The cheapness of the building is not the problem that is being dealt with.
The construction of the building w/ zoning and the political fights and utilities arguments and years of time and whatever is what is being dealt with by putting it in orbit.
I bet you could build a fully off-grid DC that didn't guzzle water for less money than launching a rocket today, and there would be thousands of people lining up down the block to sell you more than enough land to do it a thousand times for cheap. This just isn't happening yet because it is still quite possible to build on-grid DCs supplied with fresh water for cooling despite what some people would have you believe.
And then when you build on the ground you could even send people to it to swap hard drives and GPUs when they inevitably fail or upgrade them to keep them current. At lower rates of failure than they would in space because we have a planetary magnetosphere protecting us from cosmic rays.
It would be extremely funny if putting things in space is cheaper and faster than dealing with zoning and local politics.
It implies that China, which can cut through much red tape and has great (and improving) utilities and infrastructure, lots of energy, can just build normal datacenters and save the cost of dozens of space flights.
Building in space adds engineering complexity. Heat output requires radiators. Radiation damages equipment without shielding. Repairs require a spacewalk. All this for what, better solar panels? If you think local zoning challenges are an obstacle, then you have 194 other countries to build in. Going to space is probably the worst option. Even putting a data center on a boat is probably a better choice and that still sounds like a stupid idea.
Why? It seems to me to be much cheaper than a building. Musk's aim is for the cost of one Starship launch to be under $10 million in the long run. 50 rocket launches would be less than half a billion dollars. Can you get a datacenter built on the ground for half a billion dollars?
The comparison isn't half a billion for a datacenter, it's half a billion for a big shed (and some solar panels). The problem of space based data centers is that the only effort they save you is building a big shed to put the GPUs in (and potentially cheaper power at the cost of more expensive cooling)
You haven't built a data center for half a billion mate, you've just launched rockets. You still have to build the data centre! Only not from bricks, it's going to be complex modular units made of radiators and solar panels and you have to buy the gpus too, and the whole thing will be bombarded with cosmic background radiation but you can't replace or repair any part of it.
"If you give me 5 years and everything goes perfect, I can give you a system that's 9% worse than what you already have", you don't have a great investor pitch.
No, you've got the burden of proof backwards: We haven't even begun to talk about maintenance issues, space-proofing the equipment, power-generation, cooling, etc.
Sure, but it's very different from a regular datacenter REIT. It's supply and demand: a regular datacenter REIT competes with tons of other datacenter REITs. xAI has something to offer that basically nobody else can: datacenter capacity ready to use for LLM inference. When you are a monopoly you can charge exorbitant prices. There's no shame in being "just a datacenter REIT" when you can charge 10x what it costs you to run that datacenter.
The doubt you are expressing was very justified until this week. But on June 1st, Microsoft changed the pricing for business and enterprise Copilot, and people started paying real money for using AI. Until that day, Github Copilot was charging users 4 cents per request (if they exceeded their subscription's monthly limit). Now, they charge at the API rate. I monitor my usage, and it's easily 10 times more expensive than the 4 cents per request before, maybe 20 or even more. And guess what? Businesses are shocked about the changes, and thinking hard what to do, but most of them will just pay 10 or 20 times or more for AI than they used to pay until now.
We will hear projections soon, in a few months, but my guess is that the big 3 (Anthropic, OpenAI, Google) will get of the order of $10 billion per month in AI inference revenues. And it will only go up from there.
> but most of them will just pay 10 or 20 times or more for AI than they used to pay until now.
At my work, after the GitHub price hike, we all got the option of 1. Keep using Github, but with the same total spend as before. i.e, use 1/20th as much since the dollar cap isn't changing. Or option 2, use as much self hosted DeepSeek v4 Pro, Qwen 3.6, Gemma4 as you want since it's almost free. (to be fair, we already had the GPUs)
If the Chinese keep releasing open weight models that are "close enough" to the big 3, I expect many orgs to make the same choice. I think we will see VPs and higher start saying "you better have a good reason for using Opus 4.8 or GPT 5.5 Pro, do you have metrics showing ${cheaper_model} isn't good enough?"
Most businesses don't have the GPUs, or the knowledge necessary to do self-hosted inference. So, they'd have to rely on OpenRouter, or Ollama, or some other inference provider, but there are lots of problems with that. With Microsoft, people could get comfortable with the compliance side of the problem. They already use Outlook, and Office365. Copilot is just one more point where things can go wrong, but it's less scary than your emails being captured and held for ransom, and you already think Microsoft can take care of that. But with Ollama or OpenRouter, you have no idea what is happening with your data, and you also are not sure if they are serving the real models, or quantized versions.
To be sure, there will be plenty of people finding alternate solutions, but 80-90% of the businesses will just pay the higher price to Microsoft.
For sure not everyone can self host (though I suspect most tech and tech adjacent companies can).
