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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

#671

Post by fooker »

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…

The best thing about leveraged schemes like this is that if/when it fails it takes down everyone involved.

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

#672

Post by manlymuppet »

JumpCrisscross wrote: post #666
manlymuppet wrote: post #645

Earlier quoted context omitted.

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…

> 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.

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

#673

Post by adgjlsfhk1 »

JumpCrisscross wrote: post #619
adgjlsfhk1 wrote: post #577

Earlier quoted context omitted.

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.

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

#674

Post by Lplololopo »

hectdev wrote: post #543
Lplololopo wrote: post #439

Earlier quoted context omitted.

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 m…

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?

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

#675

Post by tristanj »

krupan wrote: post #667
l23k4 wrote: post #555

Earlier quoted context omitted.

[flagged]

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…

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 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.

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

#676

Post by manlymuppet »

tristanj wrote: post #664
manlymuppet wrote: post #645

Earlier quoted context omitted.

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…

Because Google owns a sizable stake of SpaceX, and for every $1 they give SpaceX they get $5 in investment return.

That $5 return doesn't actually materialize the way you're framing it.

Even if your 94x multiple held perfectly (a big if), Google's "return" here is unrealized appreciation on an illiquid, minority stake. They can't spend it. And if they try to sell post-IPO, the act of selling a large block would push the price down, shrinking the very gains you're describing.

Meanwhile, the $11B/year in cash going out the door is very real and liquid and hits Google's income statement immediately. So the actual trade is: guaranteed cash expense now, in exchange for speculative paper gains later on a stake they can't easily exit. Even if you assume bad faith on Google's part here, no CFO in their right mind would see this situation as an easy 5:1 return.

The simpler explanation is the one Google gave: they need bridge compute capacity because Gemini Enterprise demand is outrunning their own datacenter buildout, and SpaceX has 110K GPUs available now.

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

#677

Post by talbo888 »

owenthejumper wrote: post #310

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

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

#678

Post by outside2344 »

austin-cheney wrote: post #387
HarHarVeryFunny wrote: post #376

Earlier quoted context omitted.

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 t…

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).

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

#679

Post by ertian »

bmitc wrote: post #541
nrmitchi wrote: post #511

Earlier quoted context omitted.

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.

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

#680

Post by jmbwell »

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…

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.
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