Google to pay SpaceX $920M a month for compute capacity at xAI data centers • Hacker News Board

Re: Google to pay SpaceX $920M a month for compute capacity at xAI data centers

#391

Post by u1hcw9nx » Sat, Jun 06, 2026, 5:16 PM UTC

benl wrote: post #273

noir_lord wrote: post #272

Earlier quoted context omitted.

> 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.

Re: Google to pay SpaceX $920M a month for compute capacity at xAI data centers

#392

Post by GMoromisato » Sat, Jun 06, 2026, 5:16 PM UTC

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.

Re: Google to pay SpaceX $920M a month for compute capacity at xAI data centers

#393

Post by kjshsh123 » Sat, Jun 06, 2026, 5:17 PM UTC

nestes wrote: post #347

missedthecue wrote: post #324

Earlier quoted context omitted.

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 divid…

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 co…

But you can transfer your ownership.

Re: Google to pay SpaceX $920M a month for compute capacity at xAI data centers

#394

Post by highfrequency » Sat, Jun 06, 2026, 5:17 PM UTC

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?

Re: Google to pay SpaceX $920M a month for compute capacity at xAI data centers

#395

Post by sebastos » Sat, Jun 06, 2026, 5:19 PM UTC

missedthecue wrote: post #324

theturtletalks wrote: post #287

Earlier quoted context omitted.

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 divid…

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.

Re: Google to pay SpaceX $920M a month for compute capacity at xAI data centers

#396

Post by ksec » Sat, Jun 06, 2026, 5:19 PM UTC

tristanj wrote: post #205

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…

This is the first time I get to understand why it is important to have big companies as your early investors.

Re: Google to pay SpaceX $920M a month for compute capacity at xAI data centers

#397

Post by matwood » Sat, Jun 06, 2026, 5:19 PM UTC

tristanj wrote: post #205

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…

> 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

Re: Google to pay SpaceX $920M a month for compute capacity at xAI data centers

#398

Post by infecto » Sat, Jun 06, 2026, 5:20 PM UTC

ranger_danger wrote: post #380

infecto wrote: post #188

Earlier quoted context omitted.

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.

Re: Google to pay SpaceX $920M a month for compute capacity at xAI data centers

#399

Post by transcriptase » Sat, Jun 06, 2026, 5:22 PM UTC

supertroop wrote: post #352

transcriptase wrote: post #136

Earlier quoted context omitted.

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

Re: Google to pay SpaceX $920M a month for compute capacity at xAI data centers

#400

Post by matwood » Sat, Jun 06, 2026, 5:23 PM UTC

nibbleyou wrote: post #346

benl wrote: post #273

Earlier quoted context omitted.

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!

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.