This is a masterful piece of financial engineering by Google and SpaceX.
Google purchased 10% of SpaceX over a decade ago. After dilution they probably own around 5%.
SpaceX is valued at a whopping 94x revenue. This deal increases SpaceX's revenue by $11 billion per year. If SpaceX maintains this revenue multiplier, then this single deal boosts SpaceX's valuation by 94 x 11 billion = $1 trillion dollars. Google owns 5% of SpaceX, so they make 50 billion dollars. Google spends 10 billion and makes 50 billion, $40 billion profit.
The even better part is that because of this deal, SpaceX is now profitable. The S&P requires companies to demonstrate 12 months of profits before they can enter the S&P 500 index. SpaceX lobbied to have this profitability requirement removed, but S&P said no and refused to rewrite the rules.
Now with this incredible deal, SpaceX is now GAAP profitable under the existing rules, and they get to join the index next year without a rule change.
I sincerely hope the market is not willing to value this sort of deal at a P/E ratio anywhere near 94.
Off the top of my head, there is a very well established business involving buying expensive things and leasing them to the companies that intend to operate them so they can sell services: aircraft leasing.
AER is the biggest player and they have a P/E ratio of, drumroll please, 6. And I expect that GPUs, despite currently looking like an appreciating asset, will actually depreciate faster than aircraft in the long run.
Why "unwilling"? That's a weird wording. S&P Dow Jones Indices decided to not go through with their rule change after it became a political issue. Obviously they were willing, the proposed rule change originated from them!
Please provide some support that the rule changes were proposed from within. Given the fact they tried pulling this nonsense on 3 indices, it seems very unlikely the rules changes originated from within.
No it isn’t. They put rules out for consultation and declined adopting them. Nobody was responding to political anything. If management had a say, they would have probably pushed to adopt the changes.
Then a bunch of influencers turned the whole thing into a conspiracy theory and a shocking number of smart people bought the pitch and churned their retirement accounts.
Quatsch. The indices will say whatever benefits their power the most, regardless of truth. The fact that they are bending now to pressure is proof enough for me.
We live in an age proving that valuation is just a manipulation.
This whole story is just like the BaM situation: the people with more money feel emboldened to pull every dastardly trick they can to tilt the table towards their pockets, away from the honest participants. SpaceX and the AI IPOs are just the latest and most grand scheme. I’m guessing you were surprised by the collapse of lehman brothers back in the day.
I don't know how I could? The indices have already provided their reasoning for these rule changes, but that's just summarily rejected by the conspiracy-minded.
To laymen this appears to be a grand conspiracy. Rules are being changed to accommodate big companies, that's usually bad.
To people in the financial industry, it's fait accompli. The indices exist to reflect the market, these IPOs are going to be big enough that the 90s-era rules will/would result in untenable divergence.
Passive investors and retirement accounts are heavily in on automatic indexing.
This deal has been pushed hard to be included prematurely in the indexes to the point that Nasdaq changed the rules.
The accusation is that these changes were made so that index funds will buy this stock automatically far earlier than they would have previously. Given the… uh… astronomical asking price, it looks like SPCEX is meant for Elon stans and institutional index investors to be the bag holders.
> retirement accounts are heavily in on automatic indexing
Majority are not. A minority are, mostly towards the S&P. Most assets remain actively managed, including in retirement assets (which covers 401(k)s, IRAs, pensions, et cetera).
Way outside of my area of expertise, but a quick search suggests that exact numbers probably depend on exactly how you define the question, but it would be broadly reasonable to say that the balance is about 50/50 +/-5%, and trending towards the passive side over time.
Yes. But I’d caution to not conflating passive investing with indexing to a popular index. They sound similar. But most passive assets index to one of a variety of indices, many of them built in-house by various asset managers. (Vanguard, for example, is famous for doing this.)
>This deal has been pushed hard to be included prematurely in the indexes to the point that Nasdaq changed the rules.
Pushed by whom? Can you link some reporting on this topic?
> Given the… uh… astronomical asking price, it looks like SPCEX is meant for Elon stans and institutional index investors to be the bag holders.
"asking price" lmao, buyers decide the prices they'll buy at.
Edit: I wonder, why is pointing out that this apparently massive conspiracy hasn't been covered by a single credible news outlet worthy of so many downvotes?
Not if they're index funds. They buy at the price it is, until they've satisfied their holdings represent the appropriate share of the market. Which, pre-IPO and early-days-after-IPO, is likely to not be accurate to the long-term price.
It has been covered extensively. The change of nasdaq rules has been covered by Bloomberg, WSJ, NYT, and most others who have reporters on the Wall Street beat. Columnists at all three of those publications have called it out as a possible play on institutional indexing money. I don’t need to tell you who like it’s some big secret either. It was Elon Musk on behalf of spacex. The changes were openly part of the ipo.
I’m not going to cite sources for a major financial news story that is being extensively covered in the financial and general press.
Here's Matt Levine from Bloomberg saying something along the lines of "lol, obviously the indices have to do this, they'll look like fools if they don't because these will be the biggest companies on the market". He famously spends much of his time making fun of Musk, but seems to reject the idea of his influence here.
That is one of the columns. The headline makes my point succinctly. Your paraphrase of the column misses the crucial point. A Nasdaq index fund doesn’t buy a company unless it is in the Nasdaq. Under the old rules SPCEX was ineligible for listing. Now Nasdaq index funds all have to buy. Index funds by nature do not selectively buy stocks, if the stock is in the index, they buy, that’s their mandate. That’s the game, to be included in as many indexes as possible that force institutional investors to buy. That’s hundreds of billions worth of funds that now have to buy in, that previously wouldn’t have had to if it wasn’t listed on the Nasdaq.
The SP500 did not waive the rules, and that made above the fold news this week, because it is a major blow to the big IPOs happening this month since they are valued so high. It will be harder for them to move stock if the massive index funds aren’t buying automatically. The big IPOs this month are asking for prices that demand hundreds of billions or trillions of dollars of liquidity. Index funds are automatic liquidity, but only if you are on the index.
They didn’t ask them to change long standing rules for shits and giggles.
You use your back channels and good ole boys club connections to try getting the rules for inclusion changed. Maybe collude would be a better verb than design? Is that your objection?
Common sense and rationality says that you cant motivate rules changes simultaneously across 3 independent indices without outside pressure. Can you provide some reasoning why this wouldn’t be the obvious situation?
>index providers will have to decide: Are they in the business of giving passive investors exposure to all the stocks that the market thinks are good, or to all the stocks that the index committee thinks are good?
>There’s only one plausible answer.
Can you explain why your theory is better than the one widely believed by people who actually work in the financial industry?
Lol, the dude asking for reporting to justify his oligarch dickriding dismisses patrick boyle in his chat history as just a youtuber while using paywalled links to support his position.
My theory is better because it isn’t ignorant of the billionaire dynamics in play.
Criticizing Bloomberg as a poor source for finance-related reporting is kind of hilarious, but then I guess your position does seem vastly more credible when viewed through a lens that also rejects Bloomberg.
newly created alt because apparently my main account has hurt too many feefees to allow me to respond to a discussion I'm having. "posting too fast" my swingin dick...
I'm not criticizing bloomberg, i'm criticizing you for posting paywalled links to support your position in an open discussion.
Given I'm bailing on this convo now because hackers news is a shite application getting in the way of people trying to talk, let me respond to our sibling thread with the closet thing my opinion has to evidence: https://fred.stlouisfed.org/graph/?g=smH. IMO we remain at an all time high of financial flimflammery as a portion of our GDP and there have been a number of recessions triggered by the financial sectors malfeasance during my lifetime because of it.
You assume far too much competence from the supposed conspirators. If what you're claiming was truly happening, it would have been leaked and widely reported.
Yet, somehow, no journo covering the world's leakiest industry has been able to break this massive-if-true story.
and you assume these people don't have family offices filled with very well paid competence.
There was a 3 month gap between Matthew Lee raising the flag about unethical accounting practices at lehman brothers and the firm's collapse. My opinion is that we haven't hit the analgous moment yet but we will.
Generally < 1 is low, between 1 and 3 is in the middle ground, and > 3 is high. However, that all depends on margins, which is why people generally use P/E or forward P/E rather than P/S to compare multiples. Issue here being that P/E is nonsensical for unprofitable companies or companies with very low margins. Spacex's P/E after Google pushed them into profitability by a slim margin would look absolutely stupid.
I would also like to point out, that on a forward P/E basis, AAPL is quite overvalued compared to historical norms, but basically every tech company is right now.
Number like this might appear when a company is expected to create a revolutionary thing that upends multiple markets. I would consider a number much larger than 3 in SpaceX’s case, but 94 feels, indeed, excessive.
It’s almost like the future we were promised in the 1960’s would immediately materialise the moment launch costs drop. Starship will be revolutionary if it pans out the way we expect (as the shuttle would have been, had it kept the low cost promise), but that’s not enough to warrant that 94 number.
SpaceX may well revolutionize multiple markets. But I really don’t see the sub-business of building large datacenters and leasing them out, hopefully at a profit, as revolutionizing anything. Also, SpaceX has no particular competitive advantages here — the list of competitors is huge.
Yeah, only a small portion of SpaceX's revenue actually comes from Space (payload delivery). At this point they are basically an ISP (Starlink) and a datacenter/leasing company.
It's not clear if Musk (SpaceX/X.ai) is really pursuing AI any more - I expect he hasn't necessarily given up on it, and he hasn't said he has, but it seems he's rented out almost all of his GPUs to Anthropic and Google, so that's not going to be much of a revenue generator, at least for time being.
It was in the news not too long ago that Musk was looking to use Samsung to fabricate "AI chips", presumably either for X.ai and/or Tesla, so perhaps he's basically put X.ai on hold until he can reboot his efforts with his own chips (& perhaps a new datacenter)?
According to their IPO S-1 draft they are 93% an AI company and 4% a space company. Its the remaining 3% of the company that is profitable, the Starlink stuff.
As I recall isn't Starlink revenue at least 3x Space revenue, so not sure how they are characterizing that 3:1 ratio as 3% vs 4% !
The "93% AI company" is also a huge mischaracterization since this isn't AI business - it's datacenter/GPU leasing business which their 2 customers can pull the plug on with 90 days notice.
That's in the IPO documents. Starlink had $11.4 billion in revenue and $4.4 billion in operating profit in 2025. Falcon9 had ~$4 billion in revenue, so they didn't cheat by subsidizing starlink with Falcon9.
Yeah, Starlink is about 3.5x the space launch revenue but still only about 0.5x in terms of profit. Falcon 9 is as optimized as a rocket could be, and absolutely owns the market. Starlink is a mostly rural service with global consumer pricing where average monthly rates in poorer countries drag the average down. Starlink government and commercial business, however, is growing quickly and I expect that soon Starlink will be ahead of launch, in terms of income, probably by the end of this year.
For SpaceX it’s critical to maintain a steady cadence. If they don’t, they lose institutional knowledge. If the cadence drops below a point, their effectiveness at reusing rockets will also drop, defects will creep in, and they’ll have higher fleet churn.
Maybe they'll become an AI company again after they've abused their privileged access as hardware providers to reverse-engineer Google and Anthropic's weights and operations.
The profit center, to the extent any division makes money, is Starlink, yes, but what we have always known as SpaceX is just a tiny side project in the combined company.
I’m pretty sure he’s just trying to become the world’s first trillionaire at this point, these deals are obviously gimmicks to boost the SpaceX share price and his less-than-critical-thinking fanbase will happily oblige.
> I sincerely hope the market is not willing to value this sort of deal at a P/E ratio anywhere near 94.
It will very likely be valued much, much higher. The SpaceX IPO is, in itself, a marvelous piece of financial engineering (requiring co-operation among multiple actors) which has been a long time in the works.
- Right out of the gate nearly all retail investment platforms have dramatically reduced requirements for purchasing an IPO, most notably Fidelity, which previously required $500,000 in your account to participate in an IPO reduced (on Friday) this amount to $2,000
- Retail investment, despite being quieter in the post-WSB era, is at all time highs.
- Reports are that the SpaceX IPO is already highly oversubscribed, meaning there are many more retail investors interested than there are shares available.
- SpaceX has a wildy low float of only ~4% which means price discovery will be much slower then normal, especially with aforementioned demand
- All of these retail platforms enforce some sort of "soft lock-in" whereby you're excluded from future IPOs if you sell your shares within 15-30 days. So if you want to get out you're not going to be able to participate in Anthropic/OpenAI IPOs in a few months.
- Coincidentally, most of the major indexes (thankfully excluding the S&P 500) have adjusted their rules to require only 15 days post-IPO before inclusion and have no profitability requirements. Many also adjusted the rules so that low float IPOs have their weight multiplied despite the low float.
- Many retirement accounts, in one way or another, are required to track these indexes and will be forced to buy these SpaceX shares at a very likely frenzied price and further drive the price up.
SpaceX will very likely open with far more retail demand than shares, the insiders (VCs, employees etc) will still be legally locked from selling, retail investors are penalized if they sell, and so the demand will be high and supply very low.
If they can keep this demand hyped for just 3 weeks, price will still be elevated when retirement accounts are forced to buy... roughly the same time retail investor start seeing the penalty for selling expiring (meaning it is not irrational at all to be in the IPO, but it is irrational to sell before being listed in an index).
Fun fact: the other fascinating thing about this IPO is the terms for insider lock-in. At first earnings (Jun 30) inside investors unlock and can therefor liquidate 20% of their shares... but if the stock performs well, they can unlock and additional 10%. There are additional rules for continued unlocking of more shares depending on performance as time goes on. So everyone on the inside has a very vested interest in a spike in stock prices: not only will their stocks be worth more, but they can realize that value faster.
I would be surprised if SpaceX price doesn't explode in the first few weeks because for everyone involved this would make sense. It's only in August that we'll start seeing the really interesting things start happening.
> Right out of the gate nearly all retail investment platforms have dramatically reduced requirements for purchasing an IPO, most notably Fidelity, which previously required $500,000 in your account to participate in an IPO reduced (on Friday) this amount to $2,000
Not at all surprising that the US in 2026 has degenerated to the point of turning the equity market itself into a bucket shop.
Comparing SpaceX to an aircraft leasing company seems more foolish to me than a 94x multiple.
I understand the gist here, but come on. This is a generational company. It’s the only relevant space launch business, and has its tentacles deep in AI infrastructure as well. Maybe the AI bet is foolish — I don’t know — you should short it!
I am comparing SpaceX’s datacenter-and-GPU leasing business to aircraft leasing.
It’s possible, and common, for one large company to have multiple business lines, each worthy of a very different P/E multiplier. In principle you end up with a weighted average of some sort.
edit: Matt Levine has some great articles about this phenomenon and how some companies try to juice it.
I would short xAI but the market can remain irrational longer than I can remain solvent. Plus all the foolishness to prop it up with other businesses just seems like bad accounting.
All of Musks business stuff highly depends on first mover advantage.
If people now selling it as a 'generational company' than it becomes even more stupid.
He didn't invent an unkown solution he is hiding to transform something into gold, he only put a lot of money into rockets.
And the rockets right now don't even have enough payload to have unlimited potential. If Space-X knows how to build a rocket very efficient, 10 years later other companies can do that too.
> All of Musks business stuff highly depends on first mover advantage.
Do they? Out of all of them, I think only one of them really depends on, or even benefits from, first mover advantages: Starlink.
Tesla famously gave away all their patents, and is also being overtaken by Chinese companies with cheaper batteries because batteries are the expensive bit; SpaceX rockets are theoretically well protected because national security regulations >> patent law, but even there lots of Chinese clones popping up; TBC and Neuralink and SolarCity are going nowhere fast; Grok wasn't even the first in its field; Twitter/X is not only in heavy decline but was also always trivially cloneable and the clones are now an open source ecosystem of semi-distributed alternatives; xAI has shown ability to make data centres while pissing off locals but the market for those data centres is other AI companies who also commission their own data centres but found themselves scaling much faster than xAI did.
(Starlink's first mover advantage is "this orbit already contains a satellite").
I don't think you can short it before the IPO happens. Well, unless you've got a few millions and go to a bank and have them make a product for you specifically. But for normal people, for now, not happening.
But Google loses $11 billion per year, and they gain $50 billion... in stock?
As far as I know they really will be paying $11 billion annually in liquid cash to SpaceX (not a small ask) starting this year, and all they get in return is more money on paper?
What incentive do they have to help SpaceX out like this at great cost, if they're not actually buying something valuable? Why are they incentivized to do this if it's just an empty deal and financial engineering? Genuine, good faith question: what are they getting out of this?
So you think Google is going to spend $11B in hopes it will boost the value of the SpaceX stock, while pretending to public investors it's a multi-year thing, and then after 1yr sell off their SpaceX stock after the value rises while also ending the contract early?
That's what I'm saying though. They must be getting something out of this deal, otherwise why would they be going through with it?
The explanation that this is just financial engineering (which to me, means neither Google nor SpaceX is getting anything out of this other than looking better on paper) doesn't make sense to me. How does this financial engineering benefit Google?
Even if they have an exit option, why is Google (a private, separate, self-interested firm) giving a single dollar to SpaceX if the deal isn't mutually beneficial?
They’re getting compute. There was a free for all period when xAI did one smart thing and that’s build like there’s no tomorrow. Because tomorrow is today, and today jurisdictions are racing to pause datacenter construction.
This deal can't just be financial engineering, since that wouldn't make sense. They must be getting something out of this, i.e. compute.
Google is buying compute because they need it. That explanation works a lot better to me than one where Google is doing this purely for unrealized future gains on a minority stake in SpaceX.
Except for people who have pensions/investments in whole market class investments who become exposed to an over valued company with a propped up value.
If whole market means whole market, then such investments are exposed to companies who are fairly valued, companies who are massively overvalued, and companies who are massively undervalued, and the whole range in between.
If you want to start picking and choosing which companies are overvalued and which are undervalued, don’t invest in whole market funds. But most people are not good at that!
The Nasdaq 100 and FTSE Russell made a rule change that allows SpaceX to enter index without mormal time for price discovery. Most index funds have rebalance day just 5 days after IPO. S&P also made rule change for S&P Total Market Index and Dow Jones US Total Stock Market Index, but left SP500 intact.
Nothing wrong with SpaceX or Anthropic getting into indexes with fair rules, this rule change is pure creed+corruption.
I mean these rule changes have been a long time coming. SpaceX was just the straw that broke the camels back here. These major index's want to stay relevant and cutting out some of the biggest companies in the market just opens the way for a "true" NASDAQ 100 that is actually market cap weighted rather then some arbitrary rules cutting somethings out.
What evidence do you have that 9/11 was not an inside job?
> please justify your position
I'll cite Matt Levine from Bloomberg:
>1. In the next few months, SpaceX, Anthropic and OpenAI will all probably go public at massive valuations.
>2. They will be fast-tracked into the major stock indexes, because those indexes are designed to reflect the stock market, and reflecting the stock market, in 2027, will absolutely require big allocations to those three companies.
Ok, now we are getting somewhere. There is no guarantee that they will be a big part of the stock market. It is not "absolutely" sure, for them or for any new public stock. That's why the indices have/had the the rules they (used) to have, to wait and see if a newly IPOed stock actually becomes a big part of the market before it becomes part of the index.
Why did they change the rules for these companies? That's what people want an explanation for. That's what is fishy about all this. I'm not asking you to explain something that seems normal. I'm asking you to explain something that doesn't make sense
Because the fundamental purpose of an index is to track the stock market. The S&P 500 benchmark was created in 1957 to benchmark the US stock market, decades before the first investment funds that copy it (by Vanguard, in 1976).
The primary purpose of an index is to track the market. If an index excludes a significant part of the market it claims to track, then the index no longer accurately reflects the market, and fails at achieving its purpose.
The S&P 500 tracks the 500 largest large-cap US stocks. All three of the major upcoming IPOs (SpaceX, OpenAI, and Anthropic) are large-cap US stocks. Together these companies comprise ~5% of the total US stock market.
In previous decades, this was not an issue, since companies IPOed much earlier when valued at <0.1% of the market. It was fine to exclude these companies from the index for some time, since they were an insignificant part of the market.
Today we have companies raising enormous amounts of private equity, and going public as significant members of the market. All of (SpaceX, Anthropic, OpenAI) are within the top 20 largest companies in the US.
This is why many are arguing for fast-track inclusion, so the index can add these companies quickly, and retain its ability to accurately track the market.
Musk is highly unpopular, and some conspiracy theorists linked financial arcanity to him in a way that sounds compelling and hidden. If you push back on the corruption claim, you’re in Musk’s pocket. The same folks who became armchair bank experts in 2023 now confidently make statements that middle 401(k)s and pensions, or the NASDAQ 100 (for whom this has probably been the most brilliant marketing move in their history, nobody talked about that index before) and the S&P 500.
At the end of the day, some RIAs in the Bay Area made bank on folks churning their retirement accounts. Some influencers got clicks. Otherwise, this is a nothing burger.
Yes. There are probably a dozen or more across the SP500 and Russel 2000 that will 10-100x in the next 5-10 years. The trick is to be able to identify them!
Laying the blame for the transparent financial manipulation we are observing at the feet of regular people (who are putting their savings into their pension funds, a system that we incentivize because of its pro social outcomes) and saying they should just opt out because they should know better, is at best callous, most people should not have to think about that issue at all.
Fun fact, both Enron and Lehman Brothers were in the S&P 500 when they went bankrupt. So yes, the whole market or even the market of the largest companies, includes some that may not be great companies. The beauty of the index is you don't have to know or care, since it'll take care of itself over time.
>The beauty of the index is you don't have to know or care, since it'll take care of itself over time
As long as there are active investors in the market conducting price discovery. Which there always will be, just pointing out that someone has to care, even if you don’t
At least until it doesn't. If this spacex venture succeeds because it got propped up by index funds, then that's a decent indicator that more will follow.
It stands to reason that active investing will be more valuable as a result
Also, there’s a long history of companies that people yell about being overvalued being the drivers of index returns, because one of the major drivers is growth rate, whereas retail investors tend to look mostly at current state.
A company can have poor fundamentals compared to its stock price, and also have an enormous P/E multiple if it has committed investors. We've seen this with multiple meme stocks and Tesla. I have no doubt SpaceX will fly high for a while and people will make a lot of money, but I don't think the company is going to make $320bn/year in AI services (with 74% profit) by 2030 as the S-1 suggests. At some point the market price will coincide with real earnings.
The key there is "whole market." This is still a tiny sliver of the whole market and most people's exposure to it is minimal. Still a wealth extraction move ultimately, but like many other such moves, the few pull just a little from each of the many. Nobody individually goes broke, but the whole class gets slightly poorer. It takes a village to raise a billionaire!
Or you could mitigate the next dot-com style crash (which wiped out nearly 80% of the NASDAQ composite).
Back then, it was "day trading" that was one of the warning signs that a bubble was ensuing. There are certainly shades of the day-trading phenomenon in the "r/wallstreetbets" gambling, and wildly overvalued meme stocks like Tesla. And this mad rush to relax the guardrails for what appears to be wildly overvalued IPOs.
Bubbles, and their inevitable collapse, are generally not as big of a problem for younger passive investors, but they can be for older ones. (Hence why I've got a "bond tent", value tilt, and other diversification. I'm at the stage where "underperforming the market" is less of a concern than "mitigation". :) )
> SpaceX could rise to be a major winner that makes people a lot of money
Based on "sane"/traditional metrics that and much more is already priced in into the IPO valuation.
e.g. Google had a many times lower P/S ratio at their IPO and was actually profitable (and software companies usually have higher valuations than capital intensive ones like SpaceX anyway). SpaceX is already valued at more than Google was 10 years after its IPO while barely making a tiny fraction of its revenue.
Alternatively you may want to be a passive investor using the current rules for index inclusion, rather than having them altered to favor this loss-making trashcan on fire.
> Somebody will be left holding the bag eventually.
I think so too. I also thought that about Facebook: IPO around 40, swiftly down to 20 - I was laughing about stupid retail getting wrecked. Now it's around 600...
Maybe you are right, maybe not.. However Facebook as an example seems entirely irrelevant, though? It was valued 15 P/S ratio at IPO and went down to 10 a year after the IPO. You'd have a point if Facebook IPO at $400 instead of $40. But it took it 10 years to reach that.
SpaceX IPO price already has many years of extremely high growth priced in. Comparing it to Facebook's or Google's IPOs is like apples to oranges.
I feel like you are missing the difference between cash out the door and the market cap value of a business. One is a real tangible thing, the other is a function of the stock market.
I don’t think google would spend this money if they did not need this compute, and who know what will happen with SpaceX valuation over the course of a few yrs.