But all the existing “safe/trusted” cloud providers will offer cheaper models. The choice won’t just be GitHub vs OpenRouter. It will be DeepSeek, qwen, Gemma on GitHub vs Opus on GitHub. I’m sure AWS, GCP, Azure, etc will be happy to sell open weight models. And those lower priced models will put a cap on how many people pay for higher priced models.
What makes you think “most of them will just pay 10 or 20 times more for AI”?
They can’t measure ROI, and it will start costing more than their staff. You might be right, but I can’t think why any competent C suit would agree to this..
Look at cloud spend - how many of your employers have measured the ROI of using cloud vs. self-hosting? At a certain point these things just become the cost of doing business I suppose.
Every single one minus Federal Gov. if you are in a leader position you absolutely should be assessing hosting options, trade offs, costs etc, and looking forward as things grow to make sure you aren’t just burning cash. Only my experience from Australia, the low interest environment could be different in the US, but I would expect this attitude to change if interest rates stay above 5%.
Of the 4 series A-B startups I've helped grow, none have measured and made decisions on cloud spend based on measurement. The only time this came up is when bills got too large and spend needed to be controlled. You're right that it may be a difference of environment (USA here)
This is an active conversation going on at my day job right now (and I suspect many other peoples too)
Every developer (we have about 100) has Github Copilot, and interestingly some barely use it while others use it a lot (about 70% of usage comes from a handful of devs), and the dashboard shows you exactly who is using which models, and how much
I definitely don't think they will just go along with paying 10/20x more than before without seeing some sort of return on that investment
We've already had the we're spending all this money on AI, why aren't we shipping software faster conversation multiple times
My prediction is that those high users, costing the most money, will be watched carefully (one colleague even suggested half-jokingly that whoever tops the leaderboard should have to give everyone else a presentation on what they spent all those AI credits on)
The sweet spot is to have good competent developers who users AI when it actually makes sense, but aren't dependent on it
As of now, most people haven't figured out how to use AI productively. It takes time. Maybe 1 in 20 developers have come up with a good workflow to get AI-assisted coding done without a lot of slop. The remaining 19 either got burned a few times, or still use AI in a 2023-style: ask AI for a code snippet in a chatbox, then copy-paste it to the code base.
But one or two years from now, many more people will have learned how to be productive with AI. Knowledge will percolate.
And for all those people, the companies will ask themselves: is this guy's 20% increase in productivity worth $200 per month? If that increase in productivity is actually worth $2000 per month, then the answer will be an unequivocal yes. Not only that, but the need to switch to lower cost AI providers, so the $200 is lowered to $20 will just not be worth the extra headache of having to go through all the approvals to onboard a new vendor.
No. If you read 2-3 articles about the war in Iran per day, be sure they read 20 or 30, and they probably use LLMs to summarize 3000. For us, it's only the feel-good of being smart. For them it's money.
I don't think it's a bold assumption, but I also don't think the assumption would lead to the conclusion.
1. Why it's not a bold assumption: it's a bit shocking now. But in two years or so, many/most companies will realize this is the cost of doing business. Just like people are ok with using Outlook, or Office 365, or (in the case of Wall Street) Bloomberg terminals, people will realize that developers will need AI coding assistants.
2. Why the conclusion does not follow from the assumption: if the limit is set at $1500/developer/month, it does not mean all developers will use it. Companies will set incentives for people to not be very wasteful. It is more likely that on average developers will consume $100-200 worth of tokens per month, and there will be some outliers who will consume 10, 100, or 1000 times as much, but they'll be few.
> so no need to disproportionally allocate resources to them.
Maybe I'm squinting too hard, but it seems to me you are talking about Musk here. We are not allocating any resources to him. He took some risks, started some ventures, some failed, but some succeeded spectacularly. He made lots of people wealthy in the process. I own a few shares of Tesla and they appreciated since I bought them. I did not become rich, but I did benefit from Musk's activities, and millions other people did. The society did not "allocate resources to Musk", and society did not "allocate resources" to J.P. Morgan or to Rockefeller or to Ford or to Bezos.
You can't throw a rock at a news organization this year without reading back-to-back stories of how Company Z posted record breaking profits for the year followed by Company Z laying off 15% of their workforce.
That's not all that matters. The main reason to have taxes is to fund the government, not to make society a more just society. And thinking that billionaires will just take a wealth tax as served, and perhaps will ask "can I have some more" is one way to think about this, but probably not the best way. A better way to think is that action might be followed by reaction. There is no manifest destiny for California to be the epicenter of tech.
California already has very high taxes. I think marginal tax rates are higher in California than for UK tax residents, certainly for CGT, and roughly similar for income tax.
I'd say the fact that California remains the epicenter of tech despite its high taxes suggests concentration of talent matters far more than tax rates.
