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

https://www.cnbc.com/2026/06/05/google-to-pay-spacex-920-million-a-month-for-xai-compute-capacity.html

by toephu2 • 2 months ago

327 909 2 months ago

sorenjan2• 2 months ago

Is this another circular investment to help pump up the stock valuation? Why would Google need to rent that much compute?

Google parent Alphabet has made a windfall from backing SpaceX, which was worth $12 billion at the time of its 2015 investment, and is looking to go public at a valuation of over $1.75 trillion

verdverm2• 2 months ago

antigravity is a token hog

sandeepkd3• 2 months ago

SpaceX said in the filing that if it fails to “deliver access to the committed amount of GPUs by September 30, 2026,” Google can immediately end the agreement, or accept the number of GPUs provided at a reduced fee after a one-month grace period.
After this year, the agreement can be terminated by either party provided they give 90 days’ notice.

Circular financing at its peak for the IPO. There has to be some regulatory body to not allow such shady things

JumpCrisscross16• 2 months ago

Circular financing

Circular financing would require SpaceX to buy a similar quantity of stuff from Google. (Or invest in Google.) We have no evidence of that. Instead this looks like Google taking advantage of SpaceX’s desire to print revenue today versus a month from now.

(If the agreement is terminated with no exchange of goods, it might be market manipulation. But still not circular financing.)

singron2• 2 months ago

It's circular since Google owns part of SpaceX. According to [1] they own 7% of SpaceX, so a $1.75T IPO would value their stake at $120B. The target IPO price is >90x revenue, so if Google increases SpaceX's revenue by $11B, SpaceX's valuation could increase by $990B to maintain the same multiple, which would increase the value of Google's stake by $69B.

1: https://finance.yahoo.com/markets/stocks/articles/alphabet-s...

sandeepkd3• 2 months ago

Alphabet has made a windfall from backing SpaceX. Musk’s company was worth $12 billion at the time of Google’s 2015 investment

How come its not a circular deal where google is investing little bit more money to make a whole lot more money

spikels• 2 months ago

Google is paying $12.00 per gpu-hour which costs SpaceX $1.50-$3.50.

Who's taking advantage of who?

darth_avocado• 2 months ago

Circular financing

Keep in mind, Google has a 6% stake in SpaceX, so this is more like exchanging millions to gain billions.

harmmonica3• 2 months ago

Yeah, I just looked this up because my first thought was another circular financing deal (or not circular by definition but certainly backscratching). Looks like Google's SpaceX stake, diluted, based on a cursory search, at a $1.5T valuation is somewhere in the $80-$100B neighborhood (bought back in 2015 I think is what it said when SpaceX was valued in the low tens of billions if I'm remembering correctly). So you have Google sending $12B back to SpaceX annually in this deal, so maybe 12% or so of their equity stake at that valuation. I'm not sure how to feel about it other than a means of swaying people to buy into the IPO with the added benefit of actual compute value.

And seems silly to ignore that the Google founders and Elon are buddies, or were, based on which gossip rag you believe in, and there's zero chance these types of deals are being made independent of those guys talking (when are they ever, of course, but it's even more obvious in this case given the players and their histories).

HDThoreaun• 2 months ago

There is nothing shady or circular in the text you quoted

sandeepkd3• 2 months ago

I avoided adding too many details, made a base assumption that folks on this topic would already be aware of google's investment in spaceX, probably should have added that too

Havoc2• 2 months ago

Closer to just vanilla juicing numbers than circular

jeffbee4• 2 months ago

I thought it was notable that in Google's press release yesterday regarding their new facilities near Amarillo they seemed to go out of their way to point out that the applications are not AI, listing "Search, Gmail, Maps, Cloud, online banking, and 911 systems" instead. I wonder if they find it more convenient to rent an existing one rather than face public scrutiny for building another "AI data center".

foobarian• 2 months ago

I wonder if they are more than happy to let someone else take on the burden of the massive writedowns that are bound to hit in a couple of years.

jeffbee4• 2 months ago

Perhaps. It also seems to insulate Google from the risk that air quality regulators will be unexpectedly reinvigorated, while still providing to Google the benefits of xAI's lawlessness.

no-name-here2• 2 months ago

Burden in terms of tax implications, or in terms of the investment possibly not being profitable?

salkahfi• 2 months ago

Related / same story from different source (Bloomberg), submitted earlier: https://news.ycombinator.com/item?id=48416941

BonoboIO• 2 months ago

How did Elon get so much NVIDIA hardware before everyone else?

novok• 2 months ago

I've heard the harder part is to have data centers to put the nvidia hardware than getting the hardware currently.

FinnKuhn• 2 months ago

And the secret ingridient to building those faster than others is... crime.

https://www.theguardian.com/technology/2026/jan/15/elon-musk...

retr0rocket• 2 months ago

Because he went all in with money before a lot of other people.

He moved as fast as he could with known financing

JumpCrisscross16• 2 months ago

How did Elon get so much NVIDIA hardware before everyone else?

He’s the richest man on the planet and doesn’t have a track record of not paying for shit he buys. If you want to reliably offload your chips, he’s safer than e.g. OpenAI who might or might not have the money when the bill comes due.

lmeyerov• 2 months ago

tesla not paying bills: https://www.cnn.com/2025/07/31/us/elon-musk-company-unpaid-l...

x not paying bills: https://www.cnbc.com/2023/02/24/musks-twitter-has-been-sued-...

spacex not paying bills: https://www.fastcompany.com/91124157/spacex-contractors-texa...

ckastner• 2 months ago

He’s the richest man on the planet and doesn’t have a track record of not paying for shit he buys.

My impression was the other way around. The shenanigans he pulled around the Twitter acquisition were just farcical, and at Twitter he repeatedly refused to pay owed rent, etc. (I assume as a ploy to renegotiate terms).

usefulcat• 2 months ago

doesn’t have a track record of not paying for shit he buys

You mean like the time he committed to buying Twitter and then tried to back out of a legally binding contractual agreement to finalize the deal?

4ffss• 2 months ago

"doesn’t have a track record of not paying for shit he buys"

Hahaaha. A solid admission of being clueless.

Elon has a strong track record of doing shady stuff to get out of deals.

superkuh• 2 months ago

Another way to read this is, "Twitter's AI dept. has been doing so badly they don't have a use for billions of dollars of hardware they bought."

Analemma_2• 2 months ago

On the one hand, yes, this is really embarrassing for Grok. On the other hand, everyone except a couple Twitter randos already thinks Grok is worthless junk: there's no reputation left for it to to lose. And Elon is crying all the way to the bank with an extra $11bn in annual revenue.

etempleton2• 2 months ago

The downfall of Twitter is one of the most spectacular self inflicted business failures I have ever witnessed.

Amazing to think it was once so ingrained in mainstream society.

stri8ted• 2 months ago

What metrics are you using to classify it as a downfall?

wnmurphy• 2 months ago

Which means more Grok degradation, more severe throttling, etc.

I can't understand why xAI charges 50% more per month for Grok over competitors when it doesn't even gracefully downgrade to a cheaper model when paid subscribers hit the limit.

9dev• 2 months ago

Why would you even want to use that dumpster fire of a model in the first place..?

mschuster91• 2 months ago

Probably because it has all but zero filters on the input and output. It took widespread media outrage about "grok show me her in a bikini" to at least create a filter that bans such things.

[1] https://counterhate.com/research/grok-floods-x-with-sexualiz...

root-parent3• 2 months ago

Who uses Grok? Not even SpaceX engineers that is known...

guywithahat• 2 months ago

I've used/use it. For a while it had one of the best lightweight coding LLM's, which actually lead to a #1 spot on openrouter usage ranking although they've fallen off the top 10 used now. It's also provided some good reasoning models, which perform better when dealing with non-PC topics.

Also, although I've never used it for this, I believe some of the paid models produce some of the best "adult" content, and I know there are even subreddits which do nothing but praise Grok and "content" produces who use it.

rootusrootus7• 2 months ago

Tesla drivers, at least for a few minutes each day before hitting the limit.

glimshe• 2 months ago

Grok is pretty good. It really excels when the results can be improved by deep online search. It tends to be more aggressive in looking things up than competitors. I use it in certain situations.

tristanj15• 2 months ago

Grok is the best for researching recent events and real-time information. All the other AIs have a learning date cut-off too far in the past.

Claude accuses me of hallucinating events that happened the day before, and it's quite annoying.

paulpauper2• 2 months ago

They already make it required to have a premium X account

Claude has tons of throttling already. Chat GPT is not as accurate at computational problems despite less throttling. Gemini has fewest restrictions but worse quality. Always a tradeoff.

JumpCrisscross16• 2 months ago

can't understand why xAI charges 50% more per month for Grok over competitors

One potential read is xAI knows Grok isn't going to be a Tier 1 model. So while SpaceX focusses on infrastructure, Grok bets its users like its model enough that they'll pay a premium for it, even if this curtails growth prospects.

harmmonica3• 2 months ago

Tangent alert: a couple of questions for folks who know far more than I do about compute capacity and Google these days...

Lately, like the past few months, I've noticed Google services (search, gmail, drive, maps) running very slowly to the point where, at the moment it happens, I always think it has to be my connection and not Google, but sure enough every time I check a couple of speed tests and they're... fine. And then I don't seem to be having the same latency from other sites/apps. Is there any chance that the commingling of the AI snippet and then directing users into the AI funnel through the text box is actually causing material performance impacts in other Google properties? Probably a dumb question because I can't imagine they would allow performance for broader properties to suffer for AI prompts/chats, but then again all this talk of compute starts making me think otherwise, like the prolific amount of prompting and chatting is causing massive across-the-board performance issues.

