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

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

#641

Post by simonebrunozzi »

rootusrootus wrote: post #336
runako wrote: post #281

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 no…

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, n…

Watch a lot of Ben Felix. Tons of good advice for you.

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

#642

Post by mattmaroon »

amluto wrote: post #300
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…

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 cu…

I don’t think earnings have much to do with any of Elon’s projects’ market caps.

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

#643

Post by gehsty »

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…

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?

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

#644

Post by carefulfungi »

dyauspitr wrote: post #443
carefulfungi wrote: post #385

Earlier quoted context omitted.

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.

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

#645

Post by manlymuppet »

simonebrunozzi wrote: post #639
manlymuppet wrote: post #633

Earlier quoted context omitted.

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…

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.

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?

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

#646

Post by amluto »

rbanffy wrote: post #571
BobbyJo wrote: post #363

Earlier quoted context omitted.

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.

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…

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.

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

#647

Post by dmix »

simonebrunozzi wrote: post #639
manlymuppet wrote: post #633

Earlier quoted context omitted.

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…

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

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

#648

Post by [deleted] »

marcosdumay wrote: post #491
delichon wrote: post #264

Earlier quoted context omitted.

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.

[deleted]

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

#649

Post by polski-g »

happosai wrote: post #592
simoncion wrote: post #313

Earlier quoted context omitted.

> ...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 last…

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?

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

#650

Post by bryanlarsen »

l23k4 wrote: post #518
dghlsakjg wrote: post #515

Earlier quoted context omitted.

In the context of my message it is very clear that they is SpaceX. This isn’t a secret. Nasdaq has said that they are changing the rules specifically for this listing. It’s clear you aren’t interested in a good faith conversation. Thanks for the discourse either way.

[flagged]

NASDAQ and the NYSE competed heavily for the SpaceX IPO. NASDAQ was willing to do more for SpaceX, so NASDAQ won. One of the concessions NASDAQ made was to put spacex on the Nasdaq 100 index (QQQM) early.
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