Most things like this are more straightforward than we want them to be - this feels like google paying market value for compute?
The Facts: Tesla wasted billions for Cybertruck, hasn't had a new real model for years, promises Full Selfdriving without supervision for a decade and other companies are either on the same level or better.
xAI has such a shitty AI, that he makes more profit renting his Compute instead of making profit directly from it as the companies doing who have better AI then him.
Space-X is a limited business and he tries to make it unlimited by selling stories of Mars and dyson spheres (literaly), no one will ever finance or need as long as we have still desserts everywhere. In parallel his Starlink business gets competition left and right and despite this, he only has 10 Million customers AND increased prices for STarlink just last month or so.
And the payload, most payload increase is only Starlink. He has to sell us a story, that suddenly even with Starship, he can send so much payload up there to make Space-X this mega trillion company.
He can't even scale Starlink. Its expensive. The satelites work for 5 years and have limited capacity. He NEEDS Spaceship to be able to send up Starlink Server v3 and he hasn't even prooven he can get his ship back which he needs for the payload price.
Twitter/X? Yeah he tanked that one.
Optimus? When did you see the latest non faked demo? And while he works on it, we already have the market cornered here.
I'm just as dumbfounded about Tesla's stock value vs what it does in the market and will trash talk Elon all day long but SpaceX is a different beast. I know of whole industries that are just waiting for the ability to get more stuff into space for less. The company will succeed despite him once Starship is established.
Ok, you might be right about all of that. None of that changes the actual fact on the ground that the IPO valuation is currently being set at nearly 100x sales, and for god-knows-what-reason, enough people appear to be willing to actually pay it in order to justify that valuation.
Go argue with the entire market. I'm just the messenger.
See also: "The Madness of Crowds"
On Wall Street,people think they are betting on the fin performance of Companies, when in fact you are betting on the crowd's perception of a company's performance.
While you’re not wrong at all in the concept of your post, I wouldn’t call AOL a particularly innovative company. They basically innovated once and then went straight into lazy rent-seeking for the rest of their existence.
I don’t know if I would put Cisco or Nortel in that category, either. They were like gold rush pickaxe companies. The pickaxes themselves weren’t particularly innovative in their case.
A lot of the innovative companies from the dot com era are still around.
Who benefits from all this brilliant deal making who doesn’t already have plenty of money? If we are going to invent money out of paperwork maneuvers, you’d think we could invent a way to fund healthcare and schools.
> SpaceX is trading at a whopping 94x revenue. This deal increases SpaceX's revenue by $11 billion per year. If SpaceX maintains this revenue multiplier, then the single deal boosts SpaceX's valuation by 94 x 11 billion = $1 trillion dollars.
That final number doesn't make sense: if you're trading shares at $X revenue, increasing the revenue by $Y multiplier doesn't increase the share price by the same multiplier.
I rreally dislike how big corp figured out that the can sell stuff to each other without actually moving some good. Looking at you, Nvidia... I have a feeling that the ordinary people will again pay for that.
It all was many years ago after the great depression, and similar. Then people kept voting in republicans who's life mission is to gut the SEC and all related regulation keeping them from doing things like this.
The problem described isn't companies buying goods and services. It's buying from an entity they partially own and then profiting as that entity becomes more valuable because of the purchase.
If the parent comment is true, it seems the problematic aspect is the leverage created by the P/E ratio more than the percentage of ownership. What a weird situation.
Yes, if it's done with an intent to defraud the general population, which could be the case here. Effects and intent really matter when deciding actions.
Except the regulators first outlawed what is generally considered to have caused the great depression (savings banks allowed to invest, which translates to very, very rich people being allowed to take massive risks with poor people's money) ... then re-legalized it.
So not only are the regulators not going to allow things that cause another great depression, they're allowing the things that caused the first great depression too. They must want a rerun.
(Because if you don't allow this you're effectively demanding the extremely rich make good investments to stay rich ... and not even France, otherwise pretty socialist, dares to go that far)
I mean, we all understand that this is some sort of circular financial play, but at the end of the day Google is paying SpaceX $1 billion for compute. This is no different from AWS or Azure.
SpaceX's S-1 says they're going to make more than $320bn by 2030 at a 74% expected profit margin. That implies they're going to succeed at selling high-value AI services, not compute, which is a competive business with typical profit margins at or below 30%.
As an ignoramus to these things.... there are only just so many Googles though. Having made a significant jump, are they really expected to continue that growth?
The bet is that demand for AI tokens will continue to grow exponentially. And that SpaceX will be able to deploy and rent out GPUs to serve those tokens faster than anyone else.
The wrinkle is that they are planning to deploy those GPUs in space. That’s what people are most skeptical about, I think!
Space data centers need years of time to design, build, and deploy, 5-10 at least, and that's after they solve their multiple very difficult or impossible problems. How will they cool them? There are just simple ideas like giant structures to radiate the heat away, but you say you need to put lots of mass in orbit?
Well yes it will be hard, and hence maybe not economical, and that’s why many people are skeptical of the business case (myself included btw).
But satellite cooling already exists (Starlink v2 satellites dissipate heat at over a kilowatt I believe), so that’s why other people find it plausible.
SpaceX already has 10,000 satellites on orbit that are basically preview versions of space data centers. They've already paid 5 years of that 5-10 year timeline you outlined.
the math doesn't work. a starlink satellite has ~10kw power consumption. A single ai optimized server rack (GB300) is 140kw. Starlink works because you get a massive benefit from putting networking in space for rural users. no one has made a convincing case as to why putting a data center in space is a benefit that can come anywhere near the drawbacks (inability to service, launch cost, cooling etc)
Even permitting isn't a clear win. You are changing from land permitting (where you can pick the location to be wherever you want) to launch permitting (where you have to coordinate with the federal government for airspace and water closures). Not to mention that with the current regulatory status, a rocket explosion can easily lead to a multi-month mandatory safety review that blocks all new launches.
They also need Starship at minimum, which is now a 10+ year old project still exploding regularly.
Starship is at minimum a 2030 project at this point.
And even producing the volume of chips needed for the type of growth space data centers would need to have to justify this would be another decade if construction started now on those fabs.
Google and friends continue to see increased demand for their wares. The bet is probably that SpaceX is one of the best-placed companies to deliver incremental compute. They've shown they can build data centers fast.
A cynic might wonder given Musk's implausible trajectory and questionable associations whether the X project is primarily a grift and/or money laundering project that happens to do high-profile tech, and the primary aim is to pump the stock and hope some other opportunity to pump it further arrives in the future.
Otherwise a dump works too. There's plenty of money to be made from carefully timed shorting.
The entire AI field has been plagued by circular financing deals, so this is not new. But it's new in aerospace, and the market institutions appear complicit.
Otherwise, why is this IPO getting such unique treatment on such flimsy fundamentals?
> SpaceX is valued at a whopping 94x revenue. This deal increases SpaceX's revenue by $11 billion per year. If SpaceX maintains this revenue multiplier, then this single deal boosts SpaceX's valuation by 94 x 11 billion = $1 trillion dollars.
This isn’t how valuations work. The PE ratio isn’t fixed. It doesn’t scale with revenue. It’s based on projected future growth. This kind of deal is expected, meaning this deal likely won’t move SpaceX’s market cap much. Certainly not by anywhere close to $1T. That’s +60% of the entire pre-IPO market cap.
Google is doing this because they need more compute and TSMC is booked out for years.
I wouldnt class 'masterful' as a positive adjective personally.
EDIT: Downvotes? Not sure why. I would say Darth Vader is masterful of the force, and even that Donald Trump is masterful at being provocative. Masterful is not definitively positive or negative, it just describes being very good at something.
I don’t think your math is correct. Profit is revenues minus expenses. Unless Google’s purchase of compute brings SpaceX’s revenues into profit territory (such that their total revenues exceed their expenses), SpaceX still won’t be profitable. This is accounting 101.
Google’s investment in SpaceX is completely orthogonal to the analysis. Equity investments aren’t revenue for the issuer. (Gains on sale would be revenue to the investor, in which case, this would be Google, not SpaceX.)
SpaceX cannot report Google’s investment as revenue on its balance sheet. Full stop. Equity investments are reported as shareholder equity. If you don’t believe me, read FASB ASC 605-606, ask your friendly neighborhood CPA—or, perhaps so you’ll earn a valuable lesson about confidently spreading bullshit about subjects in which you are clearly uneducated (or, at best, superficially educated), try it yourself in a public company and go to jail.
You don’t know what you’re talking about and are way out of your lane. Stop now. In fact, you should retract your parent comment and apologize to the community for leading them astray.
Did you even try to ask even ChatGPT or Claude about this first?
> Under the terms of the deal, Google will pay SpaceX $920 million per month from October 2026 through June 2029 for access to “approximately 110,000 NVIDIA GPUs, CPUs, memory, and other related components.”
That part is not equity - that's revenue for services rendered. But a commitment for nearly $1B/mo in revenue will likely increase SpaceX's share price, and Google owns some of those shares, so their holdings will increase in value.
Additionally:
> In Comments
> Be kind. Don't be snarky. Converse curiously; don't cross-examine. Edit out swipes.
Yes, the appreciation will accrue to the investor, in this case, Google (and every other shareholder). But it is not revenue for SpaceX, which is the error OP made.
I’m aware of the guidelines. Another guideline should be “check yourself for accuracy before you reach for the keyboard”—especially since it’s easier than ever. Giving false information that, if practiced and not disclaimed, could land someone in jail is irresponsible.
Maybe they just need compute. Isn't that the more obvious reason. It's good that they own part of them and that's a bonus but the idea that the senior brass is orchestrating this to increase the paper value of something some division in google owns strikes me as wrong.
The company has been around since 2002, I'm sure plenty of insiders will cash out in the next calendar year to satisfy the minimum free float rule by the time they're eligible.
For your math to make sense, Google would have to sell its stake this year
There may be more to it than buying compute but what you're saying does not make sense for Google. More likely Google wants a good relationship with SpaceX and possibly to buoy the stock, but it's a bad NPV trade
It only shows that Musk can't make xAI profitable and he needs to push numbers higher for the IPO which he needs for <i actually do not know> his ego? debt correction? Having enough money for Starship development?
> this single deal boosts SpaceX's valuation by 94 x 11 billion = $1 trillion dollars
That's not how valuations work. Also, it is not unlikely that SpaceX's valuation drops post-IPO (tech was 6.65% in the most recent trading session) due to its very rich valuation and a long tenured investor based that is probably looking to get liquid.
Google is renting compute from SpaceX because they need GPUs and SpaceX owns a huge supply of them and has excess capacity bc no one uses Grok. Google has stated that this is a temporary arrangement while they continue to build out their own capacity.
> SpaceX is now GAAP profitable under the existing rules
We'll need to see audited financials, but if this part is true people are going to be upset. I wonder if all the people who have been acting like the S&P rules came down from the mountain with Moses will start lobbying to change them to keep SpaceX out?
And to be clear, I think SpaceX is way overvalued and I wouldn't buy it stand alone. But there are a lot of companies in the S&P 500 I wouldn't buy stand alone, yet I still own a a lot of an S&P 500 ETF. /shrug
The market should consider this a huge negative: SpaceX is renting out their compute because they have failed to make use of it themselves. This calls into question whether they have any talent in xAI at all.
So masterful that a random guy on HN can see right through it.
Let’s just call it what it is. It’s just basic fraud. They created a very temporary revenue injection right around the time of the IPO to defraud investors as much as they possibly can. Some businesses do this kind of thing just before they die because…why not?
Except they’re paying $30b (the deal is signed for almost 3 years), there’s no reason to believe that SpaceX maintains revenue multiples and this deal creates a trillion in value, liquid cash is not the same as pre-IPO shares. And finally, the deal comes down to $11 per hour of h100 equivalent, which is pretty much within market which experiences a severe lack of supply.
Utterly nauseating. Why would google help prop up this company and its figurehead? Maybe this is finally the straw that breaks the camel’s back for me and google.
It seems like Silicon Valley has decided on solidarity among tech billionaires and they're gonna take average Americans' wealth to keep themselves semi-relevant globally as China assumes global dominance. This is after insulting and demeaning the rest of the world, they plan to try to sell anemic services to other countries in whose politics they're also meddling. Circular agreements promising to purchase goods and services without the money in the bank, but you can show your promissory note to a guy with his own promissory note who then writes you a new promissory note based on your first one to take to another guy with his promissory notes, look at all the paper.
Since the S-1 filing, xAI has taken over and is likely the largest share of revenue. I would estimate that ~95%+ of xAI revenue, and 100% of its profit, is from renting their datacenters.
This is a datacenter REIT bolted onto a social media company bolted onto launch business bolted onto a niche ISP. The expected price to sales is ~100x. The best datacenter REITs trade at ~10x and pay a dividend, which SpaceX does not. Meta trades at ~7x sales. Comcast is one of the best-run ISPs, and it pays a 5.5% dividend on a stock trading at < 1x sales.
To say SpaceX is overvalued is to even beginning to convey the magnitude of the situation. It's going to be very painful when the valuation normalizes.
TSLA has a forward PE of ~200x. That is probably the most logical comparison with SpaceX. Proof that the market can stay irrational for quite a long time.
It fills me with a bit of dread about the future of the market. I am 10 years out from retirement, have a bit over 1M sitting in that market, and I wonder if it will implode in the meantime. I am fairly committed to the "invest like a dead man" (i.e. index funds, no touch), but the world we live in today makes me have real doubts that the next few decades will look anything like the last few.
Start gradually converting your equity to bonds is the standard advice on that timeframe. If you're dreading equity drawdowns, that's what fixed income is for.
Bonds are no longer recommended. Current research indicates 100% equities to be the best composition leading up to, and past, retirement.
To point, the economic uncertainties around geopolitics, AI, and war, plus irresponsible debt spending by governments and the prospect of QE (and higher inflation), is pushing long term rates steadily higher. There’s a reasonable chance that 30y treasuries are nearing 6% by the end of next year. Remember that rates and bond prices are inversely related. Anyone who holds bonds in this market will likely lose money. Holding to maturity won’t help much either because if inflation continues to rise, as is a major concern, most or all of that 5% yield gets eaten.
I'm technically not really in pure index funds, I just wanted to avoid trying to complicate my thoughts. Nearly all of my investments are in VFORX or Schwab's equivalent, and have been for a long time. So they are really composed of total market funds, bonds, etc, and Vanguard changes the ratio a bit as 2036 approaches. So while not really an index fund, from my perspective as a lay investor I treat it like that and consider myself an honorary Boglehead. I just put money in and forget about it.
This is absolutely terrible advice and is out of touch with modern financial understanding. Bonds feel psychologically safer, but lead to failure more often than total market equity portfolios, even when you account for market crashes.
I feel like I should go learn some more. I'm not in a pure index fund, I'm really in VFORX (almost completely, I'm not too original nor sophisticated financially and don't try to pick my own stock picks these days except with my "lunch money" just for fun). Do you think something like VFORX is a bad option? It's actively managed, so the fees will be a little higher than a pure index fund, but it's Vanguard and the fees are still really low. And it has total market components in addition to bonds.
I agree with everything in the video you linked (which is not surprising, given it's Ben Felix). That includes the parts about equities being less risky than bonds in very important ways, but also the parts about behavioral loss tolerance and risk capacity, and how they can indicate higher bond allocation.
So I disagree that "If you're dreading equity drawdowns, that's what fixed income is for" is absolutely terrible advice.
I always thought the psychological safety was exactly part of the point, since 100% equity portfolios do better in theory than practice, because people are more likely to panic sell.
About 10 years out as well. I’ve concluded I just invest a very balanced set of index funds and bonds and GICs across a handful of institutions, and then invest in my home because even if the housing market collapses I get to enjoy my nice home.
Other than that I’m just not over investing for retirement and instead making sure the money is spent today on family growth and experience.
I eventually just got tired of everyone with an opinion on what doing it right looks like or how to predict the market.
In a similar situation: I basically have just 2 funds in my retirement portfolio: SnP500 index fund (75%) AND Berkshire Hathaway B shares (25%)
from my research I know that in years where SnP500 drops too much (recessionary periods), BRK-B would soften the blow as Value stocks tend to do well in such times. And usually that works for me.
Eh, Tesla had a relatively normal growth company valuation for a while when they were growing strongly. The problem is the stock still hasn't compressed the multiple back down as growth stagnated... because the market swapped out "valuation based growth" for "call option on robotaxi success" at the blink of an eye.
PE of 380 against deteriorating margins & profit. This story doesn't end well. But to your point, it's likely a cult of personality that can stay upright until Musk leaves the company.
Circular financing at its finest. And Self-dealing between the hyperscalers, openai, and anthropic.
google invests in anthropic and spacex - and shows appreciated values as earnings. Then it turns around and rents tpus to anthropic to show it as revenues. The main buyers and sellers for all of this are the hyperscalers, openai and anthropic.
It is a game of musical chairs while the party is still on.
My only consolation is that this is so obvious that it's not going to lead to a disaster. Things like the housing crisis happened because long-established institutions like credit ratings and mortgage lenders didnt do their jobs.
It's the swiss cheese model, hidden behind curtains.
This is like a giant sign saying you can buy $2 for a $1.
Do companies like Uber, Tesla, etc ever intend to pay dividends? If a stock never intends to pay dividends, the value of the stock is simply the price the next shumck is willing to pay.
The value of the stock is your share in the underlying business. Because underlying business changes over time (hopefully for the better) you are not simply hoping another shmuck pays you more, like with tulips, whose underlying value does not change with time. You own a portion of a concern that is improving its own fortunes.
Furthermore, dividends are approved by the board once per quarter or once per year. A dividend on a stock is not a contractual guarantee like it is on a bond. Therefore, it cannot be a basis of value.
With your logic, Berkshire Hathaway is a long-running greater-fool tulip bubble whose shares are only bidded up by finding more shmucks.
Well, the value of the stock for people who essentially do not have any meaningful control of the business must essentially be tied to the expectation of some liquidity event down the line -- future cash flows. So this could come in the form of dividends, sale of the stock, bankruptcy proceedings, or a purchase of the business.
If I knew for certain (big if) that a business would never have a liquidity event and I couldn't transfer my ownership then it's dead capital for all intents and purposes and you could consider its value essentially $0, right?
And you can sell your tulip. But if the mania stopped and you suddenly _couldn’t_ find another person to sell it to, would you now be upset you paid $5000 for a tulip? What’s the value at which you wouldn’t be upset? Ok, that’s the intrinsic value of a tulip to you.
The thing about a profitable business that is different from a tulip is that it can at any point decide to issue a one-time or ongoing dividend. It can sell off parts to create cash. It has lots of optionality. Public companies have even more liquidity, which creates more optionality.
Even if you don't have immediate liquidity, it would obviously be worth something to have a slice of e.g. Rolex SA. That's obviously different than owning a tulip.
Things don't have any inherent value. It is priced at a level that a buyer thinks it is worth.
A gallon of oil can be $3 or $6 depending on whether someone is willing to pay. It can also be $10 but only if people are willing to buy it at $10 if not "prices will come down to match the demand" - another way of saying it would be $9..$8...$7...$6 until it matches a buyer at which point gas is $6.
This is what I am trying to express. There is no "inherent price" or "inherent value" there is only the real value that it is bought at (in terms of money). There can be other values (non money) like if someone is willing to swap something for it etc.
There is no underlying value. It is only how much other people are willing to exchange for it.
So stock marked is always meaningless except considering it is so large and consequanetial and so many people have access to it that it will be rational automagically. This is more of a belief that seems to be fairly correct than a rational line of thinking. This is similar to Democracy in a way
You seem to be operating on the assumption that stock values are just totally and completely random and the fact that Google is worth $4T is just as much of a possibility as Hertz Rental Car being worth $1.5B
If you disagree with the above framing, your reasoning will have to concede the existence of underlying value. Yes, obviously the price of a share is the result of the bid and the ask price in the order book. But those prices are based on something, they are not randomly generated. They are based on conceptions of value. The fact that companies with increasing free cash flow over long periods of time always see increasing share prices over time is not random coincidence.
The price of a growing business should go up because it has more options to create returns for shareholders.
Use Aldi (revenue ~$120B) as an example. Do you think a person would be a shmuck to buy a slice of it now versus when revenue was $1 million? If not, why not? Your answer will help understand why stock has value even without voting control or dividends.
That’s the story, but it’s bullshit. The underlying intrinsic value of a stock can only be materialized if the company liquidates and you receive a share of the sell off of its assets. How many publicly traded companies abruptly decide they’re tired of the business, stop in their tracks, and liquidate their assets? This only really happens if the company is acquired or if it goes bankrupt. Acquisition is the closest the story comes to truth, but it’s also just forced sale to a greater shmuck. If a company goes bankrupt, a tiny fraction of the current stock price would be realized into cash for common investors because of all the privileged investors and lenders ahead of them, not to mention that the actual value of capital assets etc probably doesn’t cover all the losses (the company’s going bankrupt after all). The value of the underlying capital assets are essentially never returned to the common investors, and the idea that you own a portion of them is in practical terms a lie.
> The underlying intrinsic value of a stock can only be materialized if the company liquidates and you receive a share of the sell off of its assets.
This is wildly incorrect. A profitable company can decide to begin paying out dividends, which can eventually return > 100% of the investor's purchase price. A company can issue more stock or bonds to raise cash to pay investors. A company can spin off assets to raise cash to pay investors.
Your framing is very much like a short-term PE investor, and if you look to their playbooks you can see there are many ways for intrinsic value to be realized while leaving an operating business behind. There are any number of stories where PE investors make big profits and then turn around and resell the company for more than they paid.
Yes, the profits it pays out are the one thing that actually makes sense, but the premise of the grandparent post was to ask what a share is worth _without_ dividends. And the answer is that shares are intrinsically worth very little. Liquidation value (actual liquidation - bankruptcy or going out of business or an exchange closure) is rarely ever practically realized for common investors. Even if you’re trading on the discounted expectation of a larger liquidation pie, nearly 0% is still nearly 0%.
Voting rights are also not valuable by themselves - they are only useful to steer the company towards greater future payouts, which means you are appealing to some other entitlement to value.
If you zoom out, a company is a temporary arrangement of people and things that makes more money than it spends _over time_. They are not really designed to accumulate and store value in and of themselves. The machines the employees use to do the work is a small fraction of the overall utility of a living breathing business. The valuable part is the capacity of this techno-social organism to reliably and continuously make profit, which is far greater than the sum of its parts. So if the profit that’s being earned is never paid out to stakeholders, then there’s no point in being a stakeholder. If the profit is redirected to make the organism bigger, then you are trading now-dollars for future-dollars which must be appropriately discounted. If everyone expects a company to do this forever, then the correct price is what the expected liquidation share should be, and that number is basically zero.
Yet, stocks that do not pay dividends exist at high valuations. What that tells you is that modern day stock trading is tulips: the lion’s share of the value derives from a temporarily stable, shared, _correct_ perception that someone else will buy it back from you.
The reality is that general investors are the greater fools in this arrangement. The prevalence of preferred stock is a tell that there are owners and there are “owners”. What we should do is recognize this and admit that the big initial investors and employees themselves are the owners, because they are the group small enough to actually realize liquidation value (should it ever be necessary). The public investors have no realistic claim on that value, so their shares should be more clearly labeled as dividend rights, which would cause them to be priced as such.
Excellent question. They may not intend, today, to pay dividends. However, the same question could have been asked about the successful tech companies of the '00s. Companies don't like to start paying dividends until they are fairly certain of their future profit stream and therefore ability to continue paying (and increasing) the dividends in the future.
Apple, Oracle, Nvidia, Cisco, Alphabet, Meta, Salesforce, and Qualcomm all pay dividends now. It's not unreasonable to expect Uber and Tesla to pay in the future. However, the median time after IPO for similar companies to pay a dividend is close to 20 years. So we could expect Uber to perhaps wfstart paying sometime around 2039. Tesla...is Tesla so who knows?
There are lots of US companies that pay dividends. Another commentor lists some tech companies that do, and there are lots of other types of businesses that do. A quick internet search will give you a list.
You are correct that stock buybacks are another way that companies reward their shareholders.
I love this clip (this is the other guy that predicted the 2008 crash, played by Steve Carell in The Big Short). Cult Stock is a great way to think about it.
> It's going to be very painful when the valuation normalizes.
Painful for everyone except the grifters who are engineering this and can get out early enough with their stolen millions and billions. Musk's companies are just a giant pyramid scheme.
Google renting infra from xAI, I did not see that coming. My understanding of what computers are doing, what companies are doing and what governments are doing seems to be getting worse day by day.