Somewhat related, but does anyone use Gemini and end up with the experience where you have a chat and it's obvious, to yourself and to Gemini, that you're trying to find a product to purchase, but Gemini doesn't even link you to what you would think would be the obvious place to purchase the product? This happens daily where I interact with it, it suggests some products, but won't even provide a link to that product or, if it does provide a link, it's to some no name site that wouldn't come up as a highly-ranked paid or organic result through regular Google search. Keeps making me think this is a Google performance problem where they have not figured out how to take the entire AI chat and engineer it back into a simple short keyword phrase to get an acceptable search result.

Btw, if anyone's thinking "why are you using Gemini because it's the worst?" I think that's fair and right. I have... reasons, but they're not super sensible ones.

jeffbee4• 2 months ago

Do you still perceive search and maps to be slow even when logged out?

harmmonica3• 2 months ago

I'm probably 50/50 with search in particular logged in vs. out and I do think I notice on both, but I'm not entirely sure. Just saying the search and maps algorithm is wading through so much of my history that it can't help but choke trying to deliver the "right" results?

bluecalm• 2 months ago

Maybe agentic PRs made it to production and performance cratered.

On a serious note I feel the same. Google is slow these days and the slowest and least reliable service of them all is Gemini. Sometimes I don't even know if it hang already (no error messages) or if it's still "thinking".

opwieurposiu• 2 months ago

Yes. When I plug my phone into the car it used to use google assistant to process voice commands and it was pretty fast. Now for some reason it has switched to Gemini and it takes twice as long to play a song or send a text. Sometimes Gemini forgets it even has the ability to play songs. Gemini is better at answering random questions that the kids ask though.

spprashant• 2 months ago

Couple of anecdotes from the last week.

Yesterday the Gmail virus scanner stopped working. For a while I couldn't download my attachments. A few minutes later it said the virus scanner was offline and download at your own risk.

Meet audio seems to be having a particularly bad week. It just doesn't work with headphones. Their testing tool indicated everything was fine. It's worked after I logged off and on. Audio quality issues are getting more common as well.

kart23• 2 months ago

google: we are commited to carbon free data centers by 2030 (https://sustainability.google/reports/247-carbon-free-energy...)

also google: renting capacity from a data center powered by 27 methane gas turbines on trailers

https://www.epw.senate.gov/public/index.cfm/2026/4/whitehous...

btian• 2 months ago

The deal ends in June 2029, which is before 2030.

minraws• 2 months ago

So you mean to say Google knows AI definitely won't be needed after June 2029... Understood...

DonsDiscountGas• 2 months ago

They also might switch power sources.

dumbmrblah• 2 months ago

So their hands are clean, but they’re outsourcing the dirty work.

paulpauper2• 2 months ago

Space-X is an AI/datacenter company that also makes rockets

0xbadcafebee• 2 months ago

And cars, and 18-wheelers, and satellite internet, and home/commercial battery backups, and (formerly) solar roof tiles

Robotbeat4• 2 months ago

That is Tesla.

dmode• 2 months ago

It's not an AI company. It is a datacenter company. While all frontier AI labs are fighting for compute SpaceX is give up compute, instead of reserving it for their own models. That tells you all we need to know

verdverm2• 2 months ago

Google is getting in bed with some folks even more unsavory than themselves. The thing I noted most from I/O was how prominent and proud the are of partnering with Palantir. "Do no evil" has become "Let's do evil"

wmf• 2 months ago

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

redox993• 2 months ago

Yes, but as Elon himself remarked, these are short term leases (90 day exit window), not guaranteed long term contracts.

tristanj15• 2 months ago

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.

shostack• 2 months ago

More like incredibly lucky that the global hardware market dried up for compute capacity even as his AI product flopped. Right place at the right time.

I just dislike that it is now harder to avoid giving Musk money directly or indirectly.

otterley8• 2 months ago

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.

cameldrv• 2 months ago

Do people think those numbers are correct? 920 million a month for 110,000 GPUs is $11.61 per GPU hour. That seems very high to me.

spunker540• 2 months ago

I think in the case of supply-constrained GPUs, you can get the opposite of a volume discount. Google has the most capacity of anyone, the fact they’re paying so much per month to spacex is pretty remarkable

bwfan1232• 2 months ago

You could also read it the other way. That there is a lot of stranded gpu-capacity which is not being allocated correctly. And buyers would rather rent - than build out themselves.

SlinkyOnStairs4• 2 months ago

The contract has some clauses that lets Google pay less if SpaceX can't deliver the full amount of GPUs.

But $12/hr is probably quite accurate. SpaceX' datacenters are horrifyingly expensive, and regular GPUs are being rented below cost in many cases.

Just the gas turbine power alone is horrific. Doubles or triples the power bill and adds a big chunk of depreciation.

yalogin2• 2 months ago

So space data centers are absolutely possible then. I heard a lot of skepticism about the feasibility but it looks like Google and Anthropic looked at SpaceX and trusted them to deliver on the promise and even signed deals worth billions.

timy2shoes• 2 months ago

They are paying for the existing earth-bound data centers SpaceXai owns.

yalogin2• 2 months ago

Oh wow did not realize xai has data centers. So are they completely abandoning xai or do they just have that much capacity left over?

Havoc2• 2 months ago

I guess their training runs aren't going great if they're dumping all the compute they can.

Or I guess juicing the numbers for IPO

fancyfredbot3• 2 months ago

In other news, the gold rush has entered a new phase as miners pivot to selling shovels.

sam_bristow• 2 months ago

Wait, are these the same GPUs that were diverted from Tesla into xAI a couple of years ago?

etc-hosts3• 2 months ago

There may be a few here, but xaispacex has bought a very large amount of nvidia GPU since then for their TN datacenter .

bigtex• 2 months ago

Google owns 5% of SpaceX fyi.

amelius• 2 months ago

If you can't buy DRAM, you gotta rent your compute infrastructure.

cj• 2 months ago

What exactly is SpaceX's core business?

cryo322• 2 months ago

Smoking crack and investment fraud.

With a light sprinkling of space.

hirako20004• 2 months ago

Its main business is connectivity. Starlink generated over 10B last year.

Becoming a broader infrastructure company with xAI.

ninkendo2• 2 months ago

Starlink generated over 10B last year

An entire one-hundredth of their proposed valuation!

sublimefire3• 2 months ago

Starlink terminals are popular, they put them on drones to avoid jamming (Starling jamming exists but not that easy for now). It might be their sales are inflated due to its use at war.

raphaelj• 2 months ago

That's only about 35% more than the main telecom operator here in Belgium (Proximus: $7.2B revenue in 2025, $2.5B market cap, positive earnings for 15+ years).

Obviously Starlink can and will growth. I'm just pointing out how insane the market cap is, when compared to similar scale "connectivity" businesses.

jeltz4• 2 months ago

Their satellite internet business is the only thing which makes them money, which is enabled by their orbital launch business which is as of right now not profitable and I have no idea of if it ever will be but without it they would not be able to launch enough satellites.

Their stupidity with AI and buying X mostly seems to be about scamming investors to make Musk even richer. Like this particular deal is just them doing what CoreWeave does at a SpaceX valuation.

sidcool• 2 months ago

I can understand this being a move to increase valuation, but I can't connect with the stupidity and scamming investors argument.

Laurel1234• 2 months ago

I'm pretty sure xAI is just Musk throwing a tantrum after being played for a fool by Lying Sam.

ACCount377• 2 months ago

Launch isn't profitable simply because ongoing Starship R&D is eating into it. A lot of opex, capex, and pre-revenue.

If they start running Starship anywhere near the way they do Falcon 9, it'll flip into profits. A lot of big bets SpaceX made ride on Starship coming online. I'm honestly surprised Starlink is already so profitable without it.

One of their big named bets includes: orbital datacenters. Which puts this specific deal into perspective.

sourcecodeplz• 2 months ago

A datacenter that also provides connectivity/Internet

dgellow7• 2 months ago

Government contracts. Dumping its shares on retail investors. Selling compute to AI vendors

dehrmann• 2 months ago

Elon Musk.

devops0002• 2 months ago

“If we fail to deliver access to the committed amount of GPUs by September 30, 2026, then following a one-month grace period, Google may immediately terminate the agreement or accept the number of GPUs provided, with a corresponding pro rata reduction in the monthly fees. After December 31, 2026, the agreement may be terminated by either party upon 90 days' notice.”

https://www.sec.gov/Archives/edgar/data/1181412/000162828026...

It’s only to boost the IPO price. The agreement will last only a few months on paper. I doubt it is a real transaction.

ta988• 2 months ago

Didn't Anthropic pull the same in both ways? you pull me up I pull you up kind of deal? Sounds like SpaceX bought themselves some time up to Q4, which is not the case of Anthropic and even worse for OpenAI. Not counting that none of them got their S&P500 fast-track ticket.

merlindru• 2 months ago

why would Google help a competitor like that, though?

hirako20004• 2 months ago

The article mentions Google is heavily invested in it.

somewhatgoated• 2 months ago

How is Google competing with SpaceX?

devops0002• 2 months ago

Maybe common investors want to sell stocks to retail

sorenjan2• 2 months ago

Google (Alphabet) owns 6% of SpaceX which they bought for $12B in 2015. They want to maximize the value of their investment.

YetAnotherNick2• 2 months ago

They are not. The amount of conspiracy in high ranked HN comments for AI companies is insane.

venkyvb• 2 months ago

Google is safeguarding it's investment in SpaceX.

fauigerzigerk2• 2 months ago

Either that or SpaceX is permanently turning xAI's assets into a neocloud because xAI itself has no traction.

