AFAIK the SI doens't do software development or direct computer science research. Other than operating Less Wrong, their main outputs seem to be philosophical essays and some philosophical pubblications, plus the annual Singularity Summits (which makes sense to do in the Silicon Valley, but don't have to be physically close to the SI main location). A cursory look on the SI team pages suggests that most of the staff are not CompSci professionals, and many of them didn't get their education or did research at Stanford or other Silicon Valley colleges.

The audience and donors are there, which is enough, but your point about the people is not strong: most of the people in Silicon Valley was not taught at Stanford, does that mean they are wasting their time there? Of course not, it just points out how California sucks in strange people and techies (and both) from around the world eg. my elder sister was raised and went to college on the east coast, but guess where she's working now? Silicon Valley.

From the donors point of view, IIUC, most of the money donated to the SI comes from very few big donors, Peter Thiel in particular donates much more than everybody else (maybe more than everybody else combined?). I suppose that such donors would continue to support the SI even if it was relocated.

You suppose that because it is convenient for your claim that being in Silicon Valley is wasteful, not because it is true. The widespread absence of telecommuting in corporations, the worldwide emphasis on clustering into cities so you can be physically close to everyone, how donors in every charity like to physically meet principles and "look them in the eyes", the success of LW meetups - all these point to presence being better than absence.

SI would never have gotten Thiel's support, I suspect, if it had remained in Atlanta. Having gotten his support, it will not keep it by moving out of Silicon Valley. Having moved out of Silicon Valley, it will find it hard to find any more donors.

What, like Thiel is guaranteed to never drop support? Even in such an absurd situation, why would you risk it by ignoring all other big donors? And what if you wanted to grow? If SI were to leave Silicon Valley to save some money on salaries, it would be a major long-term strategic mistake which would justify everything critics might say about SI being incompetent in choosing to be penny-wise and pound-foolish.

Even assuming that there are benefits from staying in the Silicon Valley that outweight the costs, the point stands that Yudkowsky could accept a lower salary while still staying well above subsistence level.

Dunno, but that wasn't the point I was addressing.