IIRC the large majority of their hardware (at least one tranche, they might have gotten more later) was Elon effectively stealing it from Tesla for xAI, saying “I’m personally doing Tesla a favor, since they can’t fully utilize it currently”, and is now renting that (stolen) compute to subsidize SpaceX.
Because hardware depreciates quickly, datacenter rentals are a competitive business with much lower profit margins than the IPO prospectus requires (even if there is a temporary bottleneck now) and there's no real moat.
The original batch was probably Musks "AI will solve everything, i have a small dick, i want to buy all the hardware and be the first" which became "Ah shit Grok doesn't need all the compute, we can't sell it properly our IPO is coming soon we need better numbers.
And
"Shit why did we agree to buy so much hardware if i can't even use the current one fully?"
to
"Ah fuck it, who cares if i indirectly pivot to selling this compute. It brings money and my Fanboys probably think its some magic smartness and not just ignorance"
> Google renting infra from xAI, I did not see that coming.
Actually that seems to be fairly logical? Hardware is what xAI has, and it's in great demand. So sell what makes you money. The real story here is that that xAI hardware is going to be running Gemini and not Grok. Which is to say: Grok basically failed as a frontier AI and they need to pivot to a business model which makes money.
Obviously not everything Musk did was wrong. xAI bought a ton of compute when it was possible to get it. But the product they were going to build with it failed and so now they're deciding to be a landlord.
This IPO is just insane. No way do you justify a $trillion+ valuation based on what amounts to a bunch of commoditized rent seeking endeavors. Datacenters are buildings and chips, and everyone can build those. Starlink is just an ISP with lots of competition at scale (they have the high bandwidth mobile market cornered, but that's a very small market!). Mars is at best a grift on public funding. Even satellite launch services are commoditized and competetive these days.
Keep in mind Google also rents GPUs via GCP, so they could be just reselling these to GCP customers?
Thing is though, Anthropic was really against the wall with lack of compute pre xAI deal. And tbh, Gemini reliability has been abysmal which probably points to real compute shortages.
And nearly _every_ major DC project is really up against it with massive delays, etc. Stargate UAE has been badly affected by the Iran conflict.
So maybe long term this isn't a great business, but _right now_ I'm not convinced it's all financial engineering. There is a enormous shortage of compute and xAI has a load of it _available now_.
> So maybe long term this isn't a great business, but _right now_
Exactly! "Maybe not a long term great business" is exactly the opposite of what you want to buy in an IPO.
This is a "private equity can squeeze out a ton of cash from this asset portfolio" situation, and very much not a "in a few years this will be a trillion dollar business competing with the biggest companies in the world" bet.
The whole of the space part of SpaceX is like 10% of the claimed business according to their S-1. And most of that is Starlink, not launches for third parties.
But building a Starlink competitor is essentially impossible without also building a space company, and the main competitor doing that just turned their only launchpad into a crater and is out of the game for a year or so.
If you are asking for government and research needs rather than commercial then ISRO (Indian space research organization) beats SpaceX
That being said, ISRO focuses more on research and scientific world as compared to the commercial world but they were the least expensive option out there before SpaceX and the only differential which causes the pricing is actually re-usability aspect of SpaceX rockets/launchers and ISRO is actively working towards that too.
And another thing as brainwad said here but Space part of SpaceX is just 10% of the claimed business according to their S-1
> Which is to say: Grok basically failed as a frontier AI and they need to pivot to a business model which makes money.
They can just run Grok as a local AI inside Tesla cars. It's actually really efficient as a compute platform because the Tesla cars are in motion at highway speeds, which gives you lots of free airflow for shedding waste heat via the car radiator. Way more efficient than trying to run AI on space satellites.
I am pretty sure the gov gets an uncensored /heretic version of the AI models instead of the nanny stuff we get so Grok really doesn’t have a “killer” feature. Even for multi model passes(I.e used purely as a contrarian gate) it’s not really that great due the high rate of hallucinations.
Anecdotally, Grok is mostly not that anti-woke. It is coasting off of its reputation from Elon's marketing. That said, it does have meaningfully fewer guardrails, which is a real benefit.
Who’s going to be paying for the energy? People have been floating using the cars as compute for years and it just doesn’t make any financial sense for anyone.
Teslas spend a tiny percentage of their life at highway speeds, and a major selling point of the platform is that their compute would be used to pilot the vehicle.
If they could train using Teslas they wouldn't have needed Dojo.
You make it sound like they’ve given up on Grok, which I don’t think is accurate. I think it’s been mentioned the Grok 5 1.5T model is currently training on Colossus 2. And their recent deal with cursor is part of being able to eventually compete with Anthropic for agentic coding.
Strongly agree with all of this, except that charging rent for the use of an asset you own is not what economic "rent-seeking" means. I blame the dumbass economists who named it this, forever polluting the discussion to be had about regulatory capture and legalized political bribery.
Thanks for the comment but then commenting to the GP (@Hellojimbo) that sure Elon might hate Demis
But nobody denies a 920M$ per deal for an unprofitable company's like SpaceX at this point, last line to somehow become profitable after this deal.
The scale at this money & influence operates, although I feel like people project to the general public that they lean a particular side and sometimes they do but what they lean the most is towards money and whatever response is the most convenient for them at that time.
The future needs more AI compute. No one has enough AI compute.
Memory chip vendors are betting hard on this being a temporary state of affairs that doesn't last, and doesn't warrant commissioning a shitton of new memory foundries.
Musk is betting hard on this staying that way, and is putting the next Colossus into the last place not corrupted by NIMBYs... SPACE!
> $920 million per month from October 2026 through June 2029 for access to “approximately 110,000 NVIDIA GPUs, CPUs, memory, and other related components.
That's about $8,400/month per "component" is that in the ballpark at all with what a month of dedicated/exclusive access to an NVIDIA GPU would go for?
That's roughly 11.66$ per hour per GPU, which is above the price that Google Cloud is reselling them at if you commit for 36 months: https://getdeploying.com/gpus/nvidia-b200
That's for standalone servers. xAI has something that nobody else has. The single largest interconnected cluster[1]. For inference it doesn't really matter, but for training that networking is crucial.
[1] Probably, there could be undisclosed clusters owned by other companies.
Yeah I was wondering about this too. It seems like way too much per GPU considering the purchase price of a B200 was around $40k last time I checked. So if we naively ignore the price of electricity and maintanence, it would only take 5 months before renting is a worse deal than buying outright.
It’s a supply and demand thing. Google would definitely be buying from nvidia and setting up themselves if nvidia had the capacity.
SpaceX/xAi/musk are currently in a good market for “happening to own 100k cards we have nothing to do with”, and are exercising that control as hard as they can.
A huge chunk of SoaceX value in their filing is attributed to their AI technology (aka Grok). I believe it’s 90% or more… Now, it seems they’re leasing the infrastructure required for Grok to scale to Anthropic and Google. I wonder how that math works…
But what is xAI? I thought that was the company that had the compute + Grok, the AI company? Since when does SpaceX (which I thought was a space company?) own AI-compute hardware and/or can do model hosting? Are all of Musks companies just one big thing now where the names no longer matter, or how is it supposed to work?
Edit: seems I'm just a bit behind: "xAI — now part of SpaceX ", seems really strange for a space company to buy an AI company, but I guess rather that, than the other way around.
Musk sold Twitter into xAI which he then sold into SpaceX as a financial engineering effort to lessen the impact of massive debts and cash burn. The IPO and some clever structuring is the final step in the process.
Not really strange... if the goal is to go to mars, you probably need robots, those need intelligence -> ai. It fits pretty well, especially because you want to own all the core technologies as a company.
Why 4-5 companies instead of one then? I thought the goal of SpaceX was to get to Mars, why does xAI need to have that same goal? Or he didn't think xAI was suitable for that goal, then changed his mind so merged the companies?
You are overthinking this. The whole purpose of the SpaceX / xAI merger is for Musk to launder his failing companies to make them more palatable to the public. Not unlike the complex Mortgage Backed Securities of the GFC era which had a ton of low quality debt but yet were somehow assigned spotless credit ratings. Twitter is also being rolled up into SpaceX for the same reason.
The stated goal is to "go to mars", the real goal is to make money.
He sold his failing but hype business to his soon-to-IPO successful but kinda boring business.
It's a way of laundering the debt and dumping into investors as he pitted different indexes against each other to force his way into one of them, and have people's 401k buy into them. Its a ton of money.
I wouldn't be surprised if Tesla is bought into spaceX in the future.
It has nothing to do with Grok, at least not the current iteration. SpaceX is the only company that can concievably launch large scale orbital compute.
I’m out of the loop, why is compute better /after/ being launched into space? Is the idea just to be co-located within the ISP to reduce round trip time to the LLMs?
There would be some benefits, assuming you could do it for a reasonable cost. For one, you have effectively uninterruptible power using solar panels in space. And it's free, too, once you have the hardware in place.
And you don't have to deal with any of the site selection stuff you have for terrestrial data centers. No NIMBYs. No politicians trying to extort bribes. No water problems.
In space there are no earthquakes, tornadoes, or floods.
I'm still skeptical. It's hard to believe it costs so much to build a data center on the ground that putting it into orbit is an economically viable alternative.
Yeah, launch costs alone make it infeasible, and power being "free" exacerbates the cost (gotta get all those panels up there). Cooling is also dramatically harder, plus shielding, and it makes repair/upgrade basically impossible.
I'm not going to assert that large scale space compute will never happen, but I feel confident saying it won't happen this decade or next.
Last time I did the math, launch costs were well balanced against permitting delays (mediated by interest rates). The break even rests almost entirely on radiator mass efficiency (which is, admittedly, a function of launch costs).
Like, if everyone’s terrestrial datacenter projects start getting blocked, and demand for AI continues, the price a rational buyer would pay for in-orbit compute could get ridiculous enough to break even on current kit. And current kit in launch vehicles, radiators and solar panels is advancing.
I don’t think the thesis is met yet. But it’s less ridiculous than I thought it was before I sat down with pen and paper.
These sort of numbers are really easy to estimate and it sounds like you haven’t done.
For the sake of a reality check:
IPO is raising approx $75bn of new equity
SpaceX has negotiated substantially below market fee of 0.75%
Total fee pool = ~550mio USD
Fee pool will be split between 23 banks, so average of 23mio per bank, likely skewed heavily towards Goldman Sachs and Morgan Stanley as the lead bookrunners.
Clearly everyone has incentives for spaceX to go up, but important to keep in mind the order of magnitudes we are talking about, the monthly google compute spend in the headline totally eclipses the one off banking fees
> compute from its Colossus 1 data center near Memphis, Tennessee, that xAI — now part of SpaceX — originally built for its own artificial intelligence efforts.
Is this the same Memphis data center notorious for burning jet fuel nonstop for power?
Is there any data on whether Google, Amazon, Microsoft, Anthropic, OpenAI etc are most cost efficient in getting datacenter compute online and operating it?
I'd be interested in how large the range is here across company and region and specific data center and how it relates to companies like Hetzner if at all.
Well, Elon seems to take the fastest path possible to these DCs. One can envision a future where these get shut down for the severity of the pollution, not to mention being built and operated illegally [0].
> Is there any data on whether Google, Amazon, Microsoft, Anthropic, OpenAI etc are most cost efficient in getting datacenter compute online and operating it?
Well considering that ~80% of the price is hardware deprecation, I don't know why they'd be considerably worse than anyone else at negotiating hardware deals.
Typically when you buy in bulk, you have more sway.
Companies like Google also have in-house chips like TPUs that are substantially cheaper for inference for them to make than anyone else can get through Nvidia.
I’ve seen some numbers related to datacenters in Ireland and they would stress price per MW as a way to see where to build them. But then you have depreciation of equipment as well. Depreciation can be played with when filing taxes though.
I don't think they are most efficient for small GPUs. I think they might only be the one which have capex and certainty required for multimillion dollar purchase of GB200 NVL72 or something of that scale.
I am really wondering if Google is just subleasing Anthropic capacity. The terms are suspiciously the same as Anthropic's and Anthropic was supposed to have leased out all of Colossus 1.
Maybe with the corp token spending limits and the rise of codex, Anthropic saw steep deceleration in usuage?
> As part of that deal, Anthropic agreed to pay SpaceX $1.25 billion per month through 2029 to rent all the available compute from its Colossus 1 data center near Memphis, Tennessee, that xAI — now part of SpaceX — originally built for its own artificial intelligence efforts.
I don't get why SpaceX is going public. But anyway, well played, the whole crypto mining that dried out GPUs back in the day seems tiny now.
Liquidity for investors. They raised everything they could from private markets, government contract, debt, the remaining source of financing is from the public
Why would you want to own your own giant datacenter? What would you do with it? Of course it's expensive to operate a datacenter that serves millions of people.
These deals are part of how the AI economy operates. Amodei has explained this in his recent Patel podcast.
1. Building datacenters takes time. Months, if not years. They take billions of investment.
2. AI revenue is highly unpredictable. Sure, you can make predictions, but maybe your competitor releases a better model 2 weeks after your release, maybe the new model you built isn't as much better, maybe the chinese models steal your show, etc.
3. AI revenue grows a lot. Anthropic's case is 10x per year.
4. So if you are off by just a year in terms of how much GPU you actually need, then that means a 90% of your compute capacity is wasted, and you go bankrupt.
As a solution, companies buy compute from each other! If one company's model did well, they can buy compute from the company whose model didn't do well (like in the case of grok). It's beneficial for both sides, so positive sum game. So deals like this aren't something bad in itself.
It's nothing new either. In SAAS deals, you often commit to a certain revenue and then pay extra if your revenue exceeds that amount. And power market is cut in two as well: longer term deals plus spot markets. Spot prices are way higher than the longer term deal prices.
Given it's SpaceX of course there is financial engineering involved: the GPUs aren't actually owned by SpaceX but a daughter company, and it's been financed via loans that are backed by pension funds. So it's already the case that pension funds back bear the risks associated with SpaceX's operations.
Right now, the bulk of the AI bubble sits in such debt statements and not in public markets.
> the GPUs aren't actually owned by SpaceX but a daughter company, and it's been financed via loans that are backed by pension funds. So it's already the case that pension funds back bear the risks associated with SpaceX's operations.
I think a more accurate phrasing of the Valor GPU deal would be something like this:
"SpaceX’s AI compute buildout relies in part on off-balance-sheet or lease-style financing vehicles. Valor-owned vehicles purchased Nvidia GPU infrastructure and leased it to xAI/SpaceX subsidiaries, with Apollo providing debt financing and SpaceX or subsidiaries guaranteeing some obligations. That creates indirect exposure for institutional and retirement capital, though not necessarily direct pension-fund ownership of SpaceX operational risk."
Is this admission that google’s proprietary chips etc. are not cutting it? Why would you need a bunch of nvidia GPUs if you have your own silicon? (AFAIK they have their own for both inference and training do they not?)
How do you come to this conclusion? All it means is that spacex has compute and google does not.
Suppose tpus were theoretically a million times better, but cannot be produced due to supply chain constraints, this action would still be rational.
My personal take is that this really shows how bottlenecked the entire supply chain is. For such an important commodity there are shockingly few players ready for scale.
3 years is quite a short horizon when it comes to semiconductor fabs. Also this article is a dupe, when it was previously discussed it surfaced that after some time either party can cancel with only 90 days notice.
Kinda; while it does show that overall Google's proprietary chips etc. are not cutting it, it doesn't say if the problem is the hardware itself or the factories to make more of the hardware. Without more information, it could be that Google's hardware is 100x the energy efficiency per token, but they can only make enough hardware for 1% of the tokens there's currently demand for: 1% of your product being 0.01% of your costs isn't nothing, but it leaves the other 99% at full price.
Its because none of the promised Data Center and NVIDIA hardware deployments described in NVDA earnings calls have actually happened. Once more Ed Zitron has the goods: https://youtu.be/zbKDmkJPVvI?t=482
Supply and demand? Bubblists seem to think there's an infinite supply of chips, power, and water to make as many chat bots as possible; physics, as usual, dictates limits.
Or alternatively there is simply a huge demand for compute and this is helping them fill a short-term need. Keep in mind if you saw in the article there is a 90-day cancellation clause. This is a nothing burger.
I don't think so. It provides some nice optionality for Google and I am guessing this opportunity only exists because Grok is not popular and xAI does not really have any other use atm.
“If we fail to deliver access to the committed amount of GPUs by September 30, 2026, then following a one-month grace period, Google may immediately terminate the agreement or accept the number of GPUs provided, with a corresponding pro rata reduction in the monthly fees. After December 31, 2026, the agreement may be terminated by either party upon 90 days' notice.”
SpaceX has recently started pitching itself as an orbital datacenter company.
If you buy into that business model (or pretend to), it makes sense for SpaceX to start selling compute early. Their "earthside compute" clients of today are "skyside compute" clients of tomorrow.
A part of Musk's old pitch for Starlink was: space-based solar makes perfect sense for powering space assets, and no sense whatsoever for powering Earth assets. So you have to find a way to use that power in space to do something economically useful. Comms were the only scalable way to do that, so Starlink it was.
I can see how space-based datacenters would follow the same logic. If SpaceX can make them economical, that is. There's no guarantees of that - but if anyone at all can make space-based datacenters economical, it's SpaceX.
> if anyone at all can make space-based datacenters economical, it's SpaceX
Let's hope burning ten thousand tons of toxic e-waste annually in upper atmoshphere never becomes economical. Or mankind gets to senses and bans externalizing your e-waste problem by burning in atmosphere...
> ...burning ten thousand tons of toxic e-waste annually...
Expressing water usage in gallons makes it seem really large, too. NASA says[0]:
Scientists estimate that about 48.5 tons (44 tonnes or 44,000 kilograms) of meteoritic material falls on Earth each day.
If we assume that they're all the heavier v2 units, the total mass of the orbital portion of Starlink is ten point four tons. [1] If we assumed that they lasted one year (instead of the five that they're reported to last[1]), then over the course of a year, Starlink would dump six hours worth of asteroid collisions into the atmosphere.
I think we'll be fine. Pour all that frustrated energy you have into substantially reducing the amount of incredibly hazardous d-waste [3] big commercial operators burn up into our atmosphere, instead.
I think you missed a factor of 1000 somewhere in there: Each satellite weighs about 1 ton, there are about 10,000 of them. That is 10,000 tons in orbit for the constellation, not 10. Assuming a 5 year decay, that's 10000/5/365 ~= 5 tons / day. Still about 10% of the natural incoming material, but considerably more than your "six hours worth per year".
> I think you missed a factor of 1000 somewhere in there... there are about 10,000 of them. That is 10,000 tons in orbit for the constellation, not 10.
I did. what. the. hell? Maybe my swiss-cheese brain read the "," in 10,413 as a decimal separator? I guess that's what I get for posting while old. Thanks for the correction and supporting arithmetic.
Though, I still stand by my "please for the love of everything, get to complaining about CO2 because this thing you're complaining about is a damn nothingburger" conclusion. (I am sufficiently aware to notice that that you're not OP, so the "you" in that pseudoquote is not directed at you.)
There are no NIMBYs in space. No government permitting on land use. And solar power is plentiful. It's like having a dollar store Dyson sphere.
Making use of that is predicated entirely on being able to put a lot of hardware into space cheaply. SpaceX is the undisputed best at that, no one comes close. The question is whether their "best" is good enough to make space datacenters economical.
There are many Not In My Orbit people on this very page. Many current national politicians would be happy to vote AI out of orbit today. Space is not an escape from earthly politics.
I am surprised how many people say that there is no reason to put data centers in orbit, when, at the same time, data centers are becoming the hated thing du jour all over the US and politicians left and right (but mostly left-of-center) are touting bans and restrictions to their electorates.
It is definitely to escape most political pressures on Earth. They will never be able to sidestep the US feds, but aside from an open war with China or Russia, all other authorities are out of the game when it comes to space.
People don't want to live near data centers. But companies find it logistically cheaper and easier to keep proposing to build them near existing towns and infrastructure, and then deal with regulatory fights rather then picking an isolated area and running an extension of high voltage lines out to them.
Which tells you something about why space data centers makes no sense.
The data link between earth and space has so much bandwidth.
There are sensors in space that send data to earth it gets processed and then the data is sent back to space then to the end user back on earth. If you do the compute in space you save the space-earth transfer time twice. Latency and availability of bandwidth are both factors.
There may be limited utility for this outside of military.
Evaporative cooling is the way it happens down on earth - and that shuttles h2o molecules from dense useful clumps like aquifers and rivers to a less useful form spread out in the air. But evaporating h2o isn’t an option in space afaik - since there’s a shortage of air to take up the h2o. In fact I think radiative cooling is the only actual option in space.
That's the neat thing: you don't, or at least not in the megawatt range. A kilowatt can be done with radiative cooling but doesn't get you far with a hypothetical datacenter satellite.
No; if you try to do this you don't launch in the first place because the amount of servers required to be useful can't be cooled within your payload budget.
My job is mostly worrying about cooling paths, maintenance, power, heat transfer, lifetime of GPUs, and high performance networks. NVIDIA partner. I can drive to the datacenter. This stuff BARELY works here on Earth. Especially thermal issues.
Looking forward to watching spacex defeat physics.
Musk is a snake oil salesman (that’s been clear since the self-driving car promises) but he also has made a lot of people a lot of money and that’s all anybody really cares about.
None of his companies have a traditionally reasonable valuation. Is there any reason to think that’s going to change soon?
Can anyone explain how the thermals will work? One of the biggest challenges on Earth is cooling the data center, and it's at least as challenging in space.
The earthbound equivalent would be strapping each chassis to the back of a dedicated solar panel and having the panel double as a giant heat sink. The problem is that doesn't work on the surface due to (at least) rain, the day/night cycle, and the cost of real estate.
But it doesn't matter since in this scenario each chassis is powered exclusively by the respective panel. How hot does a black panel sitting in the midday sun get? That's your equilibrium temperature. As long as it's within the operational limit of the device there's no problem.
The reason earthbound DCs are difficult to cool is because of density. When you match up panels to devices and shelter in their shadow you no longer have anywhere near the same power density.
It won’t. It’s not supposed to work, it’s a mirage to raise dumb money. It’s way, way more challenging to cool something a vacuum. The only option is radiative cooling, which is far from being performant. The idea is as realistic as Musk previous grifts such as his digging company and there hyperloop, both absurd and supposed to revolutionize transport, both created as grifting devices and ensure public transport doesn’t develop in the US
... what? Data centers are literally the original form of computer facility. How are they different from the computer rooms mainframes, etc were housed in?
There are asteroids with concentrations of precious metals more valuable than earth's entire economy. Why don't we just send up spaceships to mine them and send the haul back to earth? What country would say no to free money?
After all, it's just an engineering challenge, not impossible.
The numbers on that are at least somewhat questionable. Even ignoring that you'd crash the market (thus it's not actually worth what it first appears to be) what is the total fuel cost to adjust the orbit of the target asteroid to land the entire thing back on the earth? Because that's what you're doing bit by bit as you shuttle loads of ore back.
Now if you have space based manufacturing or fuel production on the other hand ...
That's the point. Basic rule of thumb: anytime someone is arguing that the military will fund something, they're wrong.
Its not a real argument it's just used because to most people the military is a big mysterious thing they don't understand which they think has an infinite budget for things.
When I hear space I think "that's the perfect location for a data center", since data centers are lightweight, small, require little power, don't need human intervention, have lifetimes measured in decades and don't have to reject heat. Since space easily satisfies these requirements, space is an ideal deployment location for data centers.
Isn't the Vegas Loop just a car tunnel? As far as I know, there aren't any actual hyperloops[1] involved, just a narrow highway, even if they deceivingly brand it "Loop".
It seems off at first glance but actually appears to work out if you do the math. You can model a solar panel as a flat, opaque rectangle. You can calculate power generation and equilibrium temperature for it based on surface area. If you require additional radiative surface area to achieve the desired equilibrium temperature you can place a flat triangle orthogonal to and behind the solar panel in its shadow.
Compute is "free" at that point because waste heat is coming out of the total energy flux which was already accounted for (because we modeled it as opaque).
Of course swapping out the equipment poses a bit of a challenge. The "helping hands" rate is entirely unaffordable and wait until you see this new DC's physical access policies. 0/10 would not rack with them again.
This is all just the typical Elon hate. What's desperate about getting paid $920,000,000 per month? If that's desperation, I'd love to start groveling more!
Given extreme supply constraints, it's very unlikely that Google or Anthropic will just suddenly cancel right after the IPO unless their own demand collapses. And even if this were true, what value would that provide Musk? Could you imagine if your newly public company suddenly received termination notices from your two largest compute customers? Disaster.