The whole thing looks rather desperate. I wonder what SpaceX's margins are on these contracts.

ACCount377• 2 months ago

SpaceX has recently started pitching itself as an orbital datacenter company.

If you buy into that business model (or pretend to), it makes sense for SpaceX to start selling compute early. Their "earthside compute" clients of today are "skyside compute" clients of tomorrow.

A part of Musk's old pitch for Starlink was: space-based solar makes perfect sense for powering space assets, and no sense whatsoever for powering Earth assets. So you have to find a way to use that power in space to do something economically useful. Comms were the only scalable way to do that, so Starlink it was.

I can see how space-based datacenters would follow the same logic. If SpaceX can make them economical, that is. There's no guarantees of that - but if anyone at all can make space-based datacenters economical, it's SpaceX.

mrcwinn• 2 months ago

This is all just the typical Elon hate. What's desperate about getting paid $920,000,000 per month? If that's desperation, I'd love to start groveling more!

Given extreme supply constraints, it's very unlikely that Google or Anthropic will just suddenly cancel right after the IPO unless their own demand collapses. And even if this were true, what value would that provide Musk? Could you imagine if your newly public company suddenly received termination notices from your two largest compute customers? Disaster.

Try logic.

SlinkyOnStairs4• 2 months ago

I wonder what SpaceX's margins are on these contracts.

In the Anthropic deal they have to be negative; Anthropic's announced higher margins during the deal.

Mistletoe• 2 months ago

Feels like these IPOs are thankfully the top coming before the AI crash and we get back to the real world.

b40d-48b2-979e• 2 months ago

One can hope, but that sentiment is quite unpopular on HN.

Rover2223• 2 months ago

Everything is a conspiracy now.

Of course this is a real deal. Compute is the most valuable resource in the world for these companies at the moment.

AtNightWeCode2• 2 months ago

The same terms Anthropic have today I believe.

doubtfuluser• 2 months ago

This feels actually like a pretty safe bet for Google, they secure the compute in case it works (I doubt that the described volume will be available in the near future), while if SpaceX doesn’t manage to provide there is not much loss. I see it more as another way of blowing up SpaceX valuation on paper…

tosh• 2 months ago

Is there any data on whether Google, Amazon, Microsoft, Anthropic, OpenAI etc are most cost efficient in getting datacenter compute online and operating it?

I'd be interested in how large the range is here across company and region and specific data center and how it relates to companies like Hetzner if at all.

cyanydeez• 2 months ago

that's asking the cart before the horse; is there any data on what compute actually results in real GDP improvements?

cryo322• 2 months ago

Nothing other than vendor promises and white papers.

sublimefire3• 2 months ago

I’ve seen some numbers related to datacenters in Ireland and they would stress price per MW as a way to see where to build them. But then you have depreciation of equipment as well. Depreciation can be played with when filing taxes though.

onlyrealcuzzo• 2 months ago

Is there any data on whether Google, Amazon, Microsoft, Anthropic, OpenAI etc are most cost efficient in getting datacenter compute online and operating it?

Well considering that ~80% of the price is hardware deprecation, I don't know why they'd be considerably worse than anyone else at negotiating hardware deals.

Typically when you buy in bulk, you have more sway.

Companies like Google also have in-house chips like TPUs that are substantially cheaper for inference for them to make than anyone else can get through Nvidia.

YetAnotherNick2• 2 months ago

I don't think they are most efficient for small GPUs. I think they might only be the one which have capex and certainty required for multimillion dollar purchase of GB200 NVL72 or something of that scale.

windexh8er• 2 months ago

Well, Elon seems to take the fastest path possible to these DCs. One can envision a future where these get shut down for the severity of the pollution, not to mention being built and operated illegally [0].

[0] https://www.selc.org/news/xai-built-an-illegal-power-plant-t...

dgellow7• 2 months ago

Which is precisely why there has been a push to weaken the EPA and other regulating agencies

discodave2• 2 months ago

Amazon / AWS is very efficient at it. They are the largest cloud by a significant margin. Much larger than Hetzner.

Google and MS may be close behind.

Not sure about Meta but they are also renting from Amazon so...

Anthropic mostly rents from Amazon, Goog & MS.

Signez• 2 months ago

Sorry, what?

Does this mean that SpaceX are the only company that really did build some datacenters to put all the million of GPU/TPU/whatever they all talk about everyday?

I mean, Google, Amazon, Meta and Microsoft told investors they spent more than $1B per day last year in CapEx... why on Earth do they (well, Google and Anthropic at least) need to rent compute to SpaceX, of all companies?

phpnode• 2 months ago

They overbuilt capacity for grok but no one wants to use grok for several reasons

transcriptase3• 2 months ago

Yes but someone will be along shortly to defuse what sounds like giving the bad mars man credit where it’s due. Like everything else he does that works out, it was just luck, timing, actually a mistake that worked out, or someone else behind the scenes that he got lucky in hiring at the right time (by accident).

supertroop2• 2 months ago

If he’s so smart why isn’t grok using all that capacity?

infinitezest• 2 months ago

People with access to enormous wealth tend to get a lot of chances at the betting table.

hirako20004• 2 months ago

Scarcity. It's becoming difficult to plan for new data centers. They will rent where capacity is available. Grok hasn't gain the expected popularity.

jeltz4• 2 months ago

No, CoreWeave for example also rent compute to the big AI companies. This likely just means Grok has few users so they need to rent their extra capacity to their competitors.

fellowmartian• 2 months ago

Plus it’s not like some absolutely enormous data centers, only 300MW.

brookst2• 2 months ago

Other companies built data centers but also built products that soak up their data center capacity.

xAI built data centers, and products that are mostly good for nonconsensual porn and confirming a small group’s biases. So they have a lot of excess capacity, and might as well rent it to the adults.

qaq2• 2 months ago

None is using grok so they are renting out unused capacity

dtj11232• 2 months ago

380 dollars per second... Good to know I could afford my own data center for an appreciable fraction of a minute.

comboy2• 2 months ago

plus $473 per second from Anthropic

As part of that deal, Anthropic agreed to pay SpaceX $1.25 billion per month through 2029 to rent all the available compute from its Colossus 1 data center near Memphis, Tennessee, that xAI — now part of SpaceX — originally built for its own artificial intelligence efforts.

I don't get why SpaceX is going public. But anyway, well played, the whole crypto mining that dried out GPUs back in the day seems tiny now.

dgellow7• 2 months ago

I don't get why SpaceX is going public.

Liquidity for investors. They raised everything they could from private markets, government contract, debt, the remaining source of financing is from the public

ignoramous• 2 months ago

For context, Alphabet earns ~$12k/sec.

jonas21• 2 months ago

Why would you want to own your own giant datacenter? What would you do with it? Of course it's expensive to operate a datacenter that serves millions of people.

jamwil• 2 months ago

They were just being jocular.

dtj11232• 2 months ago

I was actually surprised by how low the per-second rate is.

dwroberts• 2 months ago

Is this admission that google’s proprietary chips etc. are not cutting it? Why would you need a bunch of nvidia GPUs if you have your own silicon? (AFAIK they have their own for both inference and training do they not?)

ben_w2• 2 months ago

Kinda; while it does show that overall Google's proprietary chips etc. are not cutting it, it doesn't say if the problem is the hardware itself or the factories to make more of the hardware. Without more information, it could be that Google's hardware is 100x the energy efficiency per token, but they can only make enough hardware for 1% of the tokens there's currently demand for: 1% of your product being 0.01% of your costs isn't nothing, but it leaves the other 99% at full price.

amazingamazing• 2 months ago

How do you come to this conclusion? All it means is that spacex has compute and google does not.

Suppose tpus were theoretically a million times better, but cannot be produced due to supply chain constraints, this action would still be rational.

My personal take is that this really shows how bottlenecked the entire supply chain is. For such an important commodity there are shockingly few players ready for scale.

trebligdivad• 2 months ago

It's a very long contract (till 2029) for just covering themselves for supply.

espadrine• 2 months ago

I see it mean two things:

1. Indeed, Google is compute-constrained, and is ready to buy any it can.

2. xAI (now SpaceXAI) has a lot of idle compute, which it resells to Cursor, Anthropic, Google, probably others as we speak.

In other words: Google is training models, xAI is not.

netdur• 2 months ago

Yes, it is issue of scale, google had to restrict usage because hardware are not available, regardless of what kind of hardware that is

throw1234567891• 2 months ago

It could be, or simply we are so far away into chip shortage that even google needs to buy from other people’s pot.

infecto4• 2 months ago

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.

ranger_danger• 2 months ago

90-day cancellation clause

In other words, this is a fake IPO booster

paradoxyl• 2 months ago

Supply and demand? Bubblists seem to think there's an infinite supply of chips, power, and water to make as many chat bots as possible; physics, as usual, dictates limits.

dawnerd3• 2 months ago

Or it’s paying to make sure competition can’t buy said compute. Also isn’t Google an investor in SpaceX anyways?

ajb• 2 months ago

Not necessarily, just that they don't have as many as they can make use of, and that xAI can't make more valuable use of them than renting them out.

vagab0nd• 2 months ago

At this point you are not buying a particular chip. You are buying whatever compute you can get.

root-parent3• 2 months ago

Its because none of the promised Data Center and NVIDIA hardware deployments described in NVDA earnings calls have actually happened. Once more Ed Zitron has the goods: https://youtu.be/zbKDmkJPVvI?t=482

comboy2• 2 months ago

Google renting infra from xAI, I did not see that coming. My understanding of what computers are doing, what companies are doing and what governments are doing seems to be getting worse day by day.

ACCount377• 2 months ago

They're struggling.

