And just like that—surprise!—one AI company bails out another AI company's grift. Google agreeing to rent compute from xAI (cough, "SpaceX") magically makes them eligible for inclusion in the S&P500.
Americans, they are looting your life savings, the ones you earned through labour that they are gleefully replacing. Your descendants will never have the chance you had.
https://techcrunch.com/2026/06/05/google-will-pay-spacex-920m-per-month-for-compute/
@raganwald Aw crud, guess I should transfer the last of my employee stock. The corruption of the stock index criteria is absolutely a grab on everyone's conservative retirement stock funds. It wasn't enough to let people choose risky mixes in their investments and to inflate the market generally with pension savings.
Check kiting via circular investment wasn't enough.
@jmeowmeow Also, if any of them had an ironclad business model, they'd gleefully allow their "competitors" to flame out and fail.
That they are supporting each other tells us that they know that if one fails before they all offload the junk onto the public, there will be a run on all their stocks.
@jmeowmeow I think the idea is that since it's a passive fund, they aren't incentivized to make money for the fund, nor penalized for losing money for the fund. Their job is simply to keep it properly balanced and collect low fees for their trouble.
I may have an overly simplistic view of passive funds.
@ilia That is from Thursday, June 4th. What the S&P 500 said is that they are not changing the rules for xAI ("SpaceX').
Whereas, xAI announced the Google deal the next day. The assertion is that adding the Google deal to their S-1 allows them to claim profitability, thus making them eligible under the existing rules for inclusion without changes to the rules.
I believe that both sets of reporting can be true at the same time.
UPDATE: They still must wait four quarters.
@osma @raganwald @ilia The S&P 500 delists unprofitable companies, and they already stated up front that SpaceX has to show a history of profitability and other factors before it qualifies for consideration.
With them losing $15 to $160 Billion a year, $11 Billion a year is hardly going to bail them out. Even going public does not bail them out in any way that fools the index. 🤷
Profitability is often sacrificed for growth, for example Amazon was unprofitable for 6 years after going IPO, uber 4 years, I am sure there many other similar examples
@ilia @webology @osma @raganwald
All AI services operate at a massive negative margin. Every time they generate revenue they lose money. Amazon and Uber had obvious paths to positive margin, AI has none.
When Amazon buys a warehouse it lasts decades. When an AI service stocks a datacenter, the GPUs become useless in a couple of years.
The CapEx that Amazon was spending was largely in actual durable things, the "CapEx" for AI services is mostly consumables.
If these were bakeries, Amazon issued stock to buy more ovens, while the AI services are issuing stock to buy flour for the week.
Paradoxically, Musk and SpaceX were once on the good side of this; reusable rockets are more like tools than consumables, so you get recurring value from their construction.
I don't see recurring value for expenditure, I don't see a moat, I don't see a path to positive margin, these are money pits up and down.
@ilia @webology @osma @raganwald
Seems like that when fees line up with costs, it's more expensive than the alternative (a recently-fired engineer with kids and a mortgage). At least for program listing generation.
For the real use cases of claim denial, automating racist policing, domestic surveillance and purges, bombing children, AI provides a useful culpability sink that may be worth a trillion dollars to the Epstein class.
@eestileib @webology @osma @raganwald Not really, if you look @ token costs from Chinese models it is massively cheaper than what frontier labs charge, there is also the matter that there is little dedicated inference hardware optimized for inference and inference alone, which will reduce costs significantly.
That being, I do think over time number of engineers needed will only increase not decrease.
@ilia @webology @osma @raganwald
Yeah my friend who runs an eng team that uses Qwen with a non-chatbot interface says that pretty much nobody he considers to be serious is using one of the American models, because China has established credibility that they will release a free version that's just as good and far more efficient with a three month delay.
So, no moat. These AI service IPOs are money pits.
I honestly think a major reason that chatbots took over the world is that they flatter men made lonely by age and power.
@eestileib @webology @osma @raganwald The beauty of those models is that you can run them on own or cloud hardware, so you are not feeding training data to the AI labs and have full control.
They are admittedly a bit behind, but not far enough to be non-competitive or not useful for real work.
@PizzaDemon Seemingly so! But it gets better.
Google owns an estimated 5% stake in xAI ("SpaceX"). Now if xAI can obtain a valuation of 90+ times revenue, and Google gives them 11 billion a year, that makes the entire company ✌🏽worth ✌🏽990 billion more. 5% of 990 billion is 49.5 billion, so by promising to pay 11 billion they inflate their own equity by 49.5 billion.
All they have to do is sell their stake and then exercise their 90 day cancellation option.
What a great company to go public.
Absolutely thievery. I need to be off Google services ASAP.
(Edit: I long ago tapered off my use of their services to a minimum, but I'm still using Gmail. Time to end that too.)
We are watching a tech/AI-bubble come crashing down in real time.
Proof that the "market" N.E.V.E.R. learns.
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