I have no love or hate for Elon Musk. I wish him luck with his space endeavours.
What's desperate is announcing a temporary (allegedly) doubling of revenues days before an IPO that has been criticised for being overpriced at 93 times sales.
These data centers were supposed to serve xAI. Now suddenly they get rented out to others. Why the sudden change of plans?
It's either an emergency accounting gimmick or the effective shutdown or repurposing of xAI.
It’s a repurposing of xAI to be a commodity service provider during a crunch for that commodity. It would be dumb if xAI had any quality or market traction, but they have neither, so it’s actually a rational fallback. But it writes off any high margin future in favor of low margin scale.
And once the compute crunch is over, they’ll have a lot of overprovisioned data centers with no business to soak up the capacity.
Didn't Anthropic pull the same in both ways? you pull me up I pull you up kind of deal? Sounds like SpaceX bought themselves some time up to Q4, which is not the case of Anthropic and even worse for OpenAI. Not counting that none of them got their S&P500 fast-track ticket.
If you look at the IPO filings you’ll see that Spacex as we know it is just a small part of the expected revenue generator. It is supposedly Grok and AI, hence Google competitor.
All companies are now AI companies.
Just like a while ago all companies were suddenly Ads companies.
The entire tech sector is one big FOMO - once you reach certain scale you do exactly the same thing as everyone else.
I get what you mean but SpaceX owns xAI, which is objectively a company that trains models and has massive distribution by owning X.
I don’t think their models are competitive with Google, and Google obviously has the best distribution imaginable, but they definitely are a competitor.
Their satellite internet business is the only thing which makes them money, which is enabled by their orbital launch business which is as of right now not profitable and I have no idea of if it ever will be but without it they would not be able to launch enough satellites.
Their stupidity with AI and buying X mostly seems to be about scamming investors to make Musk even richer. Like this particular deal is just them doing what CoreWeave does at a SpaceX valuation.
Launch isn't profitable simply because ongoing Starship R&D is eating into it. A lot of opex, capex, and pre-revenue.
If they start running Starship anywhere near the way they do Falcon 9, it'll flip into profits. A lot of big bets SpaceX made ride on Starship coming online. I'm honestly surprised Starlink is already so profitable without it.
One of their big named bets includes: orbital datacenters. Which puts this specific deal into perspective.
80% of the space launch business is putting starlink satellites into orbit, so it's all internal funny money. They could very well be letting the space launch business take losses to make the satellite internet business look better (only profitable part of the whole thing).
Wasn't starship supposed to be funded by the NASA contract?
Well it would be a lot easier if those companies wanted to build them in uninhabited areas in the middle of nowhere with no infrastructure. Somehow they don't want to do that...
Sorry, I was unclear. With that I did not talk about this particular deal. This particular deal seems sane. XAI built more compute that they can use themselves since Grok is not very successful so to not just have the hardware standing there they rent it out to competitors. Makes total sense.
It is other things Musk has gone with Twitter and SpaceX which are shady.
That's only about 35% more than the main telecom operator here in Belgium (Proximus: $7.2B revenue in 2025, $2.5B market cap, positive earnings for 15+ years).
Obviously Starlink can and will growth. I'm just pointing out how insane the market cap is, when compared to similar scale "connectivity" businesses.
Profitability of space flight has a hard maximum. It’s not anywhere close to what their valuation would suggest.
There’s a reason Elon keeps trying to get investors to believe his “data centers in space” lunacy, because you need that sort of magic pixie dust to justify why any of this valuation makes sense, let alone have anywhere to go but down.
Starlink terminals are popular, they put them on drones to avoid jamming (Starling jamming exists but not that easy for now). It might be their sales are inflated due to its use at war.
Makes a lot of sense that Musk should do the parts of the AI stack that look more like manufacturing/regulatory bottlenecks, and rent out the compute to research-focused AI labs. Does anyone know the full accounting of how much it cost to build Colossus (plus ongoing opex) vs. the revenue it's generating now?
the GPU builds are very high stakes games of depreciation: if the mission life is e.g. 4 years you win, if a disrupting ASIC for the transformer comes in you lose.
As of today the gamblers seem to win, demand even for A100s, H100s is high prices are even rising.
Musk made big investments in building AI data centers starting in 2024, continuing through the present. SpaceX got those assets from xAI, spun off from X, via an acquisition. More details:
SpaceX valuation and ultimate success depends on two things:
1. AI demand continues to grow.
2. SpaceX's orbital data centers are profitable.
If both of those are true, then their current valuation is absolutely justified. I'm confident #1 will happen.
#2 is the big bet, and IMHO this is just an engineering/execution problem. All they need is (a) Starship to work reliably, and (b) a manufacturing line that can build a data center satellite at low cost.[1]
(a) is the harder of the two, IMHO, but they are well on their way. Once they successfully recover and refly a Starship upper-stage, they will iterate step-by-step until launch costs drop to the level they need.
Now assume that SpaceX succeeds. What if AI demand continues to grow and SpaceX orbital data centers are profitable? Think of their moat: they spent 10 years and billions of dollars developing a fully reusable rocket that happens to also be the largest rocket in the world, and that costs 1/10th of what other rockets cost (per kilo to orbit). Plus, they have an assembly line that can build data center satellites cheaply, and they start fabbing their own AI chips.
How is anyone going to compete with that? There are a bunch of data-center-in-space startups, but none have their own rocket--they're going to have to pay SpaceX to launch them. Blue Origin is developing a rocket as large as Starship, but it's not fully reusable--they will never get the cost down to Starship levels.
What's interesting is that all the AI companies, OpenAI, Anthropic, and even Microsoft and Google, are mostly leasing their data centers from someone else. They think compute is a commodity and the value is the trained model. But if SpaceX has the cheapest data center with the most capacity, they will be able to extract profits from the AI companies or (why not) compete against them with their own model (Grok).
In 10 years we'll see whether SpaceX succeeds or fails. If they fail at this, they will retrench back to a launch company (assuming they are still in business). But if they succeed, they will be a massive company, and the synergy between their businesses will be so obvious that everyone will say, "of course they succeeded!"
----------------
[1] Don't be distracted by claims that "cooling in space is hard" or "radiation is a deal-breaker". Neither of those are insurmountable problems--they are just engineering problems. Crucially, they are problems that are easily solved by getting mass to space. If you can get mass to space cheap enough, those two problems are trivial to solve.
Even if I do accept your claims that cooling in space is not insurmountable, you still would grant that launching and cooling (and shielding??) a data center in space still cost more dollars than building a data center on earth right? What is the use case that people will spend money to rent servers in space? I think nations have a strong enough grip on the internet now that the customer use case of "evading my country's laws" won't generate that much revenue.
Is the hope that power will be cheaper because solar panels have direct and continuous exposure to the sun?
Yeah sure the technical problems are solvable if you throw money at them. I'm sure we could have had a colony on Mars by this point as well if NASA/etc. continuously spent insane massive amounts of money on every year since the 70s.
So what?
Why on earth would you want an AI datacenter in space? Like what would you gain by doing that at an absurdly higher cost than you could build on them earth?
"Free" energy? lol.. just build nuclear powerplants or loads of solar, wind and batteries on earth. Its still going to be cheaper...
> How is anyone going to compete with that? There are a bunch of data-center-in-space startups
A better question is why would anyone even try?
> are mostly leasing their data centers from someone else
It's really not. Building your own datacentres is very expensive and more importantly takes a lot of time. They need compute now, so it makes perfect sense to rent it from failing AI companies like xAI which bought a lot of chips but don't have anything to do with them since their models are just not very good.
> But if SpaceX has the cheapest data center with the most capacity, they will be able to extract profits
Well.. that would be a first one, since no similar industry works that way. Compute is a commodity so unless your literally run out of space on earth to build datacenters or Nvidia/etc. stop selling to anyone but SpaceX that can't really happen, can it?
So Google AI will now be running partly on xAI data centers which run primarily on natural gas burned on site next to poor neighborhoods in Tennessee and Mississippi causing massive air pollution to these families and children. Is anyone else disgusted by this? I’m imagining all the people there developing lung and other issues because of this. Greed and power on full display over doing the right thing.
I’ll be switching off the Gemini model at work (Composer’s been off since their xAI deal). This is the final straw for me to move completely off Google services.
This feels actually like a pretty safe bet for Google, they secure the compute in case it works (I doubt that the described volume will be available in the near future), while if SpaceX doesn’t manage to provide there is not much loss.
I see it more as another way of blowing up SpaceX valuation on paper…
Cloud companies were made to sell others compute. Now, one is buying billions of compute from SpaceX, a rocket company. That sounds so backwards lol.
Great work by Musk and his companies to be in a position to sell billions to cloud vendors. I'd have probably missed that opportunity while trying to build great rockets or AI models.
Does this mean that SpaceX are the only company that really did build some datacenters to put all the million of GPU/TPU/whatever they all talk about everyday?
I mean, Google, Amazon, Meta and Microsoft told investors they spent more than $1B per day last year in CapEx... why on Earth do they (well, Google and Anthropic at least) need to rent compute to SpaceX, of all companies?
Other companies built data centers but also built products that soak up their data center capacity.
xAI built data centers, and products that are mostly good for nonconsensual porn and confirming a small group’s biases. So they have a lot of excess capacity, and might as well rent it to the adults.
No, CoreWeave for example also rent compute to the big AI companies. This likely just means Grok has few users so they need to rent their extra capacity to their competitors.
Yes but someone will be along shortly to defuse what sounds like giving the bad mars man credit where it’s due. Like everything else he does that works out, it was just luck, timing, actually a mistake that worked out, or someone else behind the scenes that he got lucky in hiring at the right time (by accident).
Short memory. When musk was buying all of this capacity it was billed as xai is going to take over the world. Instead grok is a flop and now he has extra capacity. If xai was a data center he’d be smart. But it is a failed Ai venture.
It’s like training your dog not to jump on the sofa. But then you fail to train to stay off and then brag about how you trained it to stay ON the sofa.
Huh? That's just basic history of xAI. At no point was xAI being sold as a Coreweave-like middleman leasing out data centers to hyperscalars. That's a boring, regular business. The pitch was that xAI would develop groundbreaking AI models for Grok which would attract actual users and generate revenue.
That evidently did not work out, otherwise these deals wouldn't be happening. OpenAI and Anthropic aren't leasing out their datacenters, if they did it would be obvious something was grossly wrong with their projected growth.
If your dad had owned an emerald mine I am sure you could also have been that dumb.
But to be more serious: It is impossible to say if this is good or bad for XAI without more numbers. What if they bought their compute way over market price and sell it at a loss?
From Google's spokesperson, quoted in the article: "This is a short-term, timely agreement to ensure we have bridge capacity to meet surging customer demand for our agent platform, Gemini Enterprise, which has been even higher than we expected."
Google wants a lot of compute sooner rather than later, and they're willing to pay a premium for speedy delivery of that compute. SpaceX has the capacity already built and ready to go. Hence the high price.
This is a masterful piece of financial engineering by Google and SpaceX.
Google purchased 10% of SpaceX over a decade ago. After dilution they probably own around 5%.
SpaceX is valued at a whopping 94x revenue. This deal increases SpaceX's revenue by $11 billion per year. If SpaceX maintains this revenue multiplier, then this single deal boosts SpaceX's valuation by 94 x 11 billion = $1 trillion dollars. Google owns 5% of SpaceX, so they make 50 billion dollars. Google spends 10 billion and makes 50 billion, $40 billion profit.
The even better part is that because of this deal, SpaceX is now profitable. The S&P requires companies to demonstrate 12 months of profits before they can enter the S&P 500 index. SpaceX lobbied to have this profitability requirement removed, but S&P said no and refused to rewrite the rules.
Now with this incredible deal, SpaceX is now GAAP profitable under the existing rules, and they get to join the index next year without a rule change.
Truly a brilliant deal for everyone involved.
I sincerely hope the market is not willing to value this sort of deal at a P/E ratio anywhere near 94.
Off the top of my head, there is a very well established business involving buying expensive things and leasing them to the companies that intend to operate them so they can sell services: aircraft leasing.
AER is the biggest player and they have a P/E ratio of, drumroll please, 6. And I expect that GPUs, despite currently looking like an appreciating asset, will actually depreciate faster than aircraft in the long run.
P/E is price to earning. Price to revenue is P/S. AER's P/S is like 3, so the discrepancy is much worse than you think.
Sidenote: 3 is actually high. 94 is absolutely ridiculous.
The question on my mind is-is this IPO designed to rip off recreational passive investors and those of us that invest in retirement accounts?
With the Nasdaq rule changes, almost certainly.
Those rule changes aren't happening.
My understanding is that the s&p 500 were the only ones unwilling to change their rules.
Why "unwilling"? That's a weird wording. S&P Dow Jones Indices decided to not go through with their rule change after it became a political issue. Obviously they were willing, the proposed rule change originated from them!
Please provide some support that the rule changes were proposed from within. Given the fact they tried pulling this nonsense on 3 indices, it seems very unlikely the rules changes originated from within.
It is what S&P Dow Jones Indices themselves say, so the burden of proof to prove otherwise must fall on you.
And anyway, the rule change is truly the only reasonable way they can react to the current situation.
It will absolutely be untenable to keep Anthropic , OpenAI and SpaceX off the S&P 500 with them also being the highest valued companies on the market.
If I were the DJI I would have proposed the change, simply so that we could get some outrage flowing and shut it down.
Without the proposal, you'd have outrage out the other side that it wasn't included (especially if it shoots off like, well, a rocket).
But why? Won't that just make it far more awkward when they're inevitably forced to go through with very similar changes in the end?
Because now they can say "we considered it, there was strong opposition, and we didn't change the rules and what happened happened".
And if they miss out on part of a runup, and the companies later enter the index, what is the long term "harm" if any??
But if they're "right" it makes the competing indices look weak.
> It is what S&P Dow Jones Indices themselves say
No it isn’t. They put rules out for consultation and declined adopting them. Nobody was responding to political anything. If management had a say, they would have probably pushed to adopt the changes.
Then a bunch of influencers turned the whole thing into a conspiracy theory and a shocking number of smart people bought the pitch and churned their retirement accounts.
Quatsch. The indices will say whatever benefits their power the most, regardless of truth. The fact that they are bending now to pressure is proof enough for me.
We live in an age proving that valuation is just a manipulation.
This whole story is just like the BaM situation: the people with more money feel emboldened to pull every dastardly trick they can to tilt the table towards their pockets, away from the honest participants. SpaceX and the AI IPOs are just the latest and most grand scheme. I’m guessing you were surprised by the collapse of lehman brothers back in the day.
So you don't actually have any evidence to support your claim? This just seems like a matter of faith at this point, that's fine.
I don’t think you have either?
It’s and interesting point. I’ve done a bit of searching and am also empty handed.
>I don’t think you have either?
I don't know how I could? The indices have already provided their reasoning for these rule changes, but that's just summarily rejected by the conspiracy-minded.
To laymen this appears to be a grand conspiracy. Rules are being changed to accommodate big companies, that's usually bad.
To people in the financial industry, it's fait accompli. The indices exist to reflect the market, these IPOs are going to be big enough that the 90s-era rules will/would result in untenable divergence.
They became effective last month.
How would you "design" an IPO to do that? What exactly is that even supposed to mean?
Passive investors and retirement accounts are heavily in on automatic indexing.
This deal has been pushed hard to be included prematurely in the indexes to the point that Nasdaq changed the rules.
The accusation is that these changes were made so that index funds will buy this stock automatically far earlier than they would have previously. Given the… uh… astronomical asking price, it looks like SPCEX is meant for Elon stans and institutional index investors to be the bag holders.
> retirement accounts are heavily in on automatic indexing
Majority are not. A minority are, mostly towards the S&P. Most assets remain actively managed, including in retirement assets (which covers 401(k)s, IRAs, pensions, et cetera).
Way outside of my area of expertise, but a quick search suggests that exact numbers probably depend on exactly how you define the question, but it would be broadly reasonable to say that the balance is about 50/50 +/-5%, and trending towards the passive side over time.
Would you agree with that?
Yes. But I’d caution to not conflating passive investing with indexing to a popular index. They sound similar. But most passive assets index to one of a variety of indices, many of them built in-house by various asset managers. (Vanguard, for example, is famous for doing this.)
>This deal has been pushed hard to be included prematurely in the indexes to the point that Nasdaq changed the rules.
Pushed by whom? Can you link some reporting on this topic?
> Given the… uh… astronomical asking price, it looks like SPCEX is meant for Elon stans and institutional index investors to be the bag holders.
"asking price" lmao, buyers decide the prices they'll buy at.
Edit: I wonder, why is pointing out that this apparently massive conspiracy hasn't been covered by a single credible news outlet worthy of so many downvotes?
It’s been covered extensively and is common knowledge. One example after a 5 second google: https://www.wsj.com/livecoverage/may-jobs-report-stock-marke...
Where does your link describe this claimed external pressure?
> buyers decide the prices they'll buy at.
Not if they're index funds. They buy at the price it is, until they've satisfied their holdings represent the appropriate share of the market. Which, pre-IPO and early-days-after-IPO, is likely to not be accurate to the long-term price.
This, of course, is why it's wise to wait a while after an IPO for the market to figure out how it values a new stock before it joins the index.
Index funds don't buy at any "asking price" set by SpaceX.
It has been covered extensively. The change of nasdaq rules has been covered by Bloomberg, WSJ, NYT, and most others who have reporters on the Wall Street beat. Columnists at all three of those publications have called it out as a possible play on institutional indexing money. I don’t need to tell you who like it’s some big secret either. It was Elon Musk on behalf of spacex. The changes were openly part of the ipo.
I’m not going to cite sources for a major financial news story that is being extensively covered in the financial and general press.
Here's Matt Levine from Bloomberg saying something along the lines of "lol, obviously the indices have to do this, they'll look like fools if they don't because these will be the biggest companies on the market". He famously spends much of his time making fun of Musk, but seems to reject the idea of his influence here.
https://www.bloomberg.com/opinion/newsletters/2026-05-26/ind...
Perhaps you can provide a single counterpoint? I can't find the columns you refer to.
That is one of the columns. The headline makes my point succinctly. Your paraphrase of the column misses the crucial point. A Nasdaq index fund doesn’t buy a company unless it is in the Nasdaq. Under the old rules SPCEX was ineligible for listing. Now Nasdaq index funds all have to buy. Index funds by nature do not selectively buy stocks, if the stock is in the index, they buy, that’s their mandate. That’s the game, to be included in as many indexes as possible that force institutional investors to buy. That’s hundreds of billions worth of funds that now have to buy in, that previously wouldn’t have had to if it wasn’t listed on the Nasdaq.
The SP500 did not waive the rules, and that made above the fold news this week, because it is a major blow to the big IPOs happening this month since they are valued so high. It will be harder for them to move stock if the massive index funds aren’t buying automatically. The big IPOs this month are asking for prices that demand hundreds of billions or trillions of dollars of liquidity. Index funds are automatic liquidity, but only if you are on the index.
They didn’t ask them to change long standing rules for shits and giggles.
You use your back channels and good ole boys club connections to try getting the rules for inclusion changed. Maybe collude would be a better verb than design? Is that your objection?
Can you share any credible reporting substantiating this theory?
Common sense and rationality says that you cant motivate rules changes simultaneously across 3 independent indices without outside pressure. Can you provide some reasoning why this wouldn’t be the obvious situation?
Common sense and rationality says this: https://www.bloomberg.com/opinion/newsletters/2026-05-26/ind...
>index providers will have to decide: Are they in the business of giving passive investors exposure to all the stocks that the market thinks are good, or to all the stocks that the index committee thinks are good?
>There’s only one plausible answer.
Can you explain why your theory is better than the one widely believed by people who actually work in the financial industry?
Lol, the dude asking for reporting to justify his oligarch dickriding dismisses patrick boyle in his chat history as just a youtuber while using paywalled links to support his position.
My theory is better because it isn’t ignorant of the billionaire dynamics in play.
Criticizing Bloomberg as a poor source for finance-related reporting is kind of hilarious, but then I guess your position does seem vastly more credible when viewed through a lens that also rejects Bloomberg.
newly created alt because apparently my main account has hurt too many feefees to allow me to respond to a discussion I'm having. "posting too fast" my swingin dick...
I'm not criticizing bloomberg, i'm criticizing you for posting paywalled links to support your position in an open discussion.
Given I'm bailing on this convo now because hackers news is a shite application getting in the way of people trying to talk, let me respond to our sibling thread with the closet thing my opinion has to evidence: https://fred.stlouisfed.org/graph/?g=smH. IMO we remain at an all time high of financial flimflammery as a portion of our GDP and there have been a number of recessions triggered by the financial sectors malfeasance during my lifetime because of it.
You assume far too much competence from the supposed conspirators. If what you're claiming was truly happening, it would have been leaked and widely reported.
Yet, somehow, no journo covering the world's leakiest industry has been able to break this massive-if-true story.
and you assume these people don't have family offices filled with very well paid competence.
There was a 3 month gap between Matthew Lee raising the flag about unethical accounting practices at lehman brothers and the firm's collapse. My opinion is that we haven't hit the analgous moment yet but we will.
Common sense and rationality go out the window in corrupt, unregulated environments with perverse incentives.
> Sidenote: 3 is actually high.
Do you mean low? AAPL has a ps of 10.
Generally < 1 is low, between 1 and 3 is in the middle ground, and > 3 is high. However, that all depends on margins, which is why people generally use P/E or forward P/E rather than P/S to compare multiples. Issue here being that P/E is nonsensical for unprofitable companies or companies with very low margins. Spacex's P/E after Google pushed them into profitability by a slim margin would look absolutely stupid.
I would also like to point out, that on a forward P/E basis, AAPL is quite overvalued compared to historical norms, but basically every tech company is right now.
Most companies have a P/S of 1 or 2, almost all have it bellow 4.
A few segments of the economy are known to have low revenue/investment ratios, and companies there get P/S up to 7 or so.
Then, very few companies have people betting on their growth so much that their P/S get as high as 15.
And then you have literally about half a dozen exceptions on the ones S&P tracks that get higher than that.
Nothing about Apple is representative of a normal business.
It’s an interesting phenomenon: being Apple is one of their key sales drivers. The brand is worth more than the business itself.
You're arguing with people who have no idea what they're talking about.
Who's arguing?
Number like this might appear when a company is expected to create a revolutionary thing that upends multiple markets. I would consider a number much larger than 3 in SpaceX’s case, but 94 feels, indeed, excessive.
It’s almost like the future we were promised in the 1960’s would immediately materialise the moment launch costs drop. Starship will be revolutionary if it pans out the way we expect (as the shuttle would have been, had it kept the low cost promise), but that’s not enough to warrant that 94 number.
SpaceX may well revolutionize multiple markets. But I really don’t see the sub-business of building large datacenters and leasing them out, hopefully at a profit, as revolutionizing anything. Also, SpaceX has no particular competitive advantages here — the list of competitors is huge.
Yeah, only a small portion of SpaceX's revenue actually comes from Space (payload delivery). At this point they are basically an ISP (Starlink) and a datacenter/leasing company.
It's not clear if Musk (SpaceX/X.ai) is really pursuing AI any more - I expect he hasn't necessarily given up on it, and he hasn't said he has, but it seems he's rented out almost all of his GPUs to Anthropic and Google, so that's not going to be much of a revenue generator, at least for time being.
It was in the news not too long ago that Musk was looking to use Samsung to fabricate "AI chips", presumably either for X.ai and/or Tesla, so perhaps he's basically put X.ai on hold until he can reboot his efforts with his own chips (& perhaps a new datacenter)?
According to their IPO S-1 draft they are 93% an AI company and 4% a space company. Its the remaining 3% of the company that is profitable, the Starlink stuff.
They have to say this because we know how to value a satellite and space company (aka at 1/100th of their offering price).
As I recall isn't Starlink revenue at least 3x Space revenue, so not sure how they are characterizing that 3:1 ratio as 3% vs 4% !
The "93% AI company" is also a huge mischaracterization since this isn't AI business - it's datacenter/GPU leasing business which their 2 customers can pull the plug on with 90 days notice.
given that SpaceX is choosing what price they're charging starlink, there's a reasonable argument that starlink isn't profitable either
That's in the IPO documents. Starlink had $11.4 billion in revenue and $4.4 billion in operating profit in 2025. Falcon9 had ~$4 billion in revenue, so they didn't cheat by subsidizing starlink with Falcon9.
Yeah, Starlink is about 3.5x the space launch revenue but still only about 0.5x in terms of profit. Falcon 9 is as optimized as a rocket could be, and absolutely owns the market. Starlink is a mostly rural service with global consumer pricing where average monthly rates in poorer countries drag the average down. Starlink government and commercial business, however, is growing quickly and I expect that soon Starlink will be ahead of launch, in terms of income, probably by the end of this year.