The future needs more AI compute. No one has enough AI compute.

Memory chip vendors are betting hard on this being a temporary state of affairs that doesn't last, and doesn't warrant commissioning a shitton of new memory foundries.

Musk is betting hard on this staying that way, and is putting the next Colossus into the last place not corrupted by NIMBYs... SPACE!

ajross2• 2 months ago

Google renting infra from xAI, I did not see that coming.

Actually that seems to be fairly logical? Hardware is what xAI has, and it's in great demand. So sell what makes you money. The real story here is that that xAI hardware is going to be running Gemini and not Grok. Which is to say: Grok basically failed as a frontier AI and they need to pivot to a business model which makes money.

Obviously not everything Musk did was wrong. xAI bought a ton of compute when it was possible to get it. But the product they were going to build with it failed and so now they're deciding to be a landlord.

This IPO is just insane. No way do you justify a $trillion+ valuation based on what amounts to a bunch of commoditized rent seeking endeavors. Datacenters are buildings and chips, and everyone can build those. Starlink is just an ISP with lots of competition at scale (they have the high bandwidth mobile market cornered, but that's a very small market!). Mars is at best a grift on public funding. Even satellite launch services are commoditized and competetive these days.

zozbot2342• 2 months ago

Which is to say: Grok basically failed as a frontier AI and they need to pivot to a business model which makes money.

They can just run Grok as a local AI inside Tesla cars. It's actually really efficient as a compute platform because the Tesla cars are in motion at highway speeds, which gives you lots of free airflow for shedding waste heat via the car radiator. Way more efficient than trying to run AI on space satellites.

Rover2223• 2 months ago

You make it sound like they’ve given up on Grok, which I don’t think is accurate. I think it’s been mentioned the Grok 5 1.5T model is currently training on Colossus 2. And their recent deal with cursor is part of being able to eventually compete with Anthropic for agentic coding.

senordevnyc2• 2 months ago

Strongly agree with all of this, except that charging rent for the use of an asset you own is not what economic "rent-seeking" means. I blame the dumbass economists who named it this, forever polluting the discussion to be had about regulatory capture and legalized political bribery.

martinald• 2 months ago

Keep in mind Google also rents GPUs via GCP, so they could be just reselling these to GCP customers?

Thing is though, Anthropic was really against the wall with lack of compute pre xAI deal. And tbh, Gemini reliability has been abysmal which probably points to real compute shortages.

And nearly _every_ major DC project is really up against it with massive delays, etc. Stargate UAE has been badly affected by the Iran conflict.

So maybe long term this isn't a great business, but _right now_ I'm not convinced it's all financial engineering. There is a enormous shortage of compute and xAI has a load of it _available now_.

trollbridge4• 2 months ago

Could you please describe the other satellite launch services whose prices are competitive with SpaceX?

Alive-in-20253• 2 months ago

Xai seems pointless, and they've got gpus needing to be used for something.

hellojimbo• 2 months ago

I thought elon hates demis

Alive-in-20253• 2 months ago

Demis? Democrats or something else?

Elon likes money and power.

raincole2• 2 months ago

Financial shenanigans aside, xAI seems to be buying hardware at breakneck speed. So why not?

https://techcrunch.com/2026/05/20/musks-xai-is-being-sued-ov...

Lplololopo9• 2 months ago

The original batch was probably Musks "AI will solve everything, i have a small dick, i want to buy all the hardware and be the first" which became "Ah shit Grok doesn't need all the compute, we can't sell it properly our IPO is coming soon we need better numbers.

And

"Shit why did we agree to buy so much hardware if i can't even use the current one fully?"

"Ah fuck it, who cares if i indirectly pivot to selling this compute. It brings money and my Fanboys probably think its some magic smartness and not just ignorance"

matthewdgreen4• 2 months ago

Because hardware depreciates quickly, datacenter rentals are a competitive business with much lower profit margins than the IPO prospectus requires (even if there is a temporary bottleneck now) and there's no real moat.

nrmitchi2• 2 months ago

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.

TheJoeMan• 2 months ago

I’m more confused what they’re going to do with all the infra? What could all those GPU’s be doing? Just inference?

polski-g5• 2 months ago

It means that there's no memory to buy at any price. There's no GPUs. There's no power.

Elon had the foresight to buy all that in advance and now Google, the datacenter company, has to rent datacenter space.

MU went 1000% in one year and it's still one of the cheapest companies on the NASDAQ.

est31• 2 months ago

These deals are part of how the AI economy operates. Amodei has explained this in his recent Patel podcast.

1. Building datacenters takes time. Months, if not years. They take billions of investment.

2. AI revenue is highly unpredictable. Sure, you can make predictions, but maybe your competitor releases a better model 2 weeks after your release, maybe the new model you built isn't as much better, maybe the chinese models steal your show, etc.

3. AI revenue grows a lot. Anthropic's case is 10x per year.

4. So if you are off by just a year in terms of how much GPU you actually need, then that means a 90% of your compute capacity is wasted, and you go bankrupt.

As a solution, companies buy compute from each other! If one company's model did well, they can buy compute from the company whose model didn't do well (like in the case of grok). It's beneficial for both sides, so positive sum game. So deals like this aren't something bad in itself.

It's nothing new either. In SAAS deals, you often commit to a certain revenue and then pay extra if your revenue exceeds that amount. And power market is cut in two as well: longer term deals plus spot markets. Spot prices are way higher than the longer term deal prices.

Given it's SpaceX of course there is financial engineering involved: the GPUs aren't actually owned by SpaceX but a daughter company, and it's been financed via loans that are backed by pension funds. So it's already the case that pension funds back bear the risks associated with SpaceX's operations.

Right now, the bulk of the AI bubble sits in such debt statements and not in public markets.

AustinDev2• 2 months ago

the GPUs aren't actually owned by SpaceX but a daughter company, and it's been financed via loans that are backed by pension funds. So it's already the case that pension funds back bear the risks associated with SpaceX's operations.

I think a more accurate phrasing of the Valor GPU deal would be something like this:

"SpaceX’s AI compute buildout relies in part on off-balance-sheet or lease-style financing vehicles. Valor-owned vehicles purchased Nvidia GPU infrastructure and leased it to xAI/SpaceX subsidiaries, with Apollo providing debt financing and SpaceX or subsidiaries guaranteeing some obligations. That creates indirect exposure for institutional and retirement capital, though not necessarily direct pension-fund ownership of SpaceX operational risk."

arder• 2 months ago

This is only a partial solution to a problem though. If x ai fails to build a good model they rent to Google. But that means all these companies are incentivised to build as much compute as possible. If they win their margins look great, if they lose they still make money. BUT at some point aggregate supply will outstrip aggregate demand and the bottom will fall out of the market.

dpacmittal• 2 months ago

By the time bottom falls out, they will all have done their IPOs and offloaded the risk on to the public. Govt will be forced to bail them out.

liveoneggs2• 2 months ago

I knew GCP was third banana but what is even happening?

tmountain2• 2 months ago

A huge chunk of SoaceX value in their filing is attributed to their AI technology (aka Grok). I believe it’s 90% or more… Now, it seems they’re leasing the infrastructure required for Grok to scale to Anthropic and Google. I wonder how that math works…

embedding-shape2• 2 months ago

But what is xAI? I thought that was the company that had the compute + Grok, the AI company? Since when does SpaceX (which I thought was a space company?) own AI-compute hardware and/or can do model hosting? Are all of Musks companies just one big thing now where the names no longer matter, or how is it supposed to work?

Edit: seems I'm just a bit behind: "xAI — now part of SpaceX ", seems really strange for a space company to buy an AI company, but I guess rather that, than the other way around.

peterspath• 2 months ago

Not really strange... if the goal is to go to mars, you probably need robots, those need intelligence -> ai. It fits pretty well, especially because you want to own all the core technologies as a company.

uxhacker• 2 months ago

I think some justify it as SpaceX plans to offer hosting in space, and then use Starlink to distribute it.

thisisit• 2 months ago

Next up Tesla and SpaceX are going to merge and that will another round of synergies where Tesla and Vision AI (in FSD) and xAI.

robmccoll• 2 months ago

Musk sold Twitter into xAI which he then sold into SpaceX as a financial engineering effort to lessen the impact of massive debts and cash burn. The IPO and some clever structuring is the final step in the process.

tmountain2• 2 months ago

Context here (Patrick Boyle):

https://youtu.be/IHD8BDFYyGI?is=dnpBeOoxH7LUJknm

Rover2223• 2 months ago

It has nothing to do with Grok, at least not the current iteration. SpaceX is the only company that can concievably launch large scale orbital compute.

jazzyjackson2• 2 months ago

I’m out of the loop, why is compute better /after/ being launched into space? Is the idea just to be co-located within the ISP to reduce round trip time to the LLMs?

tristanj15• 2 months ago

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 5% of SpaceX, so they make 50 billion dollars. Google spends 10 billion and makes 50 billion, $40 billion profit.

The even better part is that because of this deal, SpaceX is now profitable. The S&P requires companies to demonstrate 12 months of profits before they can enter the S&P 500 index. SpaceX lobbied to have this profitability requirement removed, but S&P said no and refused to rewrite the rules.

Now with this incredible deal, SpaceX is now GAAP profitable under the existing rules, and they get to join the index next year without a rule change.

Truly a brilliant deal for everyone involved.

lelanthran• 2 months ago

SpaceX is trading at a whopping 94x revenue. This deal increases SpaceX's revenue by $11 billion per year. If SpaceX maintains this revenue multiplier, then the single deal boosts SpaceX's valuation by 94 x 11 billion = $1 trillion dollars.

