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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

#751

Post by derektank »

worik wrote: post #703
derektank wrote: post #496

Earlier quoted context omitted.

>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

> As long as there are active investors in the market conducting price discovery. Which there always will be, Passive funds dominate ow, don't they?

Depends on what you consider passive, I think index funds specifically are only 20% but if you add other low cost ETFs it’s probably about half the market. I don’t think there’s any way to know for sure at what point passive funds become distortionary, but it should be self correcting to some degree. If active funds are able to provide a substantially better return than passive funds, even with management fees, people will migrate back to them.

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

#753

Post by btbuildem »

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 can't tell if you're being sarcastic or just really really deeply invested into it

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

#754

Post by Robotbeat »

kube-system wrote: post #748
fc417fc802 wrote: post #737

Earlier quoted context omitted.

> Comcast is one of the best-run ISPs You mean the company with such a bad reputation that it had to aggressively rebrand? I take it you've never had the displeasure of doing business with them. That said it wouldn't surprise me in the slightest to learn that it was one of the most profitable ISPs for investors. That would fit quite well with the general theme of prioritizing the interests of investors over all else.

Comcast is a successful business in spite of their customer satisfaction. You don’t need to please your customers when when you can involuntarily extract their money anyway.

Comcast is not a rapidly growing company, though.

This isn’t hypothetical. SpaceX is increasing Starlink revenue by like 50% per year. And their current Starlink constellation, about 10,000 satellites, has been launched entirely by Falcon 9. They’ve been waiting to launch much larger satellites on starship (in fact they had versions of these ready for several years now, and recently did suborbital tests of some of them on recent starship flights). Starship is about 5-10 times the capacity of Falcon 9, is fully reusable, & has larger diameter allowing much larger satellites. They asked for approval for roughly 40,000 of these larger satellites (~3 times the size of current ones, each about 10 times the bandwidth… and half of the 10,000 are even older designs), and they may eventually do about 100,000 of them & further increase the size and reduce latency (by operating at lower altitude). It’s not an exaggeration to say SpaceX intends to increase bandwidth by at least 100x, maybe a lot more. They intend to use a lot of this extra capacity to expand into mobile coverage as well. They are leveraging their platform for incredibly important national defense capabilities as well, and they operate as their own backhaul using on-board laser links. They can service anywhere in the world that will let them, including lucrative sectors like aviation. I do think it makes sense to value SpaceX as a rapidly growing business, not as a dividend-giving, plateaued ISP like Comcast.

This is all before even mentioning the idea of orbital datacenters.

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

#755

Post by otterley »

jsnell wrote: post #731
otterley wrote: post #700

Earlier quoted context omitted.

The false—or at least highly questionable and unsubstantiated—claim is “Now with this incredible deal, SpaceX is now GAAP profitable under the existing rules” simply because Google bought $11B of compute from SpaceX. It depends on how much it costs SpaceX to provision and operate the compute, and it depends on what other expenses and revenues they have. A quick peek at their S-1 filing shows a $5B annual loss last ye…

Oh, if that was your objection, why did you identify the issue as "But it is not revenue for SpaceX, which is the error OP made"? > A quick peek at their S-1 filing shows a $5B annual loss last year. Unless SpaceX is selling compute to Google at a 50% margin (unlikely but possible), they’re not going to turn a profit because of this deal. Any profit that does result will be small. The cost of AI data centers is almos…

> why did you identify the issue as "But it is not revenue for SpaceX, which is the error OP made"?

It was an error by implication. They responded with something that appeared to disagree when I responded that any profit SpaceX earns under GAAP solely depends on the revenues and expenses, and is not dependent on Google’s investment.

> The cost of AI data centers is almost entirely the capex (10% opex, 90% depreciation)

The operating costs might not vary much, but these boxes are not cheap to power, house, and cool. Not sure about the 10% opex claim, but am happy to see real world numbers.

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

#756

Post by donbox »

solenoid0937 wrote: post #721
rootusrootus wrote: post #609

Earlier quoted context omitted.

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 fe…

Active management in general is a poor idea. You'll get better risk adjusted returns by investing in total world equities (like VT). Check out Bogleheads to learn the basics. If you want to get more advanced, you can learn about factor investing as well, but VT is enough for the vast majority. If you want to get intuition for why this works , this is a really fun and interesting video: https://youtu.be/TQuxVz52w2w

For VFOROX, the expense ratio is 0.08% which is pretty low. Also VT is 45% of it. VFOROX looks well balanced to me, with 3:1 equity to bond ratio.

https://investor.vanguard.com/investment-products/mutual-fun...

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

#758

Post by hectdev »

Lplololopo wrote: post #674
hectdev wrote: post #543

Earlier quoted context omitted.

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?

Check out K2 Space. They are planning a large bus satellite that can ferry deliverables to different orbits. They are just one of many many companies just itching to send large mass objects into space at low cost.

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

#759

Post by layoric »

credit_guy wrote: post #729
BLKNSLVR wrote: post #420

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!

The doubt you are expressing was very justified until this week. But on June 1st, Microsoft changed the pricing for business and enterprise Copilot, and people started paying real money for using AI. Until that day, Github Copilot was charging users 4 cents per request (if they exceeded their subscription's monthly limit). Now, they charge at the API rate. I monitor my usage, and it's easily 10 times more expensive t…

What makes you think “most of them will just pay 10 or 20 times more for AI”?

They can’t measure ROI, and it will start costing more than their staff. You might be right, but I can’t think why any competent C suit would agree to this..

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

#760

Post by marticode »

randerson wrote: post #749
gretch wrote: post #662

Earlier quoted context omitted.

> 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.

Bonds only give you certainty to the extent that inflation remains certain. Stocks generally rise with inflation, whereas bonds continue paying out the same nominal amount, which buys you less over time. As a retiree I'm 50/45/5 in stocks/bonds/cash, having opted for a conservative portfolio. The stocks are the only reason I haven't lost buying power. But the bonds have performed so poorly that I've barely kept up wi…

Are we talking about bonds or government bonds here? The former will beat inflations assuming you don't just buy AAA rated ones. Investment grade perpetual bonds in US dollars yield over 6.5% on a Yield-to-call basis.
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