Does Starlink pay SpaceX for launches?
For SpaceX it’s critical to maintain a steady cadence. If they don’t, they lose institutional knowledge. If the cadence drops below a point, their effectiveness at reusing rockets will also drop, defects will creep in, and they’ll have higher fleet churn.
Given the amount of compute rented I doubt there’s anything meaningful left for the people there to do any AI.
They can use still every spare minute that’s contracted but not actually used.
At those scales, that’s absolutely massive, and more computing capacity than most governments have.
Maybe they'll become an AI company again after they've abused their privileged access as hardware providers to reverse-engineer Google and Anthropic's weights and operations.
That doesn’t seem beyond Elon’s capacity to rationalise.
The profit center, to the extent any division makes money, is Starlink, yes, but what we have always known as SpaceX is just a tiny side project in the combined company.
I’m pretty sure he’s just trying to become the world’s first trillionaire at this point, these deals are obviously gimmicks to boost the SpaceX share price and his less-than-critical-thinking fanbase will happily oblige.
Yeah, then next move may be to have SpaceX buy Tesla with it's inflated stock, before it collapses.
> I sincerely hope the market is not willing to value this sort of deal at a P/E ratio anywhere near 94.
It will very likely be valued much, much higher. The SpaceX IPO is, in itself, a marvelous piece of financial engineering (requiring co-operation among multiple actors) which has been a long time in the works.
- Right out of the gate nearly all retail investment platforms have dramatically reduced requirements for purchasing an IPO, most notably Fidelity, which previously required $500,000 in your account to participate in an IPO reduced (on Friday) this amount to $2,000
- Retail investment, despite being quieter in the post-WSB era, is at all time highs.
- Reports are that the SpaceX IPO is already highly oversubscribed, meaning there are many more retail investors interested than there are shares available.
- SpaceX has a wildy low float of only ~4% which means price discovery will be much slower then normal, especially with aforementioned demand
- All of these retail platforms enforce some sort of "soft lock-in" whereby you're excluded from future IPOs if you sell your shares within 15-30 days. So if you want to get out you're not going to be able to participate in Anthropic/OpenAI IPOs in a few months.
- Coincidentally, most of the major indexes (thankfully excluding the S&P 500) have adjusted their rules to require only 15 days post-IPO before inclusion and have no profitability requirements. Many also adjusted the rules so that low float IPOs have their weight multiplied despite the low float.
- Many retirement accounts, in one way or another, are required to track these indexes and will be forced to buy these SpaceX shares at a very likely frenzied price and further drive the price up.
SpaceX will very likely open with far more retail demand than shares, the insiders (VCs, employees etc) will still be legally locked from selling, retail investors are penalized if they sell, and so the demand will be high and supply very low.
If they can keep this demand hyped for just 3 weeks, price will still be elevated when retirement accounts are forced to buy... roughly the same time retail investor start seeing the penalty for selling expiring (meaning it is not irrational at all to be in the IPO, but it is irrational to sell before being listed in an index).
Fun fact: the other fascinating thing about this IPO is the terms for insider lock-in. At first earnings (Jun 30) inside investors unlock and can therefor liquidate 20% of their shares... but if the stock performs well, they can unlock and additional 10%. There are additional rules for continued unlocking of more shares depending on performance as time goes on. So everyone on the inside has a very vested interest in a spike in stock prices: not only will their stocks be worth more, but they can realize that value faster.
I would be surprised if SpaceX price doesn't explode in the first few weeks because for everyone involved this would make sense. It's only in August that we'll start seeing the really interesting things start happening.
> Right out of the gate nearly all retail investment platforms have dramatically reduced requirements for purchasing an IPO, most notably Fidelity, which previously required $500,000 in your account to participate in an IPO reduced (on Friday) this amount to $2,000
Not at all surprising that the US in 2026 has degenerated to the point of turning the equity market itself into a bucket shop.
I don’t think earnings have much to do with any of Elon’s projects’ market caps.
But growth rates could make that a bargain. If the market has taught us anything since 2009, it’s don’t underestimate growth
China just entered the chat, so that 94 multiple will get slashed in the year to come, hence the rush to offload onto retail
Comparing SpaceX to an aircraft leasing company seems more foolish to me than a 94x multiple.
I understand the gist here, but come on. This is a generational company. It’s the only relevant space launch business, and has its tentacles deep in AI infrastructure as well. Maybe the AI bet is foolish — I don’t know — you should short it!
I am comparing SpaceX’s datacenter-and-GPU leasing business to aircraft leasing.
It’s possible, and common, for one large company to have multiple business lines, each worthy of a very different P/E multiplier. In principle you end up with a weighted average of some sort.
edit: Matt Levine has some great articles about this phenomenon and how some companies try to juice it.
I would short xAI but the market can remain irrational longer than I can remain solvent. Plus all the foolishness to prop it up with other businesses just seems like bad accounting.
'generational company'? Are you on drugs or so?
All of Musks business stuff highly depends on first mover advantage.
If people now selling it as a 'generational company' than it becomes even more stupid.
He didn't invent an unkown solution he is hiding to transform something into gold, he only put a lot of money into rockets.
And the rockets right now don't even have enough payload to have unlimited potential. If Space-X knows how to build a rocket very efficient, 10 years later other companies can do that too.
> All of Musks business stuff highly depends on first mover advantage.
Do they? Out of all of them, I think only one of them really depends on, or even benefits from, first mover advantages: Starlink.
Tesla famously gave away all their patents, and is also being overtaken by Chinese companies with cheaper batteries because batteries are the expensive bit; SpaceX rockets are theoretically well protected because national security regulations >> patent law, but even there lots of Chinese clones popping up; TBC and Neuralink and SolarCity are going nowhere fast; Grok wasn't even the first in its field; Twitter/X is not only in heavy decline but was also always trivially cloneable and the clones are now an open source ecosystem of semi-distributed alternatives; xAI has shown ability to make data centres while pissing off locals but the market for those data centres is other AI companies who also commission their own data centres but found themselves scaling much faster than xAI did.
(Starlink's first mover advantage is "this orbit already contains a satellite").
He can’t do with rockets what he says SpaceX has to do to meet its goals, and he isn’t raising enough money to get the job done either.
It’s another misdirection.
I don't think you can short it before the IPO happens. Well, unless you've got a few millions and go to a bank and have them make a product for you specifically. But for normal people, for now, not happening.
But Google loses $11 billion per year, and they gain $50 billion... in stock?
As far as I know they really will be paying $11 billion annually in liquid cash to SpaceX (not a small ask) starting this year, and all they get in return is more money on paper?
What incentive do they have to help SpaceX out like this at great cost, if they're not actually buying something valuable? Why are they incentivized to do this if it's just an empty deal and financial engineering? Genuine, good faith question: what are they getting out of this?
I would bet that there is a nice clause in that contract that gives exit options to Google at year 1, 1.5, 2, etc.
Perhaps they only need to pay $11B, or $16.5B, before exiting the contract.
Plus, instead of getting nothing for these $11B/year, they surely get some compute power that should have some value.
So you think Google is going to spend $11B in hopes it will boost the value of the SpaceX stock, while pretending to public investors it's a multi-year thing, and then after 1yr sell off their SpaceX stock after the value rises while also ending the contract early?
This site is turning into conspiracy central
I can't imagine why so many people would be looking for conspiracies now days /s
That's what I'm saying though. They must be getting something out of this deal, otherwise why would they be going through with it?
The explanation that this is just financial engineering (which to me, means neither Google nor SpaceX is getting anything out of this other than looking better on paper) doesn't make sense to me. How does this financial engineering benefit Google?
Even if they have an exit option, why is Google (a private, separate, self-interested firm) giving a single dollar to SpaceX if the deal isn't mutually beneficial?
> must be getting something out of this deal
They’re getting compute. There was a free for all period when xAI did one smart thing and that’s build like there’s no tomorrow. Because tomorrow is today, and today jurisdictions are racing to pause datacenter construction.
I agree with you--this is my whole point.
This deal can't just be financial engineering, since that wouldn't make sense. They must be getting something out of this, i.e. compute.
Google is buying compute because they need it. That explanation works a lot better to me than one where Google is doing this purely for unrealized future gains on a minority stake in SpaceX.
Because Google owns a sizable stake of SpaceX, and for every $1 they give SpaceX they get $5 in investment return.
> Truly a brilliant deal for everyone involved.
Except for people who have pensions/investments in whole market class investments who become exposed to an over valued company with a propped up value.
If whole market means whole market, then such investments are exposed to companies who are fairly valued, companies who are massively overvalued, and companies who are massively undervalued, and the whole range in between.
If you want to start picking and choosing which companies are overvalued and which are undervalued, don’t invest in whole market funds. But most people are not good at that!
the problem:
The Nasdaq 100 and FTSE Russell made a rule change that allows SpaceX to enter index without mormal time for price discovery. Most index funds have rebalance day just 5 days after IPO. S&P also made rule change for S&P Total Market Index and Dow Jones US Total Stock Market Index, but left SP500 intact.
Nothing wrong with SpaceX or Anthropic getting into indexes with fair rules, this rule change is pure creed+corruption.
Those funds are not whole market funds.
But there are things to say about your point too. I’ve commented on that in other threads.
I mean these rule changes have been a long time coming. SpaceX was just the straw that broke the camels back here. These major index's want to stay relevant and cutting out some of the biggest companies in the market just opens the way for a "true" NASDAQ 100 that is actually market cap weighted rather then some arbitrary rules cutting somethings out.
>Nothing wrong with SpaceX or Anthropic getting into indexes with fair rules, this rule change is pure creed+corruption.
What evidence do you have that these rule changes are motivated by "creed" or corruption?
What evidence do you have they are not? You've been questioning everyone, please justify your position
> What evidence do you have they are not?
What evidence do you have that 9/11 was not an inside job?
> please justify your position
I'll cite Matt Levine from Bloomberg:
>1. In the next few months, SpaceX, Anthropic and OpenAI will all probably go public at massive valuations.
>2. They will be fast-tracked into the major stock indexes, because those indexes are designed to reflect the stock market, and reflecting the stock market, in 2027, will absolutely require big allocations to those three companies.
Ok, now we are getting somewhere. There is no guarantee that they will be a big part of the stock market. It is not "absolutely" sure, for them or for any new public stock. That's why the indices have/had the the rules they (used) to have, to wait and see if a newly IPOed stock actually becomes a big part of the market before it becomes part of the index.
Why did they change the rules for these companies? That's what people want an explanation for. That's what is fishy about all this. I'm not asking you to explain something that seems normal. I'm asking you to explain something that doesn't make sense
Because the fundamental purpose of an index is to track the stock market. The S&P 500 benchmark was created in 1957 to benchmark the US stock market, decades before the first investment funds that copy it (by Vanguard, in 1976).
The primary purpose of an index is to track the market. If an index excludes a significant part of the market it claims to track, then the index no longer accurately reflects the market, and fails at achieving its purpose.
The S&P 500 tracks the 500 largest large-cap US stocks. All three of the major upcoming IPOs (SpaceX, OpenAI, and Anthropic) are large-cap US stocks. Together these companies comprise ~5% of the total US stock market.
In previous decades, this was not an issue, since companies IPOed much earlier when valued at <0.1% of the market. It was fine to exclude these companies from the index for some time, since they were an insignificant part of the market.
Today we have companies raising enormous amounts of private equity, and going public as significant members of the market. All of (SpaceX, Anthropic, OpenAI) are within the top 20 largest companies in the US.
This is why many are arguing for fast-track inclusion, so the index can add these companies quickly, and retain its ability to accurately track the market.
Musk is highly unpopular, and some conspiracy theorists linked financial arcanity to him in a way that sounds compelling and hidden. If you push back on the corruption claim, you’re in Musk’s pocket. The same folks who became armchair bank experts in 2023 now confidently make statements that middle 401(k)s and pensions, or the NASDAQ 100 (for whom this has probably been the most brilliant marketing move in their history, nobody talked about that index before) and the S&P 500.
At the end of the day, some RIAs in the Bay Area made bank on folks churning their retirement accounts. Some influencers got clicks. Otherwise, this is a nothing burger.
Dude, need to @ Elon on X with a link to these comments. Pretty sure he replies to fans as dedicated as you to his cause.
Are there really 10-100x undervalued companies listed on indexes that haven’t been noticed?
Yes. There are probably a dozen or more across the SP500 and Russel 2000 that will 10-100x in the next 5-10 years. The trick is to be able to identify them!
There's a difference between "will go 10x in the next 10 years" vs "is 10x undervalued right now".
Laying the blame for the transparent financial manipulation we are observing at the feet of regular people (who are putting their savings into their pension funds, a system that we incentivize because of its pro social outcomes) and saying they should just opt out because they should know better, is at best callous, most people should not have to think about that issue at all.
You seem to have misunderstood my comment.
I don't understand this logic. Does whole market mean scamming companies too?
Fun fact, both Enron and Lehman Brothers were in the S&P 500 when they went bankrupt. So yes, the whole market or even the market of the largest companies, includes some that may not be great companies. The beauty of the index is you don't have to know or care, since it'll take care of itself over time.
>The beauty of the index is you don't have to know or care, since it'll take care of itself over time
As long as there are active investors in the market conducting price discovery. Which there always will be, just pointing out that someone has to care, even if you don’t
> it'll take care of itself over time
At least until it doesn't. If this spacex venture succeeds because it got propped up by index funds, then that's a decent indicator that more will follow.
It stands to reason that active investing will be more valuable as a result
Yes. That’s what passive investing is. You give money to the passive fund, the passive fund buys the market. No regard to price or any other metric.
Also, there’s a long history of companies that people yell about being overvalued being the drivers of index returns, because one of the major drivers is growth rate, whereas retail investors tend to look mostly at current state.
So your contention is what? This will crash? Surely you'll be shorting the stock right?
A company can have poor fundamentals compared to its stock price, and also have an enormous P/E multiple if it has committed investors. We've seen this with multiple meme stocks and Tesla. I have no doubt SpaceX will fly high for a while and people will make a lot of money, but I don't think the company is going to make $320bn/year in AI services (with 74% profit) by 2030 as the S-1 suggests. At some point the market price will coincide with real earnings.
The key there is "whole market." This is still a tiny sliver of the whole market and most people's exposure to it is minimal. Still a wealth extraction move ultimately, but like many other such moves, the few pull just a little from each of the many. Nobody individually goes broke, but the whole class gets slightly poorer. It takes a village to raise a billionaire!
Trillionaire
If you want to play “active investor” and pick and choose what companies you invest in, don’t be surprised when you underperform the whole market.
SpaceX could rise to be a major winner that makes people a lot of money. And then what? You missed out and underperform the whole market.
Or you could mitigate the next dot-com style crash (which wiped out nearly 80% of the NASDAQ composite).
Back then, it was "day trading" that was one of the warning signs that a bubble was ensuing. There are certainly shades of the day-trading phenomenon in the "r/wallstreetbets" gambling, and wildly overvalued meme stocks like Tesla. And this mad rush to relax the guardrails for what appears to be wildly overvalued IPOs.
Bubbles, and their inevitable collapse, are generally not as big of a problem for younger passive investors, but they can be for older ones. (Hence why I've got a "bond tent", value tilt, and other diversification. I'm at the stage where "underperforming the market" is less of a concern than "mitigation". :) )
> SpaceX could rise to be a major winner that makes people a lot of money
Based on "sane"/traditional metrics that and much more is already priced in into the IPO valuation.
e.g. Google had a many times lower P/S ratio at their IPO and was actually profitable (and software companies usually have higher valuations than capital intensive ones like SpaceX anyway). SpaceX is already valued at more than Google was 10 years after its IPO while barely making a tiny fraction of its revenue.
Alternatively you may want to be a passive investor using the current rules for index inclusion, rather than having them altered to favor this loss-making trashcan on fire.
OK, but SpaceX is not printing money out of thin air. And neither does the stock market. Somebody will be left holding the bag eventually.
> Somebody will be left holding the bag eventually.
I think so too. I also thought that about Facebook: IPO around 40, swiftly down to 20 - I was laughing about stupid retail getting wrecked. Now it's around 600...
Maybe you are right, maybe not.. However Facebook as an example seems entirely irrelevant, though? It was valued 15 P/S ratio at IPO and went down to 10 a year after the IPO. You'd have a point if Facebook IPO at $400 instead of $40. But it took it 10 years to reach that.
SpaceX IPO price already has many years of extremely high growth priced in. Comparing it to Facebook's or Google's IPOs is like apples to oranges.
I feel like you are missing the difference between cash out the door and the market cap value of a business. One is a real tangible thing, the other is a function of the stock market.
I don’t think google would spend this money if they did not need this compute, and who know what will happen with SpaceX valuation over the course of a few yrs.
Most things like this are more straightforward than we want them to be - this feels like google paying market value for compute?
> If SpaceX maintains this revenue multiplier
Yeah, if a ridiculous premise is given you'll reach a ridiculous result.
It's not that ridiculous considering these are the current facts on the ground.
The Facts: Tesla wasted billions for Cybertruck, hasn't had a new real model for years, promises Full Selfdriving without supervision for a decade and other companies are either on the same level or better.
xAI has such a shitty AI, that he makes more profit renting his Compute instead of making profit directly from it as the companies doing who have better AI then him.
Space-X is a limited business and he tries to make it unlimited by selling stories of Mars and dyson spheres (literaly), no one will ever finance or need as long as we have still desserts everywhere. In parallel his Starlink business gets competition left and right and despite this, he only has 10 Million customers AND increased prices for STarlink just last month or so.
And the payload, most payload increase is only Starlink. He has to sell us a story, that suddenly even with Starship, he can send so much payload up there to make Space-X this mega trillion company.
He can't even scale Starlink. Its expensive. The satelites work for 5 years and have limited capacity. He NEEDS Spaceship to be able to send up Starlink Server v3 and he hasn't even prooven he can get his ship back which he needs for the payload price.
Twitter/X? Yeah he tanked that one.
Optimus? When did you see the latest non faked demo? And while he works on it, we already have the market cornered here.
I'm just as dumbfounded about Tesla's stock value vs what it does in the market and will trash talk Elon all day long but SpaceX is a different beast. I know of whole industries that are just waiting for the ability to get more stuff into space for less. The company will succeed despite him once Starship is established.
Who? What payload?
The only thing which increased the payload is starlink itself.
Fine he might send his competition in space. Amazon and Leo.
And then?
Ok, you might be right about all of that. None of that changes the actual fact on the ground that the IPO valuation is currently being set at nearly 100x sales, and for god-knows-what-reason, enough people appear to be willing to actually pay it in order to justify that valuation.
Go argue with the entire market. I'm just the messenger.
See also: "The Madness of Crowds" On Wall Street,people think they are betting on the fin performance of Companies, when in fact you are betting on the crowd's perception of a company's performance.
Quite the abstraction.
Well... AOL had rather extreme aspirations and a massively overvalued market cap during the internet boom as well.
So yes, ridiculous things like that happen and markets are very often not rational at all (short and medium term at least).
Nortel, Sun, AOL, Cisco were all very innovative and rapidly growing companies. Until reality kicked in.
While you’re not wrong at all in the concept of your post, I wouldn’t call AOL a particularly innovative company. They basically innovated once and then went straight into lazy rent-seeking for the rest of their existence.
I don’t know if I would put Cisco or Nortel in that category, either. They were like gold rush pickaxe companies. The pickaxes themselves weren’t particularly innovative in their case.
A lot of the innovative companies from the dot com era are still around.
Why the hell ARE they even valued that way?
Who benefits from all this brilliant deal making who doesn’t already have plenty of money? If we are going to invent money out of paperwork maneuvers, you’d think we could invent a way to fund healthcare and schools.
As long as they can cash out from these investments by dumping on others, they are safe.
> SpaceX is trading at a whopping 94x revenue. This deal increases SpaceX's revenue by $11 billion per year. If SpaceX maintains this revenue multiplier, then the single deal boosts SpaceX's valuation by 94 x 11 billion = $1 trillion dollars.
That final number doesn't make sense: if you're trading shares at $X revenue, increasing the revenue by $Y multiplier doesn't increase the share price by the same multiplier.
Sure it might not stay at 94x. But as long as SpaceX trades above 20x revenue, Google makes money from this deal.
And the bigger play is this deal pushes SpaceX over the finish line for S&P 500 inclusion. That's worth tens of billions for everyone involved.
I rreally dislike how big corp figured out that the can sell stuff to each other without actually moving some good. Looking at you, Nvidia... I have a feeling that the ordinary people will again pay for that.
This sounds exactly like the kind of thing that will be outlawed in thirty years after tracing back the root cause of the second great depression.
Why was it not outlawed post dotcom crash? This was exactly the thing that led to the dotcom crash.
Maybe there wasn't enough damage, either economical, financial or societal?
It all was many years ago after the great depression, and similar. Then people kept voting in republicans who's life mission is to gut the SEC and all related regulation keeping them from doing things like this.
That would require regulators to actually pay attention, something they haven’t done actively since a long, long time
First step would be to prevent the regulators from profiting to begin with.
In my experience, if we don't (meaningfully) root out corruption and ineptitude, we will continue to be governed+leveraged by one/both.
Outlaw what? Prevent companies from selling goods and services to each other?
The problem described isn't companies buying goods and services. It's buying from an entity they partially own and then profiting as that entity becomes more valuable because of the purchase.
It’s still very tenuous you can’t prevent companies that own 5% of other companies from buying services from the that company
If the parent comment is true, it seems the problematic aspect is the leverage created by the P/E ratio more than the percentage of ownership. What a weird situation.
Oh yeah, these are definitely circular financial games but you have to be wary about putting in insane regulations that will break growth.
We can prevent anything we want. If there's a major AI crash analogous to the Depression, we'll probably institute a lot of new regulations.
Yes, if it's done with an intent to defraud the general population, which could be the case here. Effects and intent really matter when deciding actions.
Except the regulators first outlawed what is generally considered to have caused the great depression (savings banks allowed to invest, which translates to very, very rich people being allowed to take massive risks with poor people's money) ... then re-legalized it.
So not only are the regulators not going to allow things that cause another great depression, they're allowing the things that caused the first great depression too. They must want a rerun.
(Because if you don't allow this you're effectively demanding the extremely rich make good investments to stay rich ... and not even France, otherwise pretty socialist, dares to go that far)
it's not about that. it's about how it gets reported in their financials.
I think SpaceX should be valued on rockets n space n stuff, not how many magical calculator dollars they bring in.
Surely Google can "make compute go" for $1b/month. Nice way to avoid holding the bag, maybe?
The market seems to value both rockets and magical calculators.
I mean, we all understand that this is some sort of circular financial play, but at the end of the day Google is paying SpaceX $1 billion for compute. This is no different from AWS or Azure.
You're right. Share price isn't based purely on a multiplier of current revenue.
But they did need to shore up that p/e ratio. Got to assuage our inner Ben Graham.
SpaceX is valued at that revenue multiple because of its expected revenue growth rate.
This deal is part of that revenue growth. So the new revenue would be already partially or even fully priced-in.
Perhaps it reduces uncertainty around the growth rate, but expectations were already sky-high, as shown by the multiple!
SpaceX's S-1 says they're going to make more than $320bn by 2030 at a 74% expected profit margin. That implies they're going to succeed at selling high-value AI services, not compute, which is a competive business with typical profit margins at or below 30%.
As an ignoramus to these things.... there are only just so many Googles though. Having made a significant jump, are they really expected to continue that growth?
The bet is that demand for AI tokens will continue to grow exponentially. And that SpaceX will be able to deploy and rent out GPUs to serve those tokens faster than anyone else.
The wrinkle is that they are planning to deploy those GPUs in space. That’s what people are most skeptical about, I think!
Space data centers need years of time to design, build, and deploy, 5-10 at least, and that's after they solve their multiple very difficult or impossible problems. How will they cool them? There are just simple ideas like giant structures to radiate the heat away, but you say you need to put lots of mass in orbit?
Like fsd, will take decades to figure things out.
Well yes it will be hard, and hence maybe not economical, and that’s why many people are skeptical of the business case (myself included btw).
But satellite cooling already exists (Starlink v2 satellites dissipate heat at over a kilowatt I believe), so that’s why other people find it plausible.