That final number doesn't make sense: if you're trading shares at $X revenue, increasing the revenue by $Y multiplier doesn't increase the share price by the same multiplier.

IshKebab• 2 months ago

You're right. Share price isn't based purely on a multiplier of current revenue.

tristanj15• 2 months ago

Sure it might not stay at 94x. But as long as SpaceX trades above 20x revenue, Google makes money from this deal.

And the bigger play is this deal pushes SpaceX over the finish line for S&P 500 inclusion. That's worth tens of billions for everyone involved.

benl7• 2 months ago

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!

zdragnar• 2 months ago

As an ignoramus to these things.... there are only just so many Googles though. Having made a significant jump, are they really expected to continue that growth?

matthewdgreen4• 2 months ago

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%.

TheOtherHobbes• 2 months ago

A cynic might wonder given Musk's implausible trajectory and questionable associations whether the X project is primarily a grift and/or money laundering project that happens to do high-profile tech, and the primary aim is to pump the stock and hope some other opportunity to pump it further arrives in the future.

Otherwise a dump works too. There's plenty of money to be made from carefully timed shorting.

The entire AI field has been plagued by circular financing deals, so this is not new. But it's new in aerospace, and the market institutions appear complicit.

Otherwise, why is this IPO getting such unique treatment on such flimsy fundamentals?

SlinkyOnStairs4• 2 months ago

Truly a brilliant deal for everyone involved.

Same thing they used to say about Lehman.

mannanj4• 2 months ago

Do you really think its honest to call this Financial Engineering over Fraud?

tristanj15• 2 months ago

No. The definition of fraud is "lying for financial gain". This doesn't qualify.

noir_lord• 2 months ago

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.

benl7• 2 months ago

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!

rdiddly• 2 months ago

The key there is "whole market." This is still a tiny sliver of the whole market and most people's exposure to it is minimal. Still a wealth extraction move ultimately, but like many other such moves, the few pull just a little from each of the many. Nobody individually goes broke, but the whole class gets slightly poorer. It takes a village to raise a billionaire!

deadbabe2• 2 months ago

If you want to play “active investor” and pick and choose what companies you invest in, don’t be surprised when you underperform the whole market.

SpaceX could rise to be a major winner that makes people a lot of money. And then what? You missed out and underperform the whole market.

bko2• 2 months ago

So your contention is what? This will crash? Surely you'll be shorting the stock right?

echoangle• 2 months ago

Isn’t the revenue modifier a result and not the cause?

Would you really expect a company to increase proportionally in value when they increase their revenue?

mgraczyk• 2 months ago

For your math to make sense, Google would have to sell its stake this year

There may be more to it than buying compute but what you're saying does not make sense for Google. More likely Google wants a good relationship with SpaceX and possibly to buoy the stock, but it's a bad NPV trade

npn• 2 months ago

On the other hand, google does not lose all the money in that deal. Computation is still expensive.

So at most they lose like 200M each month. Peanut compares to the potentially gain of the IPO.

IAmGraydon• 2 months ago

So masterful that a random guy on HN can see right through it.

Let’s just call it what it is. It’s just basic fraud. They created a very temporary revenue injection right around the time of the IPO to defraud investors as much as they possibly can. Some businesses do this kind of thing just before they die because…why not?

tristanj15• 2 months ago

No it is not. You are conflating the colloquial definition of fraud, with the legal definition of fraud. Fraud has a defined meaning.

pqtyw8• 2 months ago

Or SpaceX just has too many GPUs and nothing to do with them besides renting them out to someone since their AI products suck and nobody uses them?

otterley8• 2 months ago

I don’t think your math is correct. Profit is revenues minus expenses. Unless Google’s purchase of compute brings SpaceX’s revenues into profit territory (such that their total revenues exceed their expenses), SpaceX still won’t be profitable. This is accounting 101.

Google’s investment in SpaceX is completely orthogonal to the analysis. Equity investments aren’t revenue for the issuer. (Gains on sale would be revenue to the investor, in which case, this would be Google, not SpaceX.)

tjwebbnorfolk3• 2 months ago

An equity interest in a company is a perpetual claim on future profits. Equity IS securitized profits.

Google's purchase sends cash to to SpaceX, which they report as revenue, and which they earn a profit from.

whateveracct2• 2 months ago

prompt engineering, harness engineering, agentic engineering, financial engineering

AI is really a pioneering engineering field

amluto3• 2 months ago

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 currently looking like an appreciating asset, will actually depreciate faster than aircraft in the long run.

coke12• 2 months ago

Comparing SpaceX to an aircraft leasing company seems more foolish to me than a 94x multiple.

I understand the gist here, but come on. This is a generational company. It’s the only relevant space launch business, and has its tentacles deep in AI infrastructure as well. Maybe the AI bet is foolish — I don’t know — you should short it!

BobbyJo4• 2 months ago

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.

HarHarVeryFunny3• 2 months ago

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 to be much of a revenue generator, at least for time being.

It was in the news not too long ago that Musk was looking to use Samsung to fabricate "AI chips", presumably either for X.ai and/or Tesla, so perhaps he's basically put X.ai on hold until he can reboot his efforts with his own chips (& perhaps a new datacenter)?

crystal_revenge• 2 months ago

I sincerely hope the market is not willing to value this sort of deal at a P/E ratio anywhere near 94.

It will very likely be valued much, much higher. The SpaceX IPO is, in itself, a marvelous piece of financial engineering (requiring co-operation among multiple actors) which has been a long time in the works.

- Right out of the gate nearly all retail investment platforms have dramatically reduced requirements for purchasing an IPO, most notably Fidelity, which previously required $500,000 in your account to participate in an IPO reduced (on Friday) this amount to $2,000

- Retail investment, despite being quieter in the post-WSB era, is at all time highs.

- Reports are that the SpaceX IPO is already highly oversubscribed, meaning there are many more retail investors interested than there are shares available.

- SpaceX has a wildy low float of only ~4% which means price discovery will be much slower then normal, especially with aforementioned demand

- All of these retail platforms enforce some sort of "soft lock-in" whereby you're excluded from future IPOs if you sell your shares within 15-30 days. So if you want to get out you're not going to be able to participate in Anthropic/OpenAI IPOs in a few months.

- Coincidentally, most of the major indexes (thankfully excluding the S&P 500) have adjusted their rules to require only 15 days post-IPO before inclusion and have no profitability requirements. Many also adjusted the rules so that low float IPOs have their weight multiplied despite the low float.

- Many retirement accounts, in one way or another, are required to track these indexes and will be forced to buy these SpaceX shares at a very likely frenzied price and further drive the price up.

SpaceX will very likely open with far more retail demand than shares, the insiders (VCs, employees etc) will still be legally locked from selling, retail investors are penalized if they sell, and so the demand will be high and supply very low.

If they can keep this demand hyped for just 3 weeks, price will still be elevated when retirement accounts are forced to buy... roughly the same time retail investor start seeing the penalty for selling expiring (meaning it is not irrational at all to be in the IPO, but it is irrational to sell before being listed in an index).

Fun fact: the other fascinating thing about this IPO is the terms for insider lock-in. At first earnings (Jun 30) inside investors unlock and can therefor liquidate 20% of their shares... but if the stock performs well, they can unlock and additional 10%. There are additional rules for continued unlocking of more shares depending on performance as time goes on. So everyone on the inside has a very vested interest in a spike in stock prices: not only will their stocks be worth more, but they can realize that value faster.

I would be surprised if SpaceX price doesn't explode in the first few weeks because for everyone involved this would make sense. It's only in August that we'll start seeing the really interesting things start happening.

chrisgd• 2 months ago

But growth rates could make that a bargain. If the market has taught us anything since 2009, it’s don’t underestimate growth

mattmaroon• 2 months ago

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

downrightmike• 2 months ago

China just entered the chat, so that 94 multiple will get slashed in the year to come, hence the rush to offload onto retail

golergka• 2 months ago

Except they’re paying $30b (the deal is signed for almost 3 years), there’s no reason to believe that SpaceX maintains revenue multiples and this deal creates a trillion in value, liquid cash is not the same as pre-IPO shares. And finally, the deal comes down to $11 per hour of h100 equivalent, which is pretty much within market which experiences a severe lack of supply.

next_xibalba• 2 months ago

this single deal boosts SpaceX's valuation by 94 x 11 billion = $1 trillion dollars

That's not how valuations work. Also, it is not unlikely that SpaceX's valuation drops post-IPO (tech was 6.65% in the most recent trading session) due to its very rich valuation and a long tenured investor based that is probably looking to get liquid.

Google is renting compute from SpaceX because they need GPUs and SpaceX owns a huge supply of them and has excess capacity bc no one uses Grok. Google has stated that this is a temporary arrangement while they continue to build out their own capacity.

iririririr• 2 months ago

why revenue that barely cover the estimated revenue (and depending on assets yet to be acquired) boost valuation? is everyone an idiot?

mock-possum• 2 months ago

Utterly nauseating. Why would google help prop up this company and its figurehead? Maybe this is finally the straw that breaks the camel’s back for me and google.

wavefunction• 2 months ago

It seems like Silicon Valley has decided on solidarity among tech billionaires and they're gonna take average Americans' wealth to keep themselves semi-relevant globally as China assumes global dominance. This is after insulting and demeaning the rest of the world, they plan to try to sell anemic services to other countries in whose politics they're also meddling. Circular agreements promising to purchase goods and services without the money in the bank, but you can show your promissory note to a guy with his own promissory note who then writes you a new promissory note based on your first one to take to another guy with his promissory notes, look at all the paper.

alt2272• 2 months ago

Why would google help prop up this company and its figurehead?

Simple, money.

