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.
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!
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.
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!
> 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.
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.
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.
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?
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 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
> 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.
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.
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.
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?
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.
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.
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.
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?
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.
> 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_.
> 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.
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.
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?
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.
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.
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.
> 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
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.
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.
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
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.
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?
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.
“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.
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.
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.
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.
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.
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.
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
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.
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 ...
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.
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…
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.
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).
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?
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.
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.
Yeah, if a ridiculous premise is given you'll reach a ridiculous result.
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 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!
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.
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.
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.
Surely Google can "make compute go" for $1b/month. Nice way to avoid holding the bag, maybe?
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!
The wrinkle is that they are planning to deploy those GPUs in space. That’s what people are most skeptical about, I think!
Like fsd, will take decades to figure things out.
Didn't they also run up against a "minimum free float" rule?
assuming google sells, the stock tanks, nobody wants to buy next year
is this masterful? more like a scam
Google’s investment in SpaceX is completely orthogonal to the analysis. Equity investments aren’t revenue.
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
So at most they lose like 200M each month. Peanut compares to the potentially gain of the IPO.
Same thing they used to say about Lehman.
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.
Would you really expect a company to increase proportionally in value when they increase their revenue?
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?
AI is really a pioneering engineering field
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.
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.
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.
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.
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?
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.
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_.
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.
If they could train using Teslas they wouldn't have needed Dojo.
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!
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?
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.
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.
https://youtu.be/IHD8BDFYyGI?is=dnpBeOoxH7LUJknm
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.
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.
[0] https://www.selc.org/news/xai-built-an-illegal-power-plant-t...
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.
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.
> 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
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.
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.
"Both SpaceX and Google have the option to terminate the agreement with 90 days’ notice after December 31, 2026"
Fellowship of the Ring.
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.
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.
Wasn't starship supposed to be funded by the NASA contract?
It is other things Musk has gone with Twitter and SpaceX which are shady.
With a light sprinkling of space.
Becoming a broader infrastructure company with xAI.
Obviously Starlink can and will growth. I'm just pointing out how insane the market cap is, when compared to similar scale "connectivity" businesses.
was just answering the question.
An entire one-hundredth of their proposed valuation!
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.
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.
The whole thing looks rather desperate. I wonder what SpaceX's margins are on these contracts.
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.
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...
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
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.
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.
Looking forward to watching spacex defeat physics.
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.
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.
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.
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.
It’s a engineering challenge not impossible.
After all, it's just an engineering challenge, not impossible.
Now if you have space based manufacturing or fuel production on the other hand ...
https://en.wikipedia.org/wiki/Hyperloop
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.
In the Anthropic deal they have to be negative; Anthropic's announced higher margins during the deal.
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.
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.
And once the compute crunch is over, they’ll have a lot of overprovisioned data centers with no business to soak up the capacity.
Of course this is a real deal. Compute is the most valuable resource in the world for these companies at the moment.
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.
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?
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.
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?