs haven’t plummeted like they have for inference afaik and the efficiencies are just translated into running larger and longer training. Basically Jevon’s paradox in action just like on the inference side.

[–] edmundsauto 1 day ago

I am projecting but I think these companies are looking at their output (“intelligence”) as electricity. There’s never too much electricity, really - it just goes into lower margin uses.

For intelligence, I bet if inference got 90% more efficient they would just increase the “thinking” by 90%.

[–] acchow 2 days ago

We’ve already seen 90% reduction in intelligence costs multiple times over the last few years. Each time, token consumption rises 20-100x

[–] pierreb-aiva 2 days ago

Jevon’s paradox would apply. If I can use order(s) of magnitude more AI for the same price, I would absolutely do that. It would also unlock many use cases that are currently gated by model pricing, which is largely dictated by the price of compute + frontier intelligence markup.

And thats just the inference side of things. For training, the big players like Anthropic would still be able to benefit from cheaper compute, by generating more RL rollouts, running more RL environments, and thus still providing frontier intelligence that would justify the markup.

Many customers cancelling would only be a risk if the compute expenditure was more decentralized. But its not

[–] solyin 3 days ago

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)

[–] chrisweekly 3 days ago

> "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)

[–] burnerRhodov3 3 days ago

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.

[–] vel0city 3 days ago

What happens when he sucks the natural gas pipes dry in the peak cold of a Texas winter and thousands of people die to keep xAI burning?

[–] burnerRhodov3 2 days ago

I don't know why I'm responding to this, because I suspect this isn't being argued in good faith, but let's actually look at the numbers.

According to the U.S. Energy Information Administration (EIA), in 2024:

- *Texas natural gas production:* 27.5 billion cubic feet per day. - *Texas natural gas consumption:* 14.6 billion cubic feet per day.

So Texas produces nearly twice as much natural gas as it consumes domestically.

Natural gas contains approximately 1,025 BTU per cubic foot. Assuming 50% efficiency in a natural gas power plant, and 1 kWh equals 3,412 BTU.

27.5 − 14.6 = *12.9 billion cubic feet per day.*

12.9 billion × 1,025 BTU × 50% efficiency ÷ 3,412 BTU/kWh ÷ 24 hours = *approximately 80.7 GW of continuous electrical generation.*

That's the equivalent of more than EIGHT 10-GW AI computing campuses operating around the clock.

Lastly, a significant amount of natural gas is produced alongside crude oil. When producers can't economically capture or transport that gas, some of it is burned off through a process called flaring. Those flames you sometimes see at oil and gas facilities are an example, although refinery flares also serve important safety functions.

Seems like you just like to say snarky things about Elon, but can't be asked to do any actual math.

[–] vel0city 2 days ago

That comment was at least 75% snark, I agree.

I do agree and understand we flare a lot of natural gas, waste because there's just not the economics to transfer it elsewhere. I definitely agree, it would be nice for that to be put to some economic use if we're pulling it out of the ground.

> Texas produces nearly twice as much natural gas as it consumes domestically.

And it exports that other half it doesn't consume domestically. It's not like half of what is produced just sits around forever. We've massively scaled up LNG exports. We export to surrounding states. But hey just act like we've got billions of cubic feet lying around doing nothing ready to go for datacenters.

> approximately 80.7 GW of continuous electrical generation.

Ooh wow. There's 420.8 GW of demand sitting in the ERCOT connection queue specifically for data centers today. All that "extra" and we'll cover like 20%. A good gas power plant will do better than 50%, but that's still not enough. And I imagine there will be even more datacenter demand coming soon. And that's just at the grid connection levels, not behind-the-meter generation like what we're talking about.

I've also lived through continued cost increases of natural gas in Texas. What does adding an additional 420GW of demand for just datacenters do to our rates? How much more am I going to spend to heat my home this winter? How much more will I spend on my electric bill next summer?

I've also lived through the collapse of natural gas supplies in 2021. I wonder if these datacenters will turn off their turbines or let people freeze it something similar happened again?

Seems like you make a big point about doing the math but only doing half of it. Keep going, see where it takes you.

[–] burnerRhodov3 2 days ago

Okay, Let go back to math!

420.8 GW is alot of compute... like an ungodly amount. A vera rubin rack is like 220KW.. so 1.9m racks. a rack is 72 GPU's per rack so 420.8GW of power is 137.7M GPU's. So lets say about 60% of the power goes to infra, we get 55.08M GPU's. So, with each GPU costing around 55k, that gives us a final cost of compute for the 420GW is 3.0294 trillion.

Obviously that is not real... Eithier double booked, or fake corps making a bunch of requests from thousand different vectors to resell access.

Also, companies like Base are making a killing off taking all the excess energy generated by wind at Night and selling it back to the grid.

So in final, we can support around a $6T AI buildout in Texas just on our exported Natural Gas alone before we really need to start expanding LNG supply.

[–] solyin 2 days ago

Thank you for doing the math. North Dakota "solved" flaring by making it illegal and fined companies for flaring just a bit more than it would take companies to capture the flared off gas, thus making it economical to capture it.

[–] me-vs-cat 3 days ago

We'll be forgiven for expecting the new overlords will take over in the bang of boiling oceans, as we miss the significant whimper of a cold Texan winter.

[–] jordanb 2 days ago

I honestly think that the whole Memphis/Colossus debacle is what lead to the datacenter backlash. Before then I'd just hear rumblings from people complaining about bitcoin miners, but data centers in general were not seen as an odious land use.

Then Elon goes to Memphis, buys a warehouse and fires up 30 jet turbines in the parking lot, and you start getting reports about the incessant noise and being able to smell it from 5 miles away.

It seems like there's a fundamental problem with realizing other people have agency and if you fuck them hard enough they will fight back.

[–] wbl 3 days ago

SpaceX does not make turbines that can run for tens of hours producing megawatts of power. A turbopump is a different beast.

[–] burnerRhodov3 3 days ago

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.

[–] ethagknight 3 days ago

all Anthropic contracts are cancelable if the intent is to stick public shareholders with a bag

[–] lumost 3 days ago

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.

[–] runako 3 days ago

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.

[–] Mistletoe 3 days ago

This is always the intent for all recent IPOs I can remember.