When Billions of $ are in the picture, people really don't care about ethics.

laughing_man5• 2 months ago

They're not "propping up" anything. They're buying a service.

pqtyw8• 2 months ago

Well Google needs GPUs, SpaceX has GPUs but nothing to do with them since their AI business failed. Why is that insufficient?

seydor• 2 months ago

and makes 50 billion

assuming google sells, the stock tanks, nobody wants to buy next year

is this masterful? more like a scam

cperciva2• 2 months ago

Now with this incredible deal, SpaceX is now GAAP profitable under the existing rules, and they get to join the index next year without a rule change.

Didn't they also run up against a "minimum free float" rule?

AustinDev2• 2 months ago

The company has been around since 2002, I'm sure plenty of insiders will cash out in the next calendar year to satisfy the minimum free float rule by the time they're eligible.

nibbleyou2• 2 months ago

masterful piece of financial engineering

Love how we assign positive adjectives to unethical practices by corporates

gigatexal2• 2 months ago

I think the op was being a bit satirical

alt2272• 2 months ago

I wouldnt class 'masterful' as a positive adjective personally.

EDIT: Downvotes? Not sure why. I would say Darth Vader is masterful of the force, and even that Donald Trump is masterful at being provocative. Masterful is not definitively positive or negative, it just describes being very good at something.

PeterStuer2• 2 months ago

So SpaceX is selling inference capacity. Who else is? What were the competing offers for Google and Anthropic?

adgjlsfhk15• 2 months ago

anthropic isn't selling capacity. they're using all of theirs and more

bendbro• 2 months ago

They still need 10% float and 1 year of bake time, so the rules are still doing some work for us

tristanj15• 2 months ago

Float will be 40-50% after lockups expire later this year.

ksec• 2 months ago

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

matwood4• 2 months ago

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

BLKNSLVR5• 2 months ago

Brilliant meaning clever, like a well thought out scam.

Not brilliant meaning something actually positive for humanity in any respect at all.

bko2• 2 months ago

Maybe they just need compute. Isn't that the more obvious reason. It's good that they own part of them and that's a bonus but the idea that the senior brass is orchestrating this to increase the paper value of something some division in google owns strikes me as wrong.

OtomotO• 2 months ago

So they have followed the rainbow and found some pots of gold... And then they all lived happily ever after.

Apart from the peasants of course.

jpmattia• 2 months ago

and they get to join the index next year without a rule change.

You seem to have ignored the 50% float rule. SpaceX is proposing to go public with about 5% of the float, but S&P requires 50%.

Do we think that the market will absorb the release of 45% of the shares? I'm dubious.

tristanj15• 2 months ago

What 50% float rule? S&P only requires 10% minimum float for index inclusion.

And while SpaceX is IPOing with 4% float, after the 6 months lockup many more shares will release and float will increase to 40-50%.

So after 12 months, SpaceX meets the S&P inclusion requirements.

Lplololopo9• 2 months ago

It only shows that Musk can't make xAI profitable and he needs to push numbers higher for the IPO which he needs for <i actually do not know> his ego? debt correction? Having enough money for Starship development?

toddmorey• 2 months ago

I don’t know. Give me a 94x multiple and I can make any financial deal look brilliant. I think a better word is just opportunistic.

7e• 2 months ago

The market should consider this a huge negative: SpaceX is renting out their compute because they have failed to make use of it themselves. This calls into question whether they have any talent in xAI at all.

saltyoldman• 2 months ago

Sounds like the system works like all other hacked systems on this planet. We need to fix our broken systems.

LeoPanthera• 2 months ago

Google spends 10 billion and makes 50 billion, $40 billion profit.

And gets a datacenter.

adgjlsfhk15• 2 months ago

that's the best part they might not, and don't really care. they've already made $30b when is the dc never shows up

tedd4u2• 2 months ago

In parallel to renting AI compute from SpaceX, Google ("Alphabet") is also doing an $80 billion public stock offering to raise funds for building more AI compute.

https://www.cnbc.com/2026/06/01/alphabet-to-raise-80-billion...

gmd632• 2 months ago

I wouldn't call it brilliant. It's like cancer cells celebrating how fast they're growing.

testing223212• 2 months ago

Isn’t that the entire point of a capitalist economy?

What is the alternative?

Gareth3213• 2 months ago

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.

This isn’t how valuations work. The PE ratio isn’t fixed. It doesn’t scale with revenue. It’s based on projected future growth. This kind of deal is expected, meaning this deal likely won’t move SpaceX’s market cap much. Certainly not by anywhere close to $1T. That’s +60% of the entire pre-IPO market cap.

Google is doing this because they need more compute and TSMC is booked out for years.

overgard• 2 months ago

"Clever" is not a word you want to hear in front of accounting..

JumpCrisscross16• 2 months ago

because of this deal, SpaceX is now profitable

This is a huge claim for which we have no evidence.

$920mm/month at 30% datacenter margins yields $3bn in gross profit. Less in net income. That doesn’t cover SpaceX’s losses.

bluegatty2• 2 months ago

I'm sorry this is a misplaced framing.

==> Those facilities are being leased because Grok is failing.

Space X does not want to lease away it's competitive advantage to a primary competitor.

It'd be like Tesla leasing factory space to Toyota and Ford.

'GPUs, Energy and Data Centres' are a hugely critical resource in the AI race and SpaceX is now leasing it away.

Will it make money? Sure.

But this is 'Strategic Fumbling'.

The cash flow happens to help them leading up to IPO - that's a side show.

poisonfountain• 2 months ago

It is probably both.

d0gsg0w00f• 2 months ago

I think they're sacrificing short term terrestrial GPU advantage to fund their space GPU mega-advantage. It's a risky bet, but if it pays off then SpaceX will be one of the most powerful companies the earth has ever seen.

manlymuppet4• 2 months ago

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 it's just an empty deal and financial engineering? Genuine, good faith question: what are they getting out of this?

simonebrunozzi2• 2 months ago

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.

tristanj15• 2 months ago

The contract has an exit clause, either side can terminate the agreement with 90 days notice. I do not expect this contract to last the full 3-year term.

And this deal protects Google's investment. Google owns close to $100 billion of SpaceX stock. This deal increases SpaceX's revenue by 30%, and pushes SpaceX into profitability. With this deal, SpaceX is eligible for S&P inclusion. Assuming $6-7 trillion in S&P 500 tracked funds, and a 1% SpaceX weight after a year, this is $600-700 billion in demand for SpaceX stock. It means Google now has someone to unload its position off to. This play directly protects Google's investments.

nouveaux• 2 months ago

They're buying compute for 11 billion and the 50 billion in stock growth is a bonus if it happens.

s1artibartfast• 2 months ago

They also get compute, which has real value. If you are going to spend 11B on new data centers or rental, better to spend with a a company you are about to ipo.

Either way, 500% return on the spend would be amazing

arbirk• 2 months ago

And that grants S&P (plus the existing NASDAQ indices). All US pensioners are bagholders for an illegal immigrant lol

gehsty• 2 months ago

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?

tw04• 2 months ago

From don’t bee evil to: f all of your 401ks, Sundar needs to join the billionaires club!

andy_ppp• 2 months ago

Great for everyone except those who invest in index funds (directly or indirectly) and want some level of stability?

fooker• 2 months ago

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

jmbwell• 2 months ago

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.

raincom• 2 months ago

As long as they can cash out from these investments by dumping on others, they are safe.

up2isomorphism• 2 months ago

I am not sure you can called this kind of thing “financial engineering”, every market manipulator know this.

fHr• 2 months ago

what the actual fuck haha

btbuildem• 2 months ago

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

adam12• 2 months ago

It's all about the money.

ggm• 2 months ago

When as appears inevitable Google decides to stop using this capability what will it do to the SpaceX stock value?

hsnewman• 2 months ago

Because SpaceX has excess capacity.

nickpsecurity• 2 months ago

Cloud companies were made to sell others compute. Now, one is buying billions of compute from SpaceX, a rocket company. That sounds so backwards lol.

Great work by Musk and his companies to be in a position to sell billions to cloud vendors. I'd have probably missed that opportunity while trying to build great rockets or AI models.

toraway2• 2 months ago

  > while trying to build great rockets or AI models

This deal was only possible because xAI isn't building great AI models with actual customers leaving most of their compute sitting unused.

froggy• 2 months ago

So Google AI will now be running partly on xAI data centers which run primarily on natural gas burned on site next to poor neighborhoods in Tennessee and Mississippi causing massive air pollution to these families and children. Is anyone else disgusted by this? I’m imagining all the people there developing lung and other issues because of this. Greed and power on full display over doing the right thing.

I’ll be switching off the Gemini model at work (Composer’s been off since their xAI deal). This is the final straw for me to move completely off Google services.

runako10• 2 months ago

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 not. Meta trades at ~7x sales. Comcast is one of the best-run ISPs, and it pays a 5.5% dividend on a stock trading at < 1x sales.

To say SpaceX is overvalued is to even beginning to convey the magnitude of the situation. It's going to be very painful when the valuation normalizes.

theturtletalks• 2 months ago

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.

runako10• 2 months ago

Excellent question. They may not intend, today, to pay dividends. However, the same question could have been asked about the successful tech companies of the '00s. Companies don't like to start paying dividends until they are fairly certain of their future profit stream and therefore ability to continue paying (and increasing) the dividends in the future.

Apple, Oracle, Nvidia, Cisco, Alphabet, Meta, Salesforce, and Qualcomm all pay dividends now. It's not unreasonable to expect Uber and Tesla to pay in the future. However, the median time after IPO for similar companies to pay a dividend is close to 20 years. So we could expect Uber to perhaps wfstart paying sometime around 2039. Tesla...is Tesla so who knows?

missedthecue3• 2 months ago

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 dividend on a stock is not a contractual guarantee like it is on a bond. Therefore, it cannot be a basis of value.