SpaceX already has 10,000 satellites on orbit that are basically preview versions of space data centers. They've already paid 5 years of that 5-10 year timeline you outlined.
the math doesn't work. a starlink satellite has ~10kw power consumption. A single ai optimized server rack (GB300) is 140kw. Starlink works because you get a massive benefit from putting networking in space for rural users. no one has made a convincing case as to why putting a data center in space is a benefit that can come anywhere near the drawbacks (inability to service, launch cost, cooling etc)
> no one has made a convincing case as to why putting a data center in space is a benefit that can come anywhere near the drawbacks
Permitting. And the main drawback is cooling. If you want to sell a company to SpaceX, build a better radiator.
I’m not saying the math maths. But it isn’t fundamentally fucked in the way a lot of armchair commentary has been making it out to be.
Even permitting isn't a clear win. You are changing from land permitting (where you can pick the location to be wherever you want) to launch permitting (where you have to coordinate with the federal government for airspace and water closures). Not to mention that with the current regulatory status, a rocket explosion can easily lead to a multi-month mandatory safety review that blocks all new launches.
They also need Starship at minimum, which is now a 10+ year old project still exploding regularly.
Starship is at minimum a 2030 project at this point.
And even producing the volume of chips needed for the type of growth space data centers would need to have to justify this would be another decade if construction started now on those fabs.
A minimum of 2030? That seems excessively pessimistic.
Google and friends continue to see increased demand for their wares. The bet is probably that SpaceX is one of the best-placed companies to deliver incremental compute. They've shown they can build data centers fast.
A cynic might wonder given Musk's implausible trajectory and questionable associations whether the X project is primarily a grift and/or money laundering project that happens to do high-profile tech, and the primary aim is to pump the stock and hope some other opportunity to pump it further arrives in the future.
Otherwise a dump works too. There's plenty of money to be made from carefully timed shorting.
The entire AI field has been plagued by circular financing deals, so this is not new. But it's new in aerospace, and the market institutions appear complicit.
Otherwise, why is this IPO getting such unique treatment on such flimsy fundamentals?
It's an opportunity to pay off early investors who are unhappy with him cratering Twitter, xAI, etc.
> SpaceX is valued at a whopping 94x revenue. This deal increases SpaceX's revenue by $11 billion per year. If SpaceX maintains this revenue multiplier, then this single deal boosts SpaceX's valuation by 94 x 11 billion = $1 trillion dollars.
This isn’t how valuations work. The PE ratio isn’t fixed. It doesn’t scale with revenue. It’s based on projected future growth. This kind of deal is expected, meaning this deal likely won’t move SpaceX’s market cap much. Certainly not by anywhere close to $1T. That’s +60% of the entire pre-IPO market cap.
Google is doing this because they need more compute and TSMC is booked out for years.
I wouldn't call it brilliant. It's like cancer cells celebrating how fast they're growing.
Isn’t that the entire point of a capitalist economy?
What is the alternative?
> masterful piece of financial engineering
Love how we assign positive adjectives to unethical practices by corporates
I think the op was being a bit satirical
I wouldnt class 'masterful' as a positive adjective personally.
EDIT: Downvotes? Not sure why. I would say Darth Vader is masterful of the force, and even that Donald Trump is masterful at being provocative. Masterful is not definitively positive or negative, it just describes being very good at something.
I don’t think your math is correct. Profit is revenues minus expenses. Unless Google’s purchase of compute brings SpaceX’s revenues into profit territory (such that their total revenues exceed their expenses), SpaceX still won’t be profitable. This is accounting 101.
Google’s investment in SpaceX is completely orthogonal to the analysis. Equity investments aren’t revenue for the issuer. (Gains on sale would be revenue to the investor, in which case, this would be Google, not SpaceX.)
An equity interest in a company is a perpetual claim on future profits. Equity IS securitized profits.
Google's purchase sends cash to to SpaceX, which they report as revenue, and which they earn a profit from.
SpaceX cannot report Google’s investment as revenue on its balance sheet. Full stop. Equity investments are reported as shareholder equity. If you don’t believe me, read FASB ASC 605-606, ask your friendly neighborhood CPA—or, perhaps so you’ll earn a valuable lesson about confidently spreading bullshit about subjects in which you are clearly uneducated (or, at best, superficially educated), try it yourself in a public company and go to jail.
You don’t know what you’re talking about and are way out of your lane. Stop now. In fact, you should retract your parent comment and apologize to the community for leading them astray.
Did you even try to ask even ChatGPT or Claude about this first?
> Under the terms of the deal, Google will pay SpaceX $920 million per month from October 2026 through June 2029 for access to “approximately 110,000 NVIDIA GPUs, CPUs, memory, and other related components.”
That part is not equity - that's revenue for services rendered. But a commitment for nearly $1B/mo in revenue will likely increase SpaceX's share price, and Google owns some of those shares, so their holdings will increase in value.
Additionally:
> In Comments
> Be kind. Don't be snarky. Converse curiously; don't cross-examine. Edit out swipes.
https://news.ycombinator.com/newsguidelines.html
Yes, the appreciation will accrue to the investor, in this case, Google (and every other shareholder). But it is not revenue for SpaceX, which is the error OP made.
I’m aware of the guidelines. Another guideline should be “check yourself for accuracy before you reach for the keyboard”—especially since it’s easier than ever. Giving false information that, if practiced and not disclaimed, could land someone in jail is irresponsible.
The best thing about leveraged schemes like this is that if/when it fails it takes down everyone involved.
> Truly a brilliant deal for everyone involved.
Same thing they used to say about Lehman.
I'm sorry this is a misplaced framing.
==> Those facilities are being leased because Grok is failing.
Space X does not want to lease away it's competitive advantage to a primary competitor.
It'd be like Tesla leasing factory space to Toyota and Ford.
'GPUs, Energy and Data Centres' are a hugely critical resource in the AI race and SpaceX is now leasing it away.
Will it make money? Sure.
But this is 'Strategic Fumbling'.
The cash flow happens to help them leading up to IPO - that's a side show.
It is probably both.
Great for everyone except those who invest in index funds (directly or indirectly) and want some level of stability?
> because of this deal, SpaceX is now profitable
This is a huge claim for which we have no evidence.
$920mm/month at 30% datacenter margins yields $3bn in gross profit. Less in net income. That doesn’t cover SpaceX’s losses.
And that grants S&P (plus the existing NASDAQ indices). All US pensioners are bagholders for an illegal immigrant lol
Maybe they just need compute. Isn't that the more obvious reason. It's good that they own part of them and that's a bonus but the idea that the senior brass is orchestrating this to increase the paper value of something some division in google owns strikes me as wrong.
> and makes 50 billion
assuming google sells, the stock tanks, nobody wants to buy next year
is this masterful? more like a scam
"Clever" is not a word you want to hear in front of accounting..
Now with this incredible deal, SpaceX is now GAAP profitable under the existing rules, and they get to join the index next year without a rule change.
Didn't they also run up against a "minimum free float" rule?
The company has been around since 2002, I'm sure plenty of insiders will cash out in the next calendar year to satisfy the minimum free float rule by the time they're eligible.
True. The amount of free float increasing dramatically will probably also depress the share price.
For your math to make sense, Google would have to sell its stake this year
There may be more to it than buying compute but what you're saying does not make sense for Google. More likely Google wants a good relationship with SpaceX and possibly to buoy the stock, but it's a bad NPV trade
On the other hand, google does not lose all the money in that deal. Computation is still expensive.
So at most they lose like 200M each month. Peanut compares to the potentially gain of the IPO.
> and they get to join the index next year without a rule change.
You seem to have ignored the 50% float rule. SpaceX is proposing to go public with about 5% of the float, but S&P requires 50%.
Do we think that the market will absorb the release of 45% of the shares? I'm dubious.
Brilliant meaning clever, like a well thought out scam.
Not brilliant meaning something actually positive for humanity in any respect at all.
It only shows that Musk can't make xAI profitable and he needs to push numbers higher for the IPO which he needs for <i actually do not know> his ego? debt correction? Having enough money for Starship development?
This is the first time I get to understand why it is important to have big companies as your early investors.
Isn’t the revenue modifier a result and not the cause?
Would you really expect a company to increase proportionally in value when they increase their revenue?
From don’t bee evil to: f all of your 401ks, Sundar needs to join the billionaires club!
> this single deal boosts SpaceX's valuation by 94 x 11 billion = $1 trillion dollars
That's not how valuations work. Also, it is not unlikely that SpaceX's valuation drops post-IPO (tech was 6.65% in the most recent trading session) due to its very rich valuation and a long tenured investor based that is probably looking to get liquid.
Google is renting compute from SpaceX because they need GPUs and SpaceX owns a huge supply of them and has excess capacity bc no one uses Grok. Google has stated that this is a temporary arrangement while they continue to build out their own capacity.
I don’t know. Give me a 94x multiple and I can make any financial deal look brilliant. I think a better word is just opportunistic.
> Google spends 10 billion and makes 50 billion, $40 billion profit.
And gets a datacenter.
that's the best part they might not, and don't really care. they've already made $30b when is the dc never shows up
> SpaceX is now GAAP profitable under the existing rules
We'll need to see audited financials, but if this part is true people are going to be upset. I wonder if all the people who have been acting like the S&P rules came down from the mountain with Moses will start lobbying to change them to keep SpaceX out?
And to be clear, I think SpaceX is way overvalued and I wouldn't buy it stand alone. But there are a lot of companies in the S&P 500 I wouldn't buy stand alone, yet I still own a a lot of an S&P 500 ETF. /shrug
So SpaceX is selling inference capacity. Who else is? What were the competing offers for Google and Anthropic?
anthropic isn't selling capacity. they're using all of theirs and more
Anthropic is buying a lott of inference from SpaceX. Where else could they have turned?
Sounds like the system works like all other hacked systems on this planet. We need to fix our broken systems.
The market should consider this a huge negative: SpaceX is renting out their compute because they have failed to make use of it themselves. This calls into question whether they have any talent in xAI at all.
So they have followed the rainbow and found some pots of gold... And then they all lived happily ever after.
Apart from the peasants of course.
They still need 10% float and 1 year of bake time, so the rules are still doing some work for us
why revenue that barely cover the estimated revenue (and depending on assets yet to be acquired) boost valuation? is everyone an idiot?
So masterful that a random guy on HN can see right through it.
Let’s just call it what it is. It’s just basic fraud. They created a very temporary revenue injection right around the time of the IPO to defraud investors as much as they possibly can. Some businesses do this kind of thing just before they die because…why not?
No it is not. You are conflating the colloquial definition of fraud, with the legal definition of fraud. Fraud has a defined meaning.
Or SpaceX just has too many GPUs and nothing to do with them besides renting them out to someone since their AI products suck and nobody uses them?
Except they’re paying $30b (the deal is signed for almost 3 years), there’s no reason to believe that SpaceX maintains revenue multiples and this deal creates a trillion in value, liquid cash is not the same as pre-IPO shares. And finally, the deal comes down to $11 per hour of h100 equivalent, which is pretty much within market which experiences a severe lack of supply.
Do you really think its honest to call this Financial Engineering over Fraud?
No. The definition of fraud is "lying for financial gain". This doesn't qualify.
Utterly nauseating. Why would google help prop up this company and its figurehead? Maybe this is finally the straw that breaks the camel’s back for me and google.
Well Google needs GPUs, SpaceX has GPUs but nothing to do with them since their AI business failed. Why is that insufficient?
They're not "propping up" anything. They're buying a service.
> Why would google help prop up this company and its figurehead?
Simple, money.
When Billions of $ are in the picture, people really don't care about ethics.
It seems like Silicon Valley has decided on solidarity among tech billionaires and they're gonna take average Americans' wealth to keep themselves semi-relevant globally as China assumes global dominance. This is after insulting and demeaning the rest of the world, they plan to try to sell anemic services to other countries in whose politics they're also meddling. Circular agreements promising to purchase goods and services without the money in the bank, but you can show your promissory note to a guy with his own promissory note who then writes you a new promissory note based on your first one to take to another guy with his promissory notes, look at all the paper.
prompt engineering, harness engineering, agentic engineering, financial engineering
AI is really a pioneering engineering field
Since the S-1 filing, xAI has taken over and is likely the largest share of revenue. I would estimate that ~95%+ of xAI revenue, and 100% of its profit, is from renting their datacenters.
This is a datacenter REIT bolted onto a social media company bolted onto launch business bolted onto a niche ISP. The expected price to sales is ~100x. The best datacenter REITs trade at ~10x and pay a dividend, which SpaceX does not. Meta trades at ~7x sales. Comcast is one of the best-run ISPs, and it pays a 5.5% dividend on a stock trading at < 1x sales.
To say SpaceX is overvalued is to even beginning to convey the magnitude of the situation. It's going to be very painful when the valuation normalizes.
TSLA has a forward PE of ~200x. That is probably the most logical comparison with SpaceX. Proof that the market can stay irrational for quite a long time.
It fills me with a bit of dread about the future of the market. I am 10 years out from retirement, have a bit over 1M sitting in that market, and I wonder if it will implode in the meantime. I am fairly committed to the "invest like a dead man" (i.e. index funds, no touch), but the world we live in today makes me have real doubts that the next few decades will look anything like the last few.
Start gradually converting your equity to bonds is the standard advice on that timeframe. If you're dreading equity drawdowns, that's what fixed income is for.
Bonds are no longer recommended. Current research indicates 100% equities to be the best composition leading up to, and past, retirement.
To point, the economic uncertainties around geopolitics, AI, and war, plus irresponsible debt spending by governments and the prospect of QE (and higher inflation), is pushing long term rates steadily higher. There’s a reasonable chance that 30y treasuries are nearing 6% by the end of next year. Remember that rates and bond prices are inversely related. Anyone who holds bonds in this market will likely lose money. Holding to maturity won’t help much either because if inflation continues to rise, as is a major concern, most or all of that 5% yield gets eaten.
> Anyone who holds bonds in this market will likely lose money.
Yes, you lose money (or more precisely you lose opportunity) but you gain certainty. Which is what you want for retirement
That’s pretty much the definition of risk premium.
I'm technically not really in pure index funds, I just wanted to avoid trying to complicate my thoughts. Nearly all of my investments are in VFORX or Schwab's equivalent, and have been for a long time. So they are really composed of total market funds, bonds, etc, and Vanguard changes the ratio a bit as 2036 approaches. So while not really an index fund, from my perspective as a lay investor I treat it like that and consider myself an honorary Boglehead. I just put money in and forget about it.
This is absolutely terrible advice and is out of touch with modern financial understanding. Bonds feel psychologically safer, but lead to failure more often than total market equity portfolios, even when you account for market crashes.
https://youtu.be/p25PPBgMiEk
I feel like I should go learn some more. I'm not in a pure index fund, I'm really in VFORX (almost completely, I'm not too original nor sophisticated financially and don't try to pick my own stock picks these days except with my "lunch money" just for fun). Do you think something like VFORX is a bad option? It's actively managed, so the fees will be a little higher than a pure index fund, but it's Vanguard and the fees are still really low. And it has total market components in addition to bonds.
I agree with everything in the video you linked (which is not surprising, given it's Ben Felix). That includes the parts about equities being less risky than bonds in very important ways, but also the parts about behavioral loss tolerance and risk capacity, and how they can indicate higher bond allocation.
So I disagree that "If you're dreading equity drawdowns, that's what fixed income is for" is absolutely terrible advice.
I always thought the psychological safety was exactly part of the point, since 100% equity portfolios do better in theory than practice, because people are more likely to panic sell.
About 10 years out as well. I’ve concluded I just invest a very balanced set of index funds and bonds and GICs across a handful of institutions, and then invest in my home because even if the housing market collapses I get to enjoy my nice home.
Other than that I’m just not over investing for retirement and instead making sure the money is spent today on family growth and experience.
I eventually just got tired of everyone with an opinion on what doing it right looks like or how to predict the market.
In a similar situation: I basically have just 2 funds in my retirement portfolio: SnP500 index fund (75%) AND Berkshire Hathaway B shares (25%)
from my research I know that in years where SnP500 drops too much (recessionary periods), BRK-B would soften the blow as Value stocks tend to do well in such times. And usually that works for me.
Plenty of hedged equity funds out there. Trade some performance for peace of mind.
Watch a lot of Ben Felix. Tons of good advice for you.
Eh, Tesla had a relatively normal growth company valuation for a while when they were growing strongly. The problem is the stock still hasn't compressed the multiple back down as growth stagnated... because the market swapped out "valuation based growth" for "call option on robotaxi success" at the blink of an eye.
PE of 380 against deteriorating margins & profit. This story doesn't end well. But to your point, it's likely a cult of personality that can stay upright until Musk leaves the company.
Circular financing at its finest. And Self-dealing between the hyperscalers, openai, and anthropic.
google invests in anthropic and spacex - and shows appreciated values as earnings. Then it turns around and rents tpus to anthropic to show it as revenues. The main buyers and sellers for all of this are the hyperscalers, openai and anthropic.
It is a game of musical chairs while the party is still on.
My only consolation is that this is so obvious that it's not going to lead to a disaster. Things like the housing crisis happened because long-established institutions like credit ratings and mortgage lenders didnt do their jobs.
It's the swiss cheese model, hidden behind curtains.
This is like a giant sign saying you can buy $2 for a $1.
Do companies like Uber, Tesla, etc ever intend to pay dividends? If a stock never intends to pay dividends, the value of the stock is simply the price the next shumck is willing to pay.
The value of the stock is your share in the underlying business. Because underlying business changes over time (hopefully for the better) you are not simply hoping another shmuck pays you more, like with tulips, whose underlying value does not change with time. You own a portion of a concern that is improving its own fortunes.
Furthermore, dividends are approved by the board once per quarter or once per year. A dividend on a stock is not a contractual guarantee like it is on a bond. Therefore, it cannot be a basis of value.
With your logic, Berkshire Hathaway is a long-running greater-fool tulip bubble whose shares are only bidded up by finding more shmucks.
Well, the value of the stock for people who essentially do not have any meaningful control of the business must essentially be tied to the expectation of some liquidity event down the line -- future cash flows. So this could come in the form of dividends, sale of the stock, bankruptcy proceedings, or a purchase of the business.
If I knew for certain (big if) that a business would never have a liquidity event and I couldn't transfer my ownership then it's dead capital for all intents and purposes and you could consider its value essentially $0, right?
But you can transfer your ownership.
And you can sell your tulip. But if the mania stopped and you suddenly _couldn’t_ find another person to sell it to, would you now be upset you paid $5000 for a tulip? What’s the value at which you wouldn’t be upset? Ok, that’s the intrinsic value of a tulip to you.
The thing about a profitable business that is different from a tulip is that it can at any point decide to issue a one-time or ongoing dividend. It can sell off parts to create cash. It has lots of optionality. Public companies have even more liquidity, which creates more optionality.
Even if you don't have immediate liquidity, it would obviously be worth something to have a slice of e.g. Rolex SA. That's obviously different than owning a tulip.
Berkshire Hathaway doesn't pay a dividend yet the business has steadily grown more valuable
This makes no sense. Why doesn’t the “underlying value” of tulips change?
“Underlying value” is a meaningless word btw
Things don't have any inherent value. It is priced at a level that a buyer thinks it is worth.
A gallon of oil can be $3 or $6 depending on whether someone is willing to pay. It can also be $10 but only if people are willing to buy it at $10 if not "prices will come down to match the demand" - another way of saying it would be $9..$8...$7...$6 until it matches a buyer at which point gas is $6.
This is what I am trying to express. There is no "inherent price" or "inherent value" there is only the real value that it is bought at (in terms of money). There can be other values (non money) like if someone is willing to swap something for it etc.
The underlying value of a tulip is the same as it was in 2000 and 2026. The underlying value of Google is much different in that same time frame.
There is no underlying value. It is only how much other people are willing to exchange for it.
So stock marked is always meaningless except considering it is so large and consequanetial and so many people have access to it that it will be rational automagically. This is more of a belief that seems to be fairly correct than a rational line of thinking. This is similar to Democracy in a way
You seem to be operating on the assumption that stock values are just totally and completely random and the fact that Google is worth $4T is just as much of a possibility as Hertz Rental Car being worth $1.5B
If you disagree with the above framing, your reasoning will have to concede the existence of underlying value. Yes, obviously the price of a share is the result of the bid and the ask price in the order book. But those prices are based on something, they are not randomly generated. They are based on conceptions of value. The fact that companies with increasing free cash flow over long periods of time always see increasing share prices over time is not random coincidence.
> The value of the stock is your share in the underlying business.
Which for most investors with Class C/D shares is... the square root of zero.
They assert no control over the business, the only way to benefit from the stock is to find another shmuck to buy it at a higher price.
The price of a growing business should go up because it has more options to create returns for shareholders.
Use Aldi (revenue ~$120B) as an example. Do you think a person would be a shmuck to buy a slice of it now versus when revenue was $1 million? If not, why not? Your answer will help understand why stock has value even without voting control or dividends.
That’s the story, but it’s bullshit. The underlying intrinsic value of a stock can only be materialized if the company liquidates and you receive a share of the sell off of its assets. How many publicly traded companies abruptly decide they’re tired of the business, stop in their tracks, and liquidate their assets? This only really happens if the company is acquired or if it goes bankrupt. Acquisition is the closest the story comes to truth, but it’s also just forced sale to a greater shmuck. If a company goes bankrupt, a tiny fraction of the current stock price would be realized into cash for common investors because of all the privileged investors and lenders ahead of them, not to mention that the actual value of capital assets etc probably doesn’t cover all the losses (the company’s going bankrupt after all). The value of the underlying capital assets are essentially never returned to the common investors, and the idea that you own a portion of them is in practical terms a lie.
> The underlying intrinsic value of a stock can only be materialized if the company liquidates and you receive a share of the sell off of its assets.
This is wildly incorrect. A profitable company can decide to begin paying out dividends, which can eventually return > 100% of the investor's purchase price. A company can issue more stock or bonds to raise cash to pay investors. A company can spin off assets to raise cash to pay investors.
Your framing is very much like a short-term PE investor, and if you look to their playbooks you can see there are many ways for intrinsic value to be realized while leaving an operating business behind. There are any number of stories where PE investors make big profits and then turn around and resell the company for more than they paid.
It's not purely the liquidation value, it's the idea that the liquidation value will continue to increase, or profits will be paid out to owners.
Yes, the profits it pays out are the one thing that actually makes sense, but the premise of the grandparent post was to ask what a share is worth _without_ dividends. And the answer is that shares are intrinsically worth very little. Liquidation value (actual liquidation - bankruptcy or going out of business or an exchange closure) is rarely ever practically realized for common investors. Even if you’re trading on the discounted expectation of a larger liquidation pie, nearly 0% is still nearly 0%.
Voting rights are also not valuable by themselves - they are only useful to steer the company towards greater future payouts, which means you are appealing to some other entitlement to value.
If you zoom out, a company is a temporary arrangement of people and things that makes more money than it spends _over time_. They are not really designed to accumulate and store value in and of themselves. The machines the employees use to do the work is a small fraction of the overall utility of a living breathing business. The valuable part is the capacity of this techno-social organism to reliably and continuously make profit, which is far greater than the sum of its parts. So if the profit that’s being earned is never paid out to stakeholders, then there’s no point in being a stakeholder. If the profit is redirected to make the organism bigger, then you are trading now-dollars for future-dollars which must be appropriately discounted. If everyone expects a company to do this forever, then the correct price is what the expected liquidation share should be, and that number is basically zero.
Yet, stocks that do not pay dividends exist at high valuations. What that tells you is that modern day stock trading is tulips: the lion’s share of the value derives from a temporarily stable, shared, _correct_ perception that someone else will buy it back from you.
The reality is that general investors are the greater fools in this arrangement. The prevalence of preferred stock is a tell that there are owners and there are “owners”. What we should do is recognize this and admit that the big initial investors and employees themselves are the owners, because they are the group small enough to actually realize liquidation value (should it ever be necessary). The public investors have no realistic claim on that value, so their shares should be more clearly labeled as dividend rights, which would cause them to be priced as such.
Excellent question. They may not intend, today, to pay dividends. However, the same question could have been asked about the successful tech companies of the '00s. Companies don't like to start paying dividends until they are fairly certain of their future profit stream and therefore ability to continue paying (and increasing) the dividends in the future.
Apple, Oracle, Nvidia, Cisco, Alphabet, Meta, Salesforce, and Qualcomm all pay dividends now. It's not unreasonable to expect Uber and Tesla to pay in the future. However, the median time after IPO for similar companies to pay a dividend is close to 20 years. So we could expect Uber to perhaps wfstart paying sometime around 2039. Tesla...is Tesla so who knows?
US companies normally do stock buy-backs instead.
It is a way to distribute the money to the investors, that their tax system favors.
There are lots of US companies that pay dividends. Another commentor lists some tech companies that do, and there are lots of other types of businesses that do. A quick internet search will give you a list.
