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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

#801

Post by riffraff »

marticode wrote: post #760
randerson wrote: post #749

Earlier quoted context omitted.

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.

Which perpetual bonds yield 6.5% on a UTC basis?

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

#802

Post by otterley »

tristanj wrote: post #88
wmf wrote: post #44

With ~$2.1B/month of GPU rental revenue, is xAI now profitable? Are all divisions of SpaceX now profitable?

Yes they should be profitable. If SpaceX maintains profitability for 12 months, they are eligible for SP 500 index inclusion, even under the old rules Elon is pulling financial engineering black magic to make this happen.

It’s not “black magic” to sell excess GPU capacity to third parties to make a profit. This is a legitimate business venture. It’s just not the business that people naturally expect a business with a name of Space Exploration Technologies to be making the most revenue from.

They’re in good company, competing with Amazon, CoreWeave, Google, Microsoft, Nebius, and many other players for the same business. They just invested (through the X.ai acquisition) in more capacity than they could take advantage of to get there.

Even if they manage to make a profit selling this capacity to Google, Anthropic, and others, it might not be enough to push them into profitability as a whole. That remains to be seen, and you keep asserting without evidence that it is true.

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

#803

Post by riffraff »

gorgonian wrote: post #768
davedx wrote: post #484

Earlier quoted context omitted.

Start gradually converting your equity to bonds is the standard advice on that timeframe. If you're dreading equity drawdowns, that's what fixed income is for.

As others have pointed out, bonds are barely (or not) keeping up with inflation. I would like to suggest a third alternative to stock index and bonds: stable dividend stocks. They should increase in value along with inflation but still pay out a steady dividend as long as the company is strong.

Buy inflation linked bonds? They won't yield much above inflation but if you have >1M that's enough to last through retirement.

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

#804

Post by anonymous_user9 »

narrator wrote: post #786
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…

Datacenter REITs do not directly own all those scarce wired up and powered Nvidia chips.

If they did, they'd be less valuable. Unlike real estate, those chips will be obsolete in a few years.

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

#805

Post by sethops1 »

omgwtfbyobbq wrote: post #793
throwawaycan wrote: post #763

Earlier quoted context omitted.

Bus Tesla isn’t in anything looking like a growth phase

It might be. It might not be. That's where the money is or isn't. I think the mature part of their business is 3/Y, energy storage, and maybe cybertruck, although I also think it's too early to call it because it depends on lower cost cell in house cell production and they only started that recently. In the near term, the growth part is Semi, cybercab, FSD, lithium cell production, and maybe cybertruck. In the long t…

The growth part of Tesla is the increasingly large promises of snake oil Elon can spin.

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

#807

Post by riffraff »

sroussey wrote: post #778
djfergus wrote: post #728

Earlier quoted context omitted.

I feel like your analysis is correct and it’s overvalued but employees and insiders have already been selling shares (eg on platforms like Forge) for around the $130-135 IPO price. So there are buyers, question is if there is enough to consume the liquidity of a $75B IPO.

I think there will be plenty of demand. Most of which is not bothered by price at all. When the indexes get in -- watch out! They will have to buy so much SpaceX, that it will force them to sell everything else.

They won't, SpaceX will weigh less then 1% in most indexes, since they're mostly float adjusted, only NASDAQ will overweight them, but FTSE/MSCI/CRSP/SP will not.

It's still quite some money but it won't crush the market by itself.

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

#808

Post by discodave »

matthewdgreen wrote: post #461
benl wrote: post #234

Earlier quoted context omitted.

SpaceX is valued at that revenue multiple because of its expected revenue growth rate. 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!

SpaceX's S-1 says they're going to make more than $320bn by 2030 at a 74% expected profit margin. That implies they're going to succeed at selling high-value AI services, not compute, which is a competive business with typical profit margins at or below 30%.

EC2 may have higher margins than that.

But your point stands, ain't no way xAI competing in that game.

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

#810

Post by tony69 »

queuebert wrote: post #792
bradleyjg wrote: post #745

Earlier quoted context omitted.

TIPS are yielding 2.1-2.75% _real_ across the curve from 10 to 30 years out.

Worth noting the cost of dealing with Treasury's absolute dumpster fire of a website, though.

There’s TIPS ETFs
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