With your logic, Berkshire Hathaway is a long-running greater-fool tulip bubble whose shares are only bidded up by finding more shmucks.

marcosdumay5• 2 months ago

US companies normally do stock buy-backs instead.

It is a way to distribute the money to the investors, that their tax system favors.

bottlepalm• 2 months ago

Not really, the company reinvests the dividends, increasing the value of the company/stock.

The big difference is you pay taxes of dividends - you don't pay taxes on the stock going up year over year. Unrealized gains compound much faster than realized ones.

bwfan1232• 2 months ago

Circular financing at its finest. And Self-dealing between the hyperscalers, openai, and anthropic.

google invests in anthropic and spacex - and shows appreciated values as earnings. Then it turns around and rents tpus to anthropic to show it as revenues. The main buyers and sellers for all of this are the hyperscalers, openai and anthropic.

It is a game of musical chairs while the party is still on.

SwellJoe• 2 months ago

They're all betting ignorant retail investors will be the final bagholders. It's a license to steal from retirement accounts.

webninja• 2 months ago

I think the measurable term for this is “Velocity of Money”.

akarii• 2 months ago

They are just trading company stocks for compute.

rootusrootus7• 2 months ago

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, no touch), but the world we live in today makes me have real doubts that the next few decades will look anything like the last few.

tony693• 2 months ago

Plenty of hedged equity funds out there. Trade some performance for peace of mind.

Waterluvian2• 2 months ago

About 10 years out as well. I’ve concluded I just invest a very balanced set of index funds and bonds and GICs across a handful of institutions, and then invest in my home because even if the housing market collapses I get to enjoy my nice home.

Other than that I’m just not over investing for retirement and instead making sure the money is spent today on family growth and experience.

I eventually just got tired of everyone with an opinion on what doing it right looks like or how to predict the market.

davedx3• 2 months ago

Eh, Tesla had a relatively normal growth company valuation for a while when they were growing strongly. The problem is the stock still hasn't compressed the multiple back down as growth stagnated... because the market swapped out "valuation based growth" for "call option on robotaxi success" at the blink of an eye.

davedx3• 2 months ago

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.

gordon_freeman• 2 months ago

In a similar situation: I basically have just 2 funds in my retirement portfolio: SnP500 index fund (75%) AND Berkshire Hathaway B shares (25%)

from my research I know that in years where SnP500 drops too much (recessionary periods), BRK-B would soften the blow as Value stocks tend to do well in such times. And usually that works for me.

runako10• 2 months ago

PE of 380 against deteriorating margins & profit. This story doesn't end well. But to your point, it's likely a cult of personality that can stay upright until Musk leaves the company.

simonebrunozzi2• 2 months ago

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

omgwtfbyobbq8• 2 months ago

PE isn't a great way to value a company in their growth phase.

Amazon's PE in 2013 was 3000+, but you'd still be up almost 20x if you purchased their stock back then.

https://www.theglobeandmail.com/investing/markets/markets-ne...

That doesn't mean Tesla or SpaceX are good buys though. Maybe they are, maybe they aren't.

holoduke• 2 months ago

Inflation is covering all the inflated valuations eventually.

mystraline• 2 months ago

We've been diversifying with physical metals.

Stocks, bonds, etc are effectively NFTs of "you own a monkey image". That monkey image can go poof on a 'market correction' aka 95% of investors lose everything.

With precious metals, you own the material. And silver, gold, platinum, palladium, rhodium and others have innate usage for a variety of industrial and jewelery uses. Their prices may change, but catalytics arent just going to bottom out.

We still have stocks, cause 401k's. But we also have a sizable metal buffer now.

bmitc4• 2 months ago

It's going to be very painful when the valuation normalizes.

Painful for everyone except the grifters who are engineering this and can get out early enough with their stolen millions and billions. Musk's companies are just a giant pyramid scheme.

krupan4• 2 months ago

I love this clip (this is the other guy that predicted the 2008 crash, played by Steve Carell in The Big Short). Cult Stock is a great way to think about it.

https://x.com/i/status/2061808563979251857

preommr• 2 months ago

My only consolation is that this is so obvious that it's not going to lead to a disaster. Things like the housing crisis happened because long-established institutions like credit ratings and mortgage lenders didnt do their jobs.

It's the swiss cheese model, hidden behind curtains.

This is like a giant sign saying you can buy $2 for a $1.

adestefan2• 2 months ago

This is exactly how the dot com crash happened. People point out this like pets.com, but that wasn’t the issue. It was the musical chairs the played with the fiber telecoms. Today it’s data centers.

djfergus• 2 months ago

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.

sroussey3• 2 months ago

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.

fc417fc8029• 2 months ago

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.

kube-system• 2 months ago

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.

overfeed• 2 months ago

That would fit quite well with the general theme of prioritizing the interests of investors over all else.

It's not a "general theme", it's right there in the name of the economic system.

Slothrop99• 2 months ago

aggressively rebrand

That had to be 20 years ago? Not that anyone likes the cable company.

As a comcast customer, their core internet service seems really solid. It comes in through some sketchy 1980s cables installed by some company who got bought by some company who got bought by Comcast. So occasionally a router in the back of a gas station blows up, the cable system wasn't exactly built to AT&T standards.

runako10• 2 months ago

Yes, my commentary was through the lens of an investor. Comcast does well for investors -> the multiples assigned to it by the market will be a good reference -> Starlink is not likely to have a terminal value anything like what boosters suggest.

narrator2• 2 months ago

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

anonymous_user9• 2 months ago

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

runako10• 2 months ago

The stated reason SpaceX and others are talking about doing the near-impossible (orbital datacenters) for astronomical sums is that they are unable to do what e.g. Digital Realty does as its core business.

Conventional wisdom is that building datacenters is easy, but maybe the CW is wrong on this? If it were easy, companies would not be talking about spending $1500+/kg to put datacenters in orbit. Note that they assume they can get the chips either way, they just need somewhere to run them and they are saying it will be easier to get them orbital than to literally do what Digital Realty does now.

ChuckMcM• 2 months ago

Yes, yes it is. (going to be painful) If the IPO gets fully subscribed. For a long time I've pointed out that after the dot com crash the 'unicorns' were mostly on private markets and when they washed out only the 'qualified' investors got hurt (and of course their employees needed to find new jobs). The retail investors were protected because the SEC made sure you couldn't lie to them without penalties.

Once the SEC got defanged, retail investors once again became the primary target.

gmerc• 2 months ago

Profit … to be seen. Compute is not a high margin business and Colossus was idle for enough of its depreciation timeline to put a question on profit. In any case none of this is a better investment than Nvdida because that’s where all the money is going

th234oi34087• 2 months ago

To say SpaceX is overvalued is to even beginning to convey the magnitude of the situation. It's going to be very painful when the valuation normalizes.

The scale of corruption in trying to use Index-Funds and Retail investors as the exit liquidity to bail out the VCs who were pumping the AI hype is unheard of.

It's become so damn brazen! I'm surprised Musk's image hasn't crumbled in front of his fan-bois.

_heimdall• 2 months ago

Not to mention all the IPO rules changes that all but guarantee SPCX will be swept into 401ks and index funds in very short order.

They seem to believe the over valuation can be hidden if the shares get picked up by the public quickly enough or that the it can be a quick exit that leaves the public holding the bag.

tcp_handshaker• 2 months ago

This is like BMW bragging about their thriving auto business while renting all their car factories to Toyota.

genghisjahn• 2 months ago

"It will have to be paid for," they said. "It isn't natural, and trouble will come of it!"

Fellowship of the Ring.

SoftTalker• 2 months ago

$920 million per month from October 2026 through June 2029 for access to “approximately 110,000 NVIDIA GPUs, CPUs, memory, and other related components.

That's about $8,400/month per "component" is that in the ballpark at all with what a month of dedicated/exclusive access to an NVIDIA GPU would go for?

ww520• 2 months ago

Plus electricity, labor, and maintenance?

Reubend• 2 months ago

Yeah I was wondering about this too. It seems like way too much per GPU considering the purchase price of a B200 was around $40k last time I checked. So if we naively ignore the price of electricity and maintanence, it would only take 5 months before renting is a worse deal than buying outright.

hijodelsol2• 2 months ago

That's roughly 11.66$ per hour per GPU, which is above the price that Google Cloud is reselling them at if you commit for 36 months: https://getdeploying.com/gpus/nvidia-b200

redox993• 2 months ago

That's for standalone servers. xAI has something that nobody else has. The single largest interconnected cluster[1]. For inference it doesn't really matter, but for training that networking is crucial.

[1] Probably, there could be undisclosed clusters owned by other companies.

owenthejumper2• 2 months ago

You guys don't understand. Banks like JPMC will make billions on this IPO. Doing everything to prop it

kshacker• 2 months ago

Maybe that was the handshake deal from twitter financing, twitter exit and so on. "I will make you whole".

I do not know, but I wonder if someone can tally the bankers from twitter buy, twitter merge into xAI and the new spaceX launch.

owenthejumper2• 2 months ago

Dimon himself is inserting himself https://www.reuters.com/legal/transactional/jpmorgans-dimon-...

talbo888• 2 months ago

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

l23k417• 2 months ago

Why did you feel the need to post this disinformation? Do you get paid to spread these lies?

raincole2• 2 months ago

If SpaceX maintains this revenue multiplier

Yeah, if a ridiculous premise is given you'll reach a ridiculous result.

tjwebbnorfolk3• 2 months ago

It's not that ridiculous considering these are the current facts on the ground.

anjel• 2 months ago

See also: "The Madness of Crowds" On Wall Street,people think they are betting on the fin performance of Companies, when in fact you are betting on the crowd's perception of a company's performance.