You are correct that stock buybacks are another way that companies reward their shareholders.
Good call. I should have said that most of those companies also do buybacks as part of their capital return strategies.
I love this clip (this is the other guy that predicted the 2008 crash, played by Steve Carell in The Big Short). Cult Stock is a great way to think about it.
https://x.com/i/status/2061808563979251857
> It's going to be very painful when the valuation normalizes.
Painful for everyone except the grifters who are engineering this and can get out early enough with their stolen millions and billions. Musk's companies are just a giant pyramid scheme.
And SpaceX will spend $800M per month on Nvidia hardware purchase contacts, and Nvidia will spend $700M per month on Google services.
I'm picturing a teenager blowing a bubble gum bubble bigger and bigger. I assume it can go on forever!
A bubble will never pop as long as stay in it's bubble form
Usually there’s some environmental disturbance eventually, that makes it burst.
So… data centres in space it is.
Google renting infra from xAI, I did not see that coming. My understanding of what computers are doing, what companies are doing and what governments are doing seems to be getting worse day by day.
Financial shenanigans aside, xAI seems to be buying hardware at breakneck speed. So why not?
https://techcrunch.com/2026/05/20/musks-xai-is-being-sued-ov...
IIRC the large majority of their hardware (at least one tranche, they might have gotten more later) was Elon effectively stealing it from Tesla for xAI, saying “I’m personally doing Tesla a favor, since they can’t fully utilize it currently”, and is now renting that (stolen) compute to subsidize SpaceX.
Musk is a walking and talking financial fraudster and criminal and somehow keeps getting away with it.
Someday, Americans may punish him with a presidency.
Because hardware depreciates quickly, datacenter rentals are a competitive business with much lower profit margins than the IPO prospectus requires (even if there is a temporary bottleneck now) and there's no real moat.
The original batch was probably Musks "AI will solve everything, i have a small dick, i want to buy all the hardware and be the first" which became "Ah shit Grok doesn't need all the compute, we can't sell it properly our IPO is coming soon we need better numbers.
And
"Shit why did we agree to buy so much hardware if i can't even use the current one fully?"
to
"Ah fuck it, who cares if i indirectly pivot to selling this compute. It brings money and my Fanboys probably think its some magic smartness and not just ignorance"
I’m more confused what they’re going to do with all the infra? What could all those GPU’s be doing? Just inference?
It means that there's no memory to buy at any price. There's no GPUs. There's no power.
Elon had the foresight to buy all that in advance and now Google, the datacenter company, has to rent datacenter space.
MU went 1000% in one year and it's still one of the cheapest companies on the NASDAQ.
> Google renting infra from xAI, I did not see that coming.
Actually that seems to be fairly logical? Hardware is what xAI has, and it's in great demand. So sell what makes you money. The real story here is that that xAI hardware is going to be running Gemini and not Grok. Which is to say: Grok basically failed as a frontier AI and they need to pivot to a business model which makes money.
Obviously not everything Musk did was wrong. xAI bought a ton of compute when it was possible to get it. But the product they were going to build with it failed and so now they're deciding to be a landlord.
This IPO is just insane. No way do you justify a $trillion+ valuation based on what amounts to a bunch of commoditized rent seeking endeavors. Datacenters are buildings and chips, and everyone can build those. Starlink is just an ISP with lots of competition at scale (they have the high bandwidth mobile market cornered, but that's a very small market!). Mars is at best a grift on public funding. Even satellite launch services are commoditized and competetive these days.
Keep in mind Google also rents GPUs via GCP, so they could be just reselling these to GCP customers?
Thing is though, Anthropic was really against the wall with lack of compute pre xAI deal. And tbh, Gemini reliability has been abysmal which probably points to real compute shortages.
And nearly _every_ major DC project is really up against it with massive delays, etc. Stargate UAE has been badly affected by the Iran conflict.
So maybe long term this isn't a great business, but _right now_ I'm not convinced it's all financial engineering. There is a enormous shortage of compute and xAI has a load of it _available now_.
> So maybe long term this isn't a great business, but _right now_
Exactly! "Maybe not a long term great business" is exactly the opposite of what you want to buy in an IPO.
This is a "private equity can squeeze out a ton of cash from this asset portfolio" situation, and very much not a "in a few years this will be a trillion dollar business competing with the biggest companies in the world" bet.
Could you please describe the other satellite launch services whose prices are competitive with SpaceX?
The whole of the space part of SpaceX is like 10% of the claimed business according to their S-1. And most of that is Starlink, not launches for third parties.
But building a Starlink competitor is essentially impossible without also building a space company, and the main competitor doing that just turned their only launchpad into a crater and is out of the game for a year or so.
SpaceX's launch business is great, but does not justify the majority of the valuation.
We will see China comming up soon i would argue.
But otherwise yeah SpaceX one that one for now. Only issue with this: We don't have enough payload for SpaceX to expand that much more.
If you are asking for government and research needs rather than commercial then ISRO (Indian space research organization) beats SpaceX
That being said, ISRO focuses more on research and scientific world as compared to the commercial world but they were the least expensive option out there before SpaceX and the only differential which causes the pricing is actually re-usability aspect of SpaceX rockets/launchers and ISRO is actively working towards that too.
And another thing as brainwad said here but Space part of SpaceX is just 10% of the claimed business according to their S-1
> Which is to say: Grok basically failed as a frontier AI and they need to pivot to a business model which makes money.
They can just run Grok as a local AI inside Tesla cars. It's actually really efficient as a compute platform because the Tesla cars are in motion at highway speeds, which gives you lots of free airflow for shedding waste heat via the car radiator. Way more efficient than trying to run AI on space satellites.
Grok is just DOA. No need to beat a dead horse. Even Musk got that thus the reason why he is renting the stuff it planned for Grok.
Grok has plenty of "non-woke AI" cred which will make it a preferred choice for lots of government-side and politically sensitive workloads.
I am pretty sure the gov gets an uncensored /heretic version of the AI models instead of the nanny stuff we get so Grok really doesn’t have a “killer” feature. Even for multi model passes(I.e used purely as a contrarian gate) it’s not really that great due the high rate of hallucinations.
Anecdotally, Grok is mostly not that anti-woke. It is coasting off of its reputation from Elon's marketing. That said, it does have meaningfully fewer guardrails, which is a real benefit.
Nazi AI is bad actually, most governments will not want to be associated with it
What do you think the term woke actually means?
I think their point is less that it really means something and more that enough customers think it means something to provide economic opportunity
The only frontier lab to be selling the compute rather than inference seems to say more about this economic opportunity.
Something which is inconvenient to trumptys
lol, not sure if this is a joke, but Teslas do not have anything close to the necessary hardware to run grok locally.
Who’s going to be paying for the energy? People have been floating using the cars as compute for years and it just doesn’t make any financial sense for anyone.
Teslas spend a tiny percentage of their life at highway speeds, and a major selling point of the platform is that their compute would be used to pilot the vehicle.
If they could train using Teslas they wouldn't have needed Dojo.
Xai seems pointless, and they've got gpus needing to be used for something.
You make it sound like they’ve given up on Grok, which I don’t think is accurate. I think it’s been mentioned the Grok 5 1.5T model is currently training on Colossus 2. And their recent deal with cursor is part of being able to eventually compete with Anthropic for agentic coding.
There is no evidence they can deliver anything competitive based on their past performance, though.
Even if their model is competitive or even surpasses e.g. Deepseek (which is far from given) how would that justify a huge valuation?
Strongly agree with all of this, except that charging rent for the use of an asset you own is not what economic "rent-seeking" means. I blame the dumbass economists who named it this, forever polluting the discussion to be had about regulatory capture and legalized political bribery.
I thought elon hates demis
Demis? Democrats or something else?
Elon likes money and power.
Demis Hassabis - head of Google DeepMind.
Thanks for the comment but then commenting to the GP (@Hellojimbo) that sure Elon might hate Demis
But nobody denies a 920M$ per deal for an unprofitable company's like SpaceX at this point, last line to somehow become profitable after this deal.
The scale at this money & influence operates, although I feel like people project to the general public that they lean a particular side and sometimes they do but what they lean the most is towards money and whatever response is the most convenient for them at that time.
They're struggling.
The future needs more AI compute. No one has enough AI compute.
Memory chip vendors are betting hard on this being a temporary state of affairs that doesn't last, and doesn't warrant commissioning a shitton of new memory foundries.
Musk is betting hard on this staying that way, and is putting the next Colossus into the last place not corrupted by NIMBYs... SPACE!
> $920 million per month from October 2026 through June 2029 for access to “approximately 110,000 NVIDIA GPUs, CPUs, memory, and other related components.
That's about $8,400/month per "component" is that in the ballpark at all with what a month of dedicated/exclusive access to an NVIDIA GPU would go for?
That's roughly 11.66$ per hour per GPU, which is above the price that Google Cloud is reselling them at if you commit for 36 months: https://getdeploying.com/gpus/nvidia-b200
That's for standalone servers. xAI has something that nobody else has. The single largest interconnected cluster[1]. For inference it doesn't really matter, but for training that networking is crucial.
[1] Probably, there could be undisclosed clusters owned by other companies.
Plus electricity, labor, and maintenance?
Yeah I was wondering about this too. It seems like way too much per GPU considering the purchase price of a B200 was around $40k last time I checked. So if we naively ignore the price of electricity and maintanence, it would only take 5 months before renting is a worse deal than buying outright.
It’s a supply and demand thing. Google would definitely be buying from nvidia and setting up themselves if nvidia had the capacity.
SpaceX/xAi/musk are currently in a good market for “happening to own 100k cards we have nothing to do with”, and are exercising that control as hard as they can.
A huge chunk of SoaceX value in their filing is attributed to their AI technology (aka Grok). I believe it’s 90% or more… Now, it seems they’re leasing the infrastructure required for Grok to scale to Anthropic and Google. I wonder how that math works…
But what is xAI? I thought that was the company that had the compute + Grok, the AI company? Since when does SpaceX (which I thought was a space company?) own AI-compute hardware and/or can do model hosting? Are all of Musks companies just one big thing now where the names no longer matter, or how is it supposed to work?
Edit: seems I'm just a bit behind: "xAI — now part of SpaceX ", seems really strange for a space company to buy an AI company, but I guess rather that, than the other way around.
I think some justify it as SpaceX plans to offer hosting in space, and then use Starlink to distribute it.
That's what the IPO salesman and pamphlet said anyway.
Can you provide a good example of something that is currently hosted in space and distributed via satellite?
Musk sold Twitter into xAI which he then sold into SpaceX as a financial engineering effort to lessen the impact of massive debts and cash burn. The IPO and some clever structuring is the final step in the process.
I.e., fraud.
Context here (Patrick Boyle):
https://youtu.be/IHD8BDFYyGI?is=dnpBeOoxH7LUJknm
Next up Tesla and SpaceX are going to merge and that will another round of synergies where Tesla and Vision AI (in FSD) and xAI.
Not really strange... if the goal is to go to mars, you probably need robots, those need intelligence -> ai. It fits pretty well, especially because you want to own all the core technologies as a company.
Wow…sounds like some kindergarten stuff
Why 4-5 companies instead of one then? I thought the goal of SpaceX was to get to Mars, why does xAI need to have that same goal? Or he didn't think xAI was suitable for that goal, then changed his mind so merged the companies?
You are overthinking this. The whole purpose of the SpaceX / xAI merger is for Musk to launder his failing companies to make them more palatable to the public. Not unlike the complex Mortgage Backed Securities of the GFC era which had a ton of low quality debt but yet were somehow assigned spotless credit ratings. Twitter is also being rolled up into SpaceX for the same reason.
I sure wish my company were failing the same way Musk’s allegedly are.
Yeah, there are too many people happy to sacrifice principles for a buck...
Personally I can go without owing money to Saudi royals.
The stated goal is to "go to mars", the real goal is to make money.
He sold his failing but hype business to his soon-to-IPO successful but kinda boring business.
It's a way of laundering the debt and dumping into investors as he pitted different indexes against each other to force his way into one of them, and have people's 401k buy into them. Its a ton of money.
I wouldn't be surprised if Tesla is bought into spaceX in the future.
He’s a drug addict and sociopath. Also has very thin skin (and hair) so he does stupid shit. Somehow we are all left holding the bag on his BS.
And Africa is left holding a larger bag of Ebola.
It has nothing to do with Grok, at least not the current iteration. SpaceX is the only company that can concievably launch large scale orbital compute.
I’m out of the loop, why is compute better /after/ being launched into space? Is the idea just to be co-located within the ISP to reduce round trip time to the LLMs?
There would be some benefits, assuming you could do it for a reasonable cost. For one, you have effectively uninterruptible power using solar panels in space. And it's free, too, once you have the hardware in place.
And you don't have to deal with any of the site selection stuff you have for terrestrial data centers. No NIMBYs. No politicians trying to extort bribes. No water problems.
In space there are no earthquakes, tornadoes, or floods.
I'm still skeptical. It's hard to believe it costs so much to build a data center on the ground that putting it into orbit is an economically viable alternative.
Yeah, launch costs alone make it infeasible, and power being "free" exacerbates the cost (gotta get all those panels up there). Cooling is also dramatically harder, plus shielding, and it makes repair/upgrade basically impossible.
I'm not going to assert that large scale space compute will never happen, but I feel confident saying it won't happen this decade or next.
> launch costs alone make it infeasible
Last time I did the math, launch costs were well balanced against permitting delays (mediated by interest rates). The break even rests almost entirely on radiator mass efficiency (which is, admittedly, a function of launch costs).
Like, if everyone’s terrestrial datacenter projects start getting blocked, and demand for AI continues, the price a rational buyer would pay for in-orbit compute could get ridiculous enough to break even on current kit. And current kit in launch vehicles, radiators and solar panels is advancing.
I don’t think the thesis is met yet. But it’s less ridiculous than I thought it was before I sat down with pen and paper.
Grokipedia would be way better launched into space.
The risk is getting our planet annihilated if something stumbles upon it.
You guys don't understand. Banks like JPMC will make billions on this IPO. Doing everything to prop it
These sort of numbers are really easy to estimate and it sounds like you haven’t done.
For the sake of a reality check:
IPO is raising approx $75bn of new equity
SpaceX has negotiated substantially below market fee of 0.75%
Total fee pool = ~550mio USD
Fee pool will be split between 23 banks, so average of 23mio per bank, likely skewed heavily towards Goldman Sachs and Morgan Stanley as the lead bookrunners.
Clearly everyone has incentives for spaceX to go up, but important to keep in mind the order of magnitudes we are talking about, the monthly google compute spend in the headline totally eclipses the one off banking fees
Maybe that was the handshake deal from twitter financing, twitter exit and so on. "I will make you whole".
I do not know, but I wonder if someone can tally the bankers from twitter buy, twitter merge into xAI and the new spaceX launch.
Dimon himself is inserting himself https://www.reuters.com/legal/transactional/jpmorgans-dimon-...
> compute from its Colossus 1 data center near Memphis, Tennessee, that xAI — now part of SpaceX — originally built for its own artificial intelligence efforts.
Is this the same Memphis data center notorious for burning jet fuel nonstop for power?
Not surprised. I work in the gas turbine market and this AI boom has revolutionised our business and investments, oil and gas is dead. (to us)
What would you prefer it to burn instead?
Is there any data on whether Google, Amazon, Microsoft, Anthropic, OpenAI etc are most cost efficient in getting datacenter compute online and operating it?
I'd be interested in how large the range is here across company and region and specific data center and how it relates to companies like Hetzner if at all.
Well, Elon seems to take the fastest path possible to these DCs. One can envision a future where these get shut down for the severity of the pollution, not to mention being built and operated illegally [0].
[0] https://www.selc.org/news/xai-built-an-illegal-power-plant-t...
Which is precisely why there has been a push to weaken the EPA and other regulating agencies
> Is there any data on whether Google, Amazon, Microsoft, Anthropic, OpenAI etc are most cost efficient in getting datacenter compute online and operating it?
Well considering that ~80% of the price is hardware deprecation, I don't know why they'd be considerably worse than anyone else at negotiating hardware deals.
Typically when you buy in bulk, you have more sway.
Companies like Google also have in-house chips like TPUs that are substantially cheaper for inference for them to make than anyone else can get through Nvidia.
I’ve seen some numbers related to datacenters in Ireland and they would stress price per MW as a way to see where to build them. But then you have depreciation of equipment as well. Depreciation can be played with when filing taxes though.
I don't think they are most efficient for small GPUs. I think they might only be the one which have capex and certainty required for multimillion dollar purchase of GB200 NVL72 or something of that scale.
that's asking the cart before the horse; is there any data on what compute actually results in real GDP improvements?
Nothing other than vendor promises and white papers.
I am really wondering if Google is just subleasing Anthropic capacity. The terms are suspiciously the same as Anthropic's and Anthropic was supposed to have leased out all of Colossus 1.
Maybe with the corp token spending limits and the rise of codex, Anthropic saw steep deceleration in usuage?
That plus sota model regressions. When they’re public we’ll see the numbers at least.
380 dollars per second... Good to know I could afford my own data center for an appreciable fraction of a minute.
plus $473 per second from Anthropic
> As part of that deal, Anthropic agreed to pay SpaceX $1.25 billion per month through 2029 to rent all the available compute from its Colossus 1 data center near Memphis, Tennessee, that xAI — now part of SpaceX — originally built for its own artificial intelligence efforts.
I don't get why SpaceX is going public. But anyway, well played, the whole crypto mining that dried out GPUs back in the day seems tiny now.
> I don't get why SpaceX is going public.
Liquidity for investors. They raised everything they could from private markets, government contract, debt, the remaining source of financing is from the public
For context, Alphabet earns ~$12k/sec.
Why would you want to own your own giant datacenter? What would you do with it? Of course it's expensive to operate a datacenter that serves millions of people.
They were just being jocular.
I was actually surprised by how low the per-second rate is.
These deals are part of how the AI economy operates. Amodei has explained this in his recent Patel podcast.
1. Building datacenters takes time. Months, if not years. They take billions of investment.
2. AI revenue is highly unpredictable. Sure, you can make predictions, but maybe your competitor releases a better model 2 weeks after your release, maybe the new model you built isn't as much better, maybe the chinese models steal your show, etc.
3. AI revenue grows a lot. Anthropic's case is 10x per year.
4. So if you are off by just a year in terms of how much GPU you actually need, then that means a 90% of your compute capacity is wasted, and you go bankrupt.
As a solution, companies buy compute from each other! If one company's model did well, they can buy compute from the company whose model didn't do well (like in the case of grok). It's beneficial for both sides, so positive sum game. So deals like this aren't something bad in itself.
It's nothing new either. In SAAS deals, you often commit to a certain revenue and then pay extra if your revenue exceeds that amount. And power market is cut in two as well: longer term deals plus spot markets. Spot prices are way higher than the longer term deal prices.
Given it's SpaceX of course there is financial engineering involved: the GPUs aren't actually owned by SpaceX but a daughter company, and it's been financed via loans that are backed by pension funds. So it's already the case that pension funds back bear the risks associated with SpaceX's operations.
Right now, the bulk of the AI bubble sits in such debt statements and not in public markets.
> the GPUs aren't actually owned by SpaceX but a daughter company, and it's been financed via loans that are backed by pension funds. So it's already the case that pension funds back bear the risks associated with SpaceX's operations.
I think a more accurate phrasing of the Valor GPU deal would be something like this:
"SpaceX’s AI compute buildout relies in part on off-balance-sheet or lease-style financing vehicles. Valor-owned vehicles purchased Nvidia GPU infrastructure and leased it to xAI/SpaceX subsidiaries, with Apollo providing debt financing and SpaceX or subsidiaries guaranteeing some obligations. That creates indirect exposure for institutional and retirement capital, though not necessarily direct pension-fund ownership of SpaceX operational risk."
Is this admission that google’s proprietary chips etc. are not cutting it? Why would you need a bunch of nvidia GPUs if you have your own silicon? (AFAIK they have their own for both inference and training do they not?)
How do you come to this conclusion? All it means is that spacex has compute and google does not.
Suppose tpus were theoretically a million times better, but cannot be produced due to supply chain constraints, this action would still be rational.
My personal take is that this really shows how bottlenecked the entire supply chain is. For such an important commodity there are shockingly few players ready for scale.
I see it mean two things:
1. Indeed, Google is compute-constrained, and is ready to buy any it can.
2. xAI (now SpaceXAI) has a lot of idle compute, which it resells to Cursor, Anthropic, Google, probably others as we speak.
In other words: Google is training models, xAI is not.
It's a very long contract (till 2029) for just covering themselves for supply.
3 years is quite a short horizon when it comes to semiconductor fabs. Also this article is a dupe, when it was previously discussed it surfaced that after some time either party can cancel with only 90 days notice.
No its not.
"Both SpaceX and Google have the option to terminate the agreement with 90 days’ notice after December 31, 2026"
They know allocation they have from TSMC for TPUs production they know allocation they have from Nvidia they see demand curve.
Kinda; while it does show that overall Google's proprietary chips etc. are not cutting it, it doesn't say if the problem is the hardware itself or the factories to make more of the hardware. Without more information, it could be that Google's hardware is 100x the energy efficiency per token, but they can only make enough hardware for 1% of the tokens there's currently demand for: 1% of your product being 0.01% of your costs isn't nothing, but it leaves the other 99% at full price.
Its because none of the promised Data Center and NVIDIA hardware deployments described in NVDA earnings calls have actually happened. Once more Ed Zitron has the goods: https://youtu.be/zbKDmkJPVvI?t=482
Supply and demand? Bubblists seem to think there's an infinite supply of chips, power, and water to make as many chat bots as possible; physics, as usual, dictates limits.
Not necessarily, just that they don't have as many as they can make use of, and that xAI can't make more valuable use of them than renting them out.
Yes, it is issue of scale, google had to restrict usage because hardware are not available, regardless of what kind of hardware that is
Or it’s paying to make sure competition can’t buy said compute. Also isn’t Google an investor in SpaceX anyways?
It could be, or simply we are so far away into chip shortage that even google needs to buy from other people’s pot.
At this point you are not buying a particular chip. You are buying whatever compute you can get.
Or alternatively there is simply a huge demand for compute and this is helping them fill a short-term need. Keep in mind if you saw in the article there is a 90-day cancellation clause. This is a nothing burger.
> 90-day cancellation clause
In other words, this is a fake IPO booster
I don't think so. It provides some nice optionality for Google and I am guessing this opportunity only exists because Grok is not popular and xAI does not really have any other use atm.
“If we fail to deliver access to the committed amount of GPUs by September 30, 2026, then following a one-month grace period, Google may immediately terminate the agreement or accept the number of GPUs provided, with a corresponding pro rata reduction in the monthly fees. After December 31, 2026, the agreement may be terminated by either party upon 90 days' notice.”
https://www.sec.gov/Archives/edgar/data/1181412/000162828026...
It’s only to boost the IPO price. The agreement will last only a few months on paper. I doubt it is a real transaction.
Either that or SpaceX is permanently turning xAI's assets into a neocloud because xAI itself has no traction.
The whole thing looks rather desperate. I wonder what SpaceX's margins are on these contracts.
SpaceX has recently started pitching itself as an orbital datacenter company.
If you buy into that business model (or pretend to), it makes sense for SpaceX to start selling compute early. Their "earthside compute" clients of today are "skyside compute" clients of tomorrow.
A part of Musk's old pitch for Starlink was: space-based solar makes perfect sense for powering space assets, and no sense whatsoever for powering Earth assets. So you have to find a way to use that power in space to do something economically useful. Comms were the only scalable way to do that, so Starlink it was.
I can see how space-based datacenters would follow the same logic. If SpaceX can make them economical, that is. There's no guarantees of that - but if anyone at all can make space-based datacenters economical, it's SpaceX.
> if anyone at all can make space-based datacenters economical, it's SpaceX
Let's hope burning ten thousand tons of toxic e-waste annually in upper atmoshphere never becomes economical. Or mankind gets to senses and bans externalizing your e-waste problem by burning in atmosphere...
> ...burning ten thousand tons of toxic e-waste annually...
Expressing water usage in gallons makes it seem really large, too. NASA says[0]:
If we assume that they're all the heavier v2 units, the total mass of the orbital portion of Starlink is ten point four tons. [1] If we assumed that they lasted one year (instead of the five that they're reported to last[1]), then over the course of a year, Starlink would dump six hours worth of asteroid collisions into the atmosphere.I think we'll be fine. Pour all that frustrated energy you have into substantially reducing the amount of incredibly hazardous d-waste [3] big commercial operators burn up into our atmosphere, instead.