Sure, the government has that goal too. But the government has many tools, and using taxes for that is using the wrong tool. Or maybe you think that billionaires owe us not only to pay taxes, but also to play nice, and pay those taxes with a smile on their face?
Billionares shouldn't exist. We shouldn't just tax them for the revenue. We should tax them to limit the undemocratic power that comes with excessive wealth.
Agreed. Humans evolved in a tribal, local community leadership system. To have as much wealth as millions of people that you never interact with should not exist as a person. It is against the system principles of humanity; either create a new species and turn the billionaires into them, or balance the system.
This is wishful thinking. Billionaires can vote with their feet, or can pay expensive lawyers and accountants to find all the possible loopholes to not pay those taxes. California wants to tax Elon Musk for his trillion dollars. But how much of that trillion dollars was generated in California? He has a very valid claim that a lot of it was generated in Texas, and he'll go all the way to the Supreme Court with that.
People can vote that a new tax should be levied on billionaires, but can't vote how those billionaires will react to the tax. Moving out of state is one option (see Larry Page, Sergey Brin, etc). Hiring armies of lawyers to challenge any wealth assessment is another. Litigating to the Supreme Court yet another. I'm not a billionaire and never will be, but if I can think of these few ideas, they can think of 100 times more.
Exactly. You can ask many things, like you can ask for world peace, and you can ask for universal brotherly love. If the ask has no chance to result in the outcome you desire, it's purely wishful thinking.
It feels to me you are asking "why can't we just eliminate billionaires". Well, they have a vote in that decision.
Considering the alternative for them over the past millennia has been, inevitably that they get caught, hanged, quartered, beaten and other various violent methods: yes, they should smile, they're buying their lives with all that money :)
Ah yes, extortion is not the part where their disproportionate centralisation of wealth threatens your very livelihood with every action they take. Extortion isn't when they happily tell you they're going to replace you with AI. Extortion isn't when they steal your money with unpaid hours, it isn't when they threaten to fire you if you don't shut the fuck up and do as they say, when they act as a state within the state, corrupting institutions and polluting the very ground you, your children and your food grow on, it's when they're being held accountable for their actions and told that if they're going to have a personal wealth equal to that of millions, they also have the sum of responsibilities of these millions.
Just so you know, careers as a bootlicker are kind of a dead end.
You clearly don't understand psychology at all. Rule by fear has a major downside that Machivelli warned about. If you keep people under threat all the time, as soon as the threat fails and you can no longer point a gun at your head they preemptively kill you and feel good about it.
Threatening violence to get what you want always ends with you being out-violenced by a bigger thug.
This is how alpha chimps function in their tribe. They resort to war and violence to prolong their rule, and it works for long enough, thats all they need for the cost-benefits to be worth it on their side.
In humanity, being the alpha chimp, you can actually just run away from the tribe with all your wealth instead of outright die and form a new identity and start a life elsewhere and change your last name and go somewhere not well known, and if you and your family does this for enough generations you are forgotten.
I think this might explain the rotten apples at the tip-top of our industrial/societal wealth classes. I think they are these people, played out over generations, having somehow survived the system that used to make it impossible to do this when at the chimp level (or even medieval maybe, maybe this new form of evasion only arose in the industrial age).
It's only by fear if they don't understand how to restrain themselves. Behave well with all your wealth, and nothing will happen: it's the same reason why wealthy patrons of art and craftsmen were at least respected, and why things ended poorly for robber barons.
And no, I do not believe that Musk's flabby arms or Bezos' shiny head are a threat of bigger violence to me anyways.
> The main reason to have taxes is to fund the government, not to make society a more just society.
Both are important reasons for taxes.
"We can have democracy in this country, or we can have great wealth concentrated in the hands of a few, but we cannot have both." (often attributed to Louis Brandeis, though he probably never said exactly the quote)
Taxation is one of the primary tools for avoiding destructive levels of wealth concentration.
Of course, the wealthy decry this as unfair wealth redistribution but all governments engage in constant wealth redistribution.
In the US we happen to have decided (since the Reagan era) that through increasingly regressive taxes the redistribution will almost always function upwards, ultimately resulting in the oligarchical dismantling of our government that we find ourselves in today.
It is a technical problem bit still with very hard limits as to how much energy it will cost minimum to accomplish. You still gotta push through the air at higher speeds which takes a lot of energy/fuel. Best case is they go high enough to avoid a lot of the air, but you still have to get yourself up to that altitude through the air to start with.
Airplane cost to operate is fuel consumption, and, by the laws of physic, aerodynamic resistance scales as a square of speed, so you can’t really work around it unless you invent some new laws of physics.
Your conclusion is really a false dichotomy.
The square of something very very small (close to zero) is negligeable : thus subortibal hop (Concorde was flying at 18km altitute for example).
Ok. And why does it follow from this that the physics of an orbital data center makes no sense?
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