[0] <https://science.nasa.gov/solar-system/meteors-meteorites/#h-...>
[1] According to [2] there are currently 10,413 satellites. At an assumed 1760 lbs each, this works out to roughly 10.4 tons.
[2] <https://www.space.com/spacex-starlink-satellites.html>
[3] "dino"-waste, AKA CO2
a) Meteorites don't have any of toxic chemicals used to build a server with lithium-ion batteries and solar panels
b) we could use the same argument to defend dumping spent nuclear fuel to oceans (like we used to do)
c) I agree with the CO2 issue, grok/spacex/xAI and others should be banned from building gas powered datacenters.
You think that meteors don't have lithium? The third most common atom in the universe?
I think you missed a factor of 1000 somewhere in there: Each satellite weighs about 1 ton, there are about 10,000 of them. That is 10,000 tons in orbit for the constellation, not 10. Assuming a 5 year decay, that's 10000/5/365 ~= 5 tons / day. Still about 10% of the natural incoming material, but considerably more than your "six hours worth per year".
> I think you missed a factor of 1000 somewhere in there... there are about 10,000 of them. That is 10,000 tons in orbit for the constellation, not 10.
I did. what. the. hell? Maybe my swiss-cheese brain read the "," in 10,413 as a decimal separator? I guess that's what I get for posting while old. Thanks for the correction and supporting arithmetic.
Though, I still stand by my "please for the love of everything, get to complaining about CO2 because this thing you're complaining about is a damn nothingburger" conclusion. (I am sufficiently aware to notice that that you're not OP, so the "you" in that pseudoquote is not directed at you.)
Why would it ever be more economical to put datacenters in orbit, rather than on some dirt cheap land?
There are no NIMBYs in space. No government permitting on land use. And solar power is plentiful. It's like having a dollar store Dyson sphere.
Making use of that is predicated entirely on being able to put a lot of hardware into space cheaply. SpaceX is the undisputed best at that, no one comes close. The question is whether their "best" is good enough to make space datacenters economical.
There are many Not In My Orbit people on this very page. Many current national politicians would be happy to vote AI out of orbit today. Space is not an escape from earthly politics.
> Space is not an escape from earthly politics.
Well, Earth orbit isn't.
First, build an independent civilization.
But you don't have to build it in someone's _backyard_, just build it in a middle of nowhere.
That's literally what datacenter in Utah was and it still had a horde of retards complaining.
That won’t ever be the case. It’s pure grift. There is literally no other actual reason
I am surprised how many people say that there is no reason to put data centers in orbit, when, at the same time, data centers are becoming the hated thing du jour all over the US and politicians left and right (but mostly left-of-center) are touting bans and restrictions to their electorates.
It is definitely to escape most political pressures on Earth. They will never be able to sidestep the US feds, but aside from an open war with China or Russia, all other authorities are out of the game when it comes to space.
People don't want to live near data centers. But companies find it logistically cheaper and easier to keep proposing to build them near existing towns and infrastructure, and then deal with regulatory fights rather then picking an isolated area and running an extension of high voltage lines out to them.
Which tells you something about why space data centers makes no sense.
The data link between earth and space has so much bandwidth.
There are sensors in space that send data to earth it gets processed and then the data is sent back to space then to the end user back on earth. If you do the compute in space you save the space-earth transfer time twice. Latency and availability of bandwidth are both factors.
There may be limited utility for this outside of military.
Because dirt cheap land usually does not have dirt, cheap water or dirt cheap electricity.
Water in orbit: famously cheap.
Ah yes: computation. Famous for annihilating water. Every bit you flip consumes an H2O molecule.
Well, how do you cool servers in space then?
Evaporative cooling is the way it happens down on earth - and that shuttles h2o molecules from dense useful clumps like aquifers and rivers to a less useful form spread out in the air. But evaporating h2o isn’t an option in space afaik - since there’s a shortage of air to take up the h2o. In fact I think radiative cooling is the only actual option in space.
That's the neat thing: you don't, or at least not in the megawatt range. A kilowatt can be done with radiative cooling but doesn't get you far with a hypothetical datacenter satellite.
So, somehow the servers can run hot in space without a problem?
No; if you try to do this you don't launch in the first place because the amount of servers required to be useful can't be cooled within your payload budget.
It seems like you are agreeing with me while sounding like you’re arguing with me… confusing.
My job is mostly worrying about cooling paths, maintenance, power, heat transfer, lifetime of GPUs, and high performance networks. NVIDIA partner. I can drive to the datacenter. This stuff BARELY works here on Earth. Especially thermal issues.
Looking forward to watching spacex defeat physics.
Space-based datacenters simply won't work. That people are talking about them shows Musk is the greatest snake oil salesman the world has ever seen.
> Space-based datacenters simply won't work.
Everybody knows.
Musk is a snake oil salesman (that’s been clear since the self-driving car promises) but he also has made a lot of people a lot of money and that’s all anybody really cares about.
None of his companies have a traditionally reasonable valuation. Is there any reason to think that’s going to change soon?
Can anyone explain how the thermals will work? One of the biggest challenges on Earth is cooling the data center, and it's at least as challenging in space.
The earthbound equivalent would be strapping each chassis to the back of a dedicated solar panel and having the panel double as a giant heat sink. The problem is that doesn't work on the surface due to (at least) rain, the day/night cycle, and the cost of real estate.
That's not right. This works a couple orders of magnitude better on the ground than on space (unless your computers run at several hundred °C).
The reason people don't do it here is because it's too expensive.
Isn't a solar panel going to be a poor heatsink, though? It's flat, and thus has relatively small surface area compared to its size.
In atmosphere, yeah, relatively speaking.
But it doesn't matter since in this scenario each chassis is powered exclusively by the respective panel. How hot does a black panel sitting in the midday sun get? That's your equilibrium temperature. As long as it's within the operational limit of the device there's no problem.
The reason earthbound DCs are difficult to cool is because of density. When you match up panels to devices and shelter in their shadow you no longer have anywhere near the same power density.
Thermals are one among many really big challenges that require costly solutions.
It won’t. It’s not supposed to work, it’s a mirage to raise dumb money. It’s way, way more challenging to cool something a vacuum. The only option is radiative cooling, which is far from being performant. The idea is as realistic as Musk previous grifts such as his digging company and there hyperloop, both absurd and supposed to revolutionize transport, both created as grifting devices and ensure public transport doesn’t develop in the US
> won’t work
A datacenter (earthbound or space) itself is a fantastical idea until a mix of events and inventions made it feasible to build them to sell compute.
... what? Data centers are literally the original form of computer facility. How are they different from the computer rooms mainframes, etc were housed in?
You think the military can’t or won’t dump billions into this to make killing people with drones more effective?
It’s a engineering challenge not impossible.
There are asteroids with concentrations of precious metals more valuable than earth's entire economy. Why don't we just send up spaceships to mine them and send the haul back to earth? What country would say no to free money?
After all, it's just an engineering challenge, not impossible.
The numbers on that are at least somewhat questionable. Even ignoring that you'd crash the market (thus it's not actually worth what it first appears to be) what is the total fuel cost to adjust the orbit of the target asteroid to land the entire thing back on the earth? Because that's what you're doing bit by bit as you shuttle loads of ore back.
Now if you have space based manufacturing or fuel production on the other hand ...
That's the point. Basic rule of thumb: anytime someone is arguing that the military will fund something, they're wrong.
Its not a real argument it's just used because to most people the military is a big mysterious thing they don't understand which they think has an infinite budget for things.
When I hear space I think "that's the perfect location for a data center", since data centers are lightweight, small, require little power, don't need human intervention, have lifetimes measured in decades and don't have to reject heat. Since space easily satisfies these requirements, space is an ideal deployment location for data centers.
You forgot that standard computers are also not sensitive to radiation
Yeah... What am I missing? Like why isn't this just laughed at when it's proposed?
I felt the same way about the "tube with an air hockey table in it." But here I am fifteen years later eating crow as I take the hyperloop to Vegas.
Isn't the Vegas Loop just a car tunnel? As far as I know, there aren't any actual hyperloops[1] involved, just a narrow highway, even if they deceivingly brand it "Loop".
https://en.wikipedia.org/wiki/Hyperloop
That’s the joke
It seems off at first glance but actually appears to work out if you do the math. You can model a solar panel as a flat, opaque rectangle. You can calculate power generation and equilibrium temperature for it based on surface area. If you require additional radiative surface area to achieve the desired equilibrium temperature you can place a flat triangle orthogonal to and behind the solar panel in its shadow.
Compute is "free" at that point because waste heat is coming out of the total energy flux which was already accounted for (because we modeled it as opaque).
Of course swapping out the equipment poses a bit of a challenge. The "helping hands" rate is entirely unaffordable and wait until you see this new DC's physical access policies. 0/10 would not rack with them again.
This may be one of the rare instances where the sarcasm is obvious without using the sarcasm font
> I wonder what SpaceX's margins are on these contracts.
In the Anthropic deal they have to be negative; Anthropic's announced higher margins during the deal.
This is all just the typical Elon hate. What's desperate about getting paid $920,000,000 per month? If that's desperation, I'd love to start groveling more!
Given extreme supply constraints, it's very unlikely that Google or Anthropic will just suddenly cancel right after the IPO unless their own demand collapses. And even if this were true, what value would that provide Musk? Could you imagine if your newly public company suddenly received termination notices from your two largest compute customers? Disaster.
Try logic.
I have no love or hate for Elon Musk. I wish him luck with his space endeavours.
What's desperate is announcing a temporary (allegedly) doubling of revenues days before an IPO that has been criticised for being overpriced at 93 times sales.
These data centers were supposed to serve xAI. Now suddenly they get rented out to others. Why the sudden change of plans?
It's either an emergency accounting gimmick or the effective shutdown or repurposing of xAI.
It’s a repurposing of xAI to be a commodity service provider during a crunch for that commodity. It would be dumb if xAI had any quality or market traction, but they have neither, so it’s actually a rational fallback. But it writes off any high margin future in favor of low margin scale.
And once the compute crunch is over, they’ll have a lot of overprovisioned data centers with no business to soak up the capacity.
Why don’t you have hate for Elon? You can love his companies but hate the man. It’s what I’m doing anyway.
Didn't Anthropic pull the same in both ways? you pull me up I pull you up kind of deal? Sounds like SpaceX bought themselves some time up to Q4, which is not the case of Anthropic and even worse for OpenAI. Not counting that none of them got their S&P500 fast-track ticket.
why would Google help a competitor like that, though?
Google (Alphabet) owns 6% of SpaceX which they bought for $12B in 2015. They want to maximize the value of their investment.
The article mentions Google is heavily invested in it.
Google is safeguarding it's investment in SpaceX.
How is Google competing with SpaceX?
If you look at the IPO filings you’ll see that Spacex as we know it is just a small part of the expected revenue generator. It is supposedly Grok and AI, hence Google competitor.
Well you or me also can publish a statement claiming we are Google's competitors. That doesn't mean they'll take it seriously.
I can’t believe serious people use Grok. It has to be propped up by Twitter usage/Musk fans right? It really strikes me as the worst one.
They’re both AI companies
All companies are now AI companies. Just like a while ago all companies were suddenly Ads companies. The entire tech sector is one big FOMO - once you reach certain scale you do exactly the same thing as everyone else.
I get what you mean but SpaceX owns xAI, which is objectively a company that trains models and has massive distribution by owning X.
I don’t think their models are competitive with Google, and Google obviously has the best distribution imaginable, but they definitely are a competitor.
In the way that Michael Jordan and myself are both basketball players
One of which has more capacity and wants even more, one of which has less capacity and is renting it out.
One is an ad company the other a lifestyle venture?
In the sense that if you want to sell anything whatsoever today it must an AI story.
Maybe common investors want to sell stocks to retail
They are not. The amount of conspiracy in high ranked HN comments for AI companies is insane.
Feels like these IPOs are thankfully the top coming before the AI crash and we get back to the real world.
One can hope, but that sentiment is quite unpopular on HN.
The same terms Anthropic have today I believe.
Everything is a conspiracy now.
Of course this is a real deal. Compute is the most valuable resource in the world for these companies at the moment.
What exactly is SpaceX's core business?
Their satellite internet business is the only thing which makes them money, which is enabled by their orbital launch business which is as of right now not profitable and I have no idea of if it ever will be but without it they would not be able to launch enough satellites.
Their stupidity with AI and buying X mostly seems to be about scamming investors to make Musk even richer. Like this particular deal is just them doing what CoreWeave does at a SpaceX valuation.
Launch isn't profitable simply because ongoing Starship R&D is eating into it. A lot of opex, capex, and pre-revenue.
If they start running Starship anywhere near the way they do Falcon 9, it'll flip into profits. A lot of big bets SpaceX made ride on Starship coming online. I'm honestly surprised Starlink is already so profitable without it.
One of their big named bets includes: orbital datacenters. Which puts this specific deal into perspective.
80% of the space launch business is putting starlink satellites into orbit, so it's all internal funny money. They could very well be letting the space launch business take losses to make the satellite internet business look better (only profitable part of the whole thing).
Wasn't starship supposed to be funded by the NASA contract?
Orbital datacenters sound like a dangerous bet. I couldn't think of a worse place for a lot of delecate electronics.
Have you considered Magma Chamber datacenters?
Boomers and luddites won't let them be built on earth so no other option really
Well it would be a lot easier if those companies wanted to build them in uninhabited areas in the middle of nowhere with no infrastructure. Somehow they don't want to do that...
It's more unpopular than that. Not surprising since they're competing underhandedly for electricity generation with everyone else.
I can understand this being a move to increase valuation, but I can't connect with the stupidity and scamming investors argument.
Sorry, I was unclear. With that I did not talk about this particular deal. This particular deal seems sane. XAI built more compute that they can use themselves since Grok is not very successful so to not just have the hardware standing there they rent it out to competitors. Makes total sense.
It is other things Musk has gone with Twitter and SpaceX which are shady.
I'm pretty sure xAI is just Musk throwing a tantrum after being played for a fool by Lying Sam.
Smoking crack and investment fraud.
With a light sprinkling of space.
Harvesting energy from the convulsions of people who got tds / tiktok psychosis during covid
Its main business is connectivity. Starlink generated over 10B last year.
Becoming a broader infrastructure company with xAI.
That's only about 35% more than the main telecom operator here in Belgium (Proximus: $7.2B revenue in 2025, $2.5B market cap, positive earnings for 15+ years).
Obviously Starlink can and will growth. I'm just pointing out how insane the market cap is, when compared to similar scale "connectivity" businesses.
I'm with you the 5B loss for 18B overall revenue shouldn't grant a valuation anywhere near 1.7 trillion.
was just answering the question.
> Starlink generated over 10B last year
An entire one-hundredth of their proposed valuation!
Yeah, crazy for a company with nothing but the largest civilian satellite network and what amounts to a monopoly on space flight.
Profitability of space flight has a hard maximum. It’s not anywhere close to what their valuation would suggest.
There’s a reason Elon keeps trying to get investors to believe his “data centers in space” lunacy, because you need that sort of magic pixie dust to justify why any of this valuation makes sense, let alone have anywhere to go but down.
Starlink terminals are popular, they put them on drones to avoid jamming (Starling jamming exists but not that easy for now). It might be their sales are inflated due to its use at war.
Government contracts. Dumping its shares on retail investors. Selling compute to AI vendors
A datacenter that also provides connectivity/Internet
Elon Musk.
Makes a lot of sense that Musk should do the parts of the AI stack that look more like manufacturing/regulatory bottlenecks, and rent out the compute to research-focused AI labs. Does anyone know the full accounting of how much it cost to build Colossus (plus ongoing opex) vs. the revenue it's generating now?
the GPU builds are very high stakes games of depreciation: if the mission life is e.g. 4 years you win, if a disrupting ASIC for the transformer comes in you lose.
As of today the gamblers seem to win, demand even for A100s, H100s is high prices are even rising.
looks like elon web services (EWS) is the master plan all along :D
Everything will run on Elon's Costly Compute servers.
"It will have to be paid for," they said. "It isn't natural, and trouble will come of it!"
Fellowship of the Ring.
I'm curious if this offer lasts until after the IPO.
When as appears inevitable Google decides to stop using this capability what will it do to the SpaceX stock value?
How can SpaceX have so much GPU spare capacity? It doesn't make any sense.
Did Musk blindly order humongous amounts of GPUs years ago before any of us had any sense of the scale this was going to reach?
Musk made big investments in building AI data centers starting in 2024, continuing through the present. SpaceX got those assets from xAI, spun off from X, via an acquisition. More details:
https://en.wikipedia.org/wiki/Colossus_(supercomputer)
That wikipedia page mentions SpaceX reached a deal to lease all of Colossus 1 to Anthropic: https://en.wikipedia.org/wiki/Colossus_(supercomputer)#cite_...
So will SpaceX lease Colossus 2 to Google? If both Colossus datacenters are rented, will xAI have any compute?
They acquired xAI
so why did xAI acquire so many GPUs but have no use for them today?
SpaceX valuation and ultimate success depends on two things:
1. AI demand continues to grow. 2. SpaceX's orbital data centers are profitable.
If both of those are true, then their current valuation is absolutely justified. I'm confident #1 will happen.
#2 is the big bet, and IMHO this is just an engineering/execution problem. All they need is (a) Starship to work reliably, and (b) a manufacturing line that can build a data center satellite at low cost.[1]
(a) is the harder of the two, IMHO, but they are well on their way. Once they successfully recover and refly a Starship upper-stage, they will iterate step-by-step until launch costs drop to the level they need.
Now assume that SpaceX succeeds. What if AI demand continues to grow and SpaceX orbital data centers are profitable? Think of their moat: they spent 10 years and billions of dollars developing a fully reusable rocket that happens to also be the largest rocket in the world, and that costs 1/10th of what other rockets cost (per kilo to orbit). Plus, they have an assembly line that can build data center satellites cheaply, and they start fabbing their own AI chips.
How is anyone going to compete with that? There are a bunch of data-center-in-space startups, but none have their own rocket--they're going to have to pay SpaceX to launch them. Blue Origin is developing a rocket as large as Starship, but it's not fully reusable--they will never get the cost down to Starship levels.
What's interesting is that all the AI companies, OpenAI, Anthropic, and even Microsoft and Google, are mostly leasing their data centers from someone else. They think compute is a commodity and the value is the trained model. But if SpaceX has the cheapest data center with the most capacity, they will be able to extract profits from the AI companies or (why not) compete against them with their own model (Grok).
In 10 years we'll see whether SpaceX succeeds or fails. If they fail at this, they will retrench back to a launch company (assuming they are still in business). But if they succeed, they will be a massive company, and the synergy between their businesses will be so obvious that everyone will say, "of course they succeeded!"
----------------
[1] Don't be distracted by claims that "cooling in space is hard" or "radiation is a deal-breaker". Neither of those are insurmountable problems--they are just engineering problems. Crucially, they are problems that are easily solved by getting mass to space. If you can get mass to space cheap enough, those two problems are trivial to solve.
Even if I do accept your claims that cooling in space is not insurmountable, you still would grant that launching and cooling (and shielding??) a data center in space still cost more dollars than building a data center on earth right? What is the use case that people will spend money to rent servers in space? I think nations have a strong enough grip on the internet now that the customer use case of "evading my country's laws" won't generate that much revenue.
Is the hope that power will be cheaper because solar panels have direct and continuous exposure to the sun?
Yeah sure the technical problems are solvable if you throw money at them. I'm sure we could have had a colony on Mars by this point as well if NASA/etc. continuously spent insane massive amounts of money on every year since the 70s.
So what?
Why on earth would you want an AI datacenter in space? Like what would you gain by doing that at an absurdly higher cost than you could build on them earth?
"Free" energy? lol.. just build nuclear powerplants or loads of solar, wind and batteries on earth. Its still going to be cheaper...
> How is anyone going to compete with that? There are a bunch of data-center-in-space startups
A better question is why would anyone even try?
> are mostly leasing their data centers from someone else
It's really not. Building your own datacentres is very expensive and more importantly takes a lot of time. They need compute now, so it makes perfect sense to rent it from failing AI companies like xAI which bought a lot of chips but don't have anything to do with them since their models are just not very good.
> But if SpaceX has the cheapest data center with the most capacity, they will be able to extract profits
Well.. that would be a first one, since no similar industry works that way. Compute is a commodity so unless your literally run out of space on earth to build datacenters or Nvidia/etc. stop selling to anyone but SpaceX that can't really happen, can it?
2. SpaceX's orbital data centers are profitable.
This will never happen.
Even Google does not use GCP…
If you can't buy DRAM, you gotta rent your compute infrastructure.
the road goes ever on and on.
what a crock
I knew GCP was third banana but what is even happening?
So Google AI will now be running partly on xAI data centers which run primarily on natural gas burned on site next to poor neighborhoods in Tennessee and Mississippi causing massive air pollution to these families and children. Is anyone else disgusted by this? I’m imagining all the people there developing lung and other issues because of this. Greed and power on full display over doing the right thing.
I’ll be switching off the Gemini model at work (Composer’s been off since their xAI deal). This is the final straw for me to move completely off Google services.
Because SpaceX has excess capacity.
This feels actually like a pretty safe bet for Google, they secure the compute in case it works (I doubt that the described volume will be available in the near future), while if SpaceX doesn’t manage to provide there is not much loss. I see it more as another way of blowing up SpaceX valuation on paper…
Cloud companies were made to sell others compute. Now, one is buying billions of compute from SpaceX, a rocket company. That sounds so backwards lol.
Great work by Musk and his companies to be in a position to sell billions to cloud vendors. I'd have probably missed that opportunity while trying to build great rockets or AI models.
It's all about the money.
Sorry, what?
Does this mean that SpaceX are the only company that really did build some datacenters to put all the million of GPU/TPU/whatever they all talk about everyday?
I mean, Google, Amazon, Meta and Microsoft told investors they spent more than $1B per day last year in CapEx... why on Earth do they (well, Google and Anthropic at least) need to rent compute to SpaceX, of all companies?
They overbuilt capacity for grok but no one wants to use grok for several reasons
Scarcity. It's becoming difficult to plan for new data centers. They will rent where capacity is available. Grok hasn't gain the expected popularity.
Other companies built data centers but also built products that soak up their data center capacity.
xAI built data centers, and products that are mostly good for nonconsensual porn and confirming a small group’s biases. So they have a lot of excess capacity, and might as well rent it to the adults.
No, CoreWeave for example also rent compute to the big AI companies. This likely just means Grok has few users so they need to rent their extra capacity to their competitors.
None is using grok so they are renting out unused capacity
Yes but someone will be along shortly to defuse what sounds like giving the bad mars man credit where it’s due. Like everything else he does that works out, it was just luck, timing, actually a mistake that worked out, or someone else behind the scenes that he got lucky in hiring at the right time (by accident).
People with access to enormous wealth tend to get a lot of chances at the betting table.
If he’s so smart why isn’t grok using all that capacity?
Building excess capacity from the start and selling it for a billion a month to constrained competitors. I only wish I could be so dumb.
Short memory. When musk was buying all of this capacity it was billed as xai is going to take over the world. Instead grok is a flop and now he has extra capacity. If xai was a data center he’d be smart. But it is a failed Ai venture.
It’s like training your dog not to jump on the sofa. But then you fail to train to stay off and then brag about how you trained it to stay ON the sofa.
Source: vibes
Huh? That's just basic history of xAI. At no point was xAI being sold as a Coreweave-like middleman leasing out data centers to hyperscalars. That's a boring, regular business. The pitch was that xAI would develop groundbreaking AI models for Grok which would attract actual users and generate revenue.
That evidently did not work out, otherwise these deals wouldn't be happening. OpenAI and Anthropic aren't leasing out their datacenters, if they did it would be obvious something was grossly wrong with their projected growth.
If your dad had owned an emerald mine I am sure you could also have been that dumb.
But to be more serious: It is impossible to say if this is good or bad for XAI without more numbers. What if they bought their compute way over market price and sell it at a loss?
Plus it’s not like some absolutely enormous data centers, only 300MW.
$$ taking another circular financing lap.
[dupe] Discussion: https://news.ycombinator.com/item?id=48417490
This is such a disgusting economy
That's... $12.50/hr per GPU. WTF?
From Google's spokesperson, quoted in the article: "This is a short-term, timely agreement to ensure we have bridge capacity to meet surging customer demand for our agent platform, Gemini Enterprise, which has been even higher than we expected."
Google wants a lot of compute sooner rather than later, and they're willing to pay a premium for speedy delivery of that compute. SpaceX has the capacity already built and ready to go. Hence the high price.
We're all going to end up as Elon's serfs, aren't we?