Quite the abstraction.

Lplololopo9• 2 months ago

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 make it unlimited by selling stories of Mars and dyson spheres (literaly), no one will ever finance or need as long as we have still desserts everywhere. In parallel his Starlink business gets competition left and right and despite this, he only has 10 Million customers AND increased prices for STarlink just last month or so.

And the payload, most payload increase is only Starlink. He has to sell us a story, that suddenly even with Starship, he can send so much payload up there to make Space-X this mega trillion company.

He can't even scale Starlink. Its expensive. The satelites work for 5 years and have limited capacity. He NEEDS Spaceship to be able to send up Starlink Server v3 and he hasn't even prooven he can get his ship back which he needs for the payload price.

Twitter/X? Yeah he tanked that one.

Optimus? When did you see the latest non faked demo? And while he works on it, we already have the market cornered here.

pqtyw8• 2 months ago

Well... AOL had rather extreme aspirations and a massively overvalued market cap during the internet boom as well.

So yes, ridiculous things like that happen and markets are very often not rational at all (short and medium term at least).

Nortel, Sun, AOL, Cisco were all very innovative and rapidly growing companies. Until reality kicked in.

beowulfey• 2 months ago

Why the hell ARE they even valued that way?

emsign• 2 months ago

I'm curious if this offer lasts until after the IPO.

mwkaufma• 2 months ago

$$ taking another circular financing lap.

zxspectrum19822• 2 months ago

How can SpaceX have so much GPU spare capacity? It doesn't make any sense.

Did Musk blindly order humongous amounts of GPUs years ago before any of us had any sense of the scale this was going to reach?

stogot2• 2 months ago

They acquired xAI

zxspectrum19822• 2 months ago

so why did xAI acquire so many GPUs but have no use for them today?

pjscott2• 2 months ago

Musk made big investments in building AI data centers starting in 2024, continuing through the present. SpaceX got those assets from xAI, spun off from X, via an acquisition. More details:

https://en.wikipedia.org/wiki/Colossus_(supercomputer)

diziet_sma• 2 months ago

That wikipedia page mentions SpaceX reached a deal to lease all of Colossus 1 to Anthropic: https://en.wikipedia.org/wiki/Colossus_(supercomputer)#cite_...

So will SpaceX lease Colossus 2 to Google? If both Colossus datacenters are rented, will xAI have any compute?

GMoromisato4• 2 months ago

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.

positr0n• 2 months ago

Even if I do accept your claims that cooling in space is not insurmountable, you still would grant that launching and cooling (and shielding??) a data center in space still cost more dollars than building a data center on earth right? What is the use case that people will spend money to rent servers in space? I think nations have a strong enough grip on the internet now that the customer use case of "evading my country's laws" won't generate that much revenue.

Is the hope that power will be cheaper because solar panels have direct and continuous exposure to the sun?

GMoromisato4• 2 months ago

There is no physical reason why it can't be cheaper. For starters, solar power is 4x better in space, so you need 1/4th the area of panels. But also, data center costs are skewed by things like permits, environmental reviews, and (increasingly) lawsuits.

Terrestrial data center costs are only going up, while space tech costs keep going down. It is plausible (but not guaranteed) that they will intersect at some point.

AtNightWeCode2• 2 months ago

2. SpaceX's orbital data centers are profitable.

This will never happen.

GMoromisato4• 2 months ago

I'm never that confident about the future, and I hope I never am.

pqtyw8• 2 months ago

Yeah sure the technical problems are solvable if you throw money at them. I'm sure we could have had a colony on Mars by this point as well if NASA/etc. continuously spent insane massive amounts of money on every year since the 70s.

So what?

Why on earth would you want an AI datacenter in space? Like what would you gain by doing that at an absurdly higher cost than you could build on them earth?

"Free" energy? lol.. just build nuclear powerplants or loads of solar, wind and batteries on earth. Its still going to be cheaper...

How is anyone going to compete with that? There are a bunch of data-center-in-space startups

A better question is why would anyone even try?

are mostly leasing their data centers from someone else

It's really not. Building your own datacentres is very expensive and more importantly takes a lot of time. They need compute now, so it makes perfect sense to rent it from failing AI companies like xAI which bought a lot of chips but don't have anything to do with them since their models are just not very good.

But if SpaceX has the cheapest data center with the most capacity, they will be able to extract profits

Well.. that would be a first one, since no similar industry works that way. Compute is a commodity so unless your literally run out of space on earth to build datacenters or Nvidia/etc. stop selling to anyone but SpaceX that can't really happen, can it?

GMoromisato4• 2 months ago

You just said that "building your own datacentres is very expensive and more importantly takes a lot of time."

I agree. If building data centers in space is cheaper and takes less time, then that's a win and a clear reason to do it.

Costs for terrestrial data centers keep going up and costs for space tech keep going down. At some point, they will intersect.

highfrequency• 2 months ago

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?

BLKNSLVR5• 2 months ago

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!

vdfs• 2 months ago

A bubble will never pop as long as stay in it's bubble form

manmal• 2 months ago

Usually there’s some environmental disturbance eventually, that makes it burst.

credit_guy3• 2 months ago

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 than the 4 cents per request before, maybe 20 or even more. And guess what? Businesses are shocked about the changes, and thinking hard what to do, but most of them will just pay 10 or 20 times or more for AI than they used to pay until now.

We will hear projections soon, in a few months, but my guess is that the big 3 (Anthropic, OpenAI, Google) will get of the order of $10 billion per month in AI inference revenues. And it will only go up from there.

layoric2• 2 months ago

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..

MichaelNolan2• 2 months ago

but most of them will just pay 10 or 20 times or more for AI than they used to pay until now.

At my work, after the GitHub price hike, we all got the option of 1. Keep using Github, but with the same total spend as before. i.e, use 1/20th as much since the dollar cap isn't changing. Or option 2, use as much self hosted DeepSeek v4 Pro, Qwen 3.6, Gemma4 as you want since it's almost free. (to be fair, we already had the GPUs)

If the Chinese keep releasing open weight models that are "close enough" to the big 3, I expect many orgs to make the same choice. I think we will see VPs and higher start saying "you better have a good reason for using Opus 4.8 or GPT 5.5 Pro, do you have metrics showing ${cheaper_model} isn't good enough?"

jmkni• 2 months ago

This is an active conversation going on at my day job right now (and I suspect many other peoples too)

Every developer (we have about 100) has Github Copilot, and interestingly some barely use it while others use it a lot (about 70% of usage comes from a handful of devs), and the dashboard shows you exactly who is using which models, and how much

I definitely don't think they will just go along with paying 10/20x more than before without seeing some sort of return on that investment

We've already had the we're spending all this money on AI, why aren't we shipping software faster conversation multiple times

My prediction is that those high users, costing the most money, will be watched carefully (one colleague even suggested half-jokingly that whoever tops the leaderboard should have to give everyone else a presentation on what they spent all those AI credits on)

The sweet spot is to have good competent developers who users AI when it actually makes sense, but aren't dependent on it

nish__• 2 months ago

What is Nvidia spending so much on Google services for?

delduca• 2 months ago

Even Google does not use GCP…

wolttam• 2 months ago

That's... $12.50/hr per GPU. WTF?

pjscott2• 2 months ago

From Google's spokesperson, quoted in the article: "This is a short-term, timely agreement to ensure we have bridge capacity to meet surging customer demand for our agent platform, Gemini Enterprise, which has been even higher than we expected."

Google wants a lot of compute sooner rather than later, and they're willing to pay a premium for speedy delivery of that compute. SpaceX has the capacity already built and ready to go. Hence the high price.

semessier• 2 months ago

the GPU builds are very high stakes games of depreciation: if the mission life is e.g. 4 years you win, if a disrupting ASIC for the transformer comes in you lose.

As of today the gamblers seem to win, demand even for A100s, H100s is high prices are even rising.

ethagnawl• 2 months ago

We're all going to end up as Elon's serfs, aren't we?

softwaredoug• 2 months ago

compute from its Colossus 1 data center near Memphis, Tennessee, that xAI — now part of SpaceX — originally built for its own artificial intelligence efforts.

Is this the same Memphis data center notorious for burning jet fuel nonstop for power?

polski-g5• 2 months ago

What would you prefer it to burn instead?

liveoneggs2• 2 months ago

probably boiling water with nuclear energy?

margalabargala• 2 months ago

I'd prefer it to absorb photons and wind kinetic energy, and store it in lithium batteries.

prism56• 2 months ago

Not surprised. I work in the gas turbine market and this AI boom has revolutionised our business and investments, oil and gas is dead. (to us)

wigster• 2 months ago

the road goes ever on and on.

what a crock

megadragon9• 2 months ago

looks like elon web services (EWS) is the master plan all along :D

politelemon• 2 months ago

Everything will run on Elon's Costly Compute servers.

arjunchint• 2 months ago

I am really wondering if Google is just subleasing Anthropic capacity. The terms are suspiciously the same as Anthropic's and Anthropic was supposed to have leased out all of Colossus 1.

Maybe with the corp token spending limits and the rise of codex, Anthropic saw steep deceleration in usuage?

le-mark• 2 months ago

That plus sota model regressions. When they’re public we’ll see the numbers at least.

dev1ycan• 2 months ago

This is such a disgusting economy

chiph• 2 months ago

Google has code written for their Tensor processors (TPU). Will it run on the NVidia GPUs that xAI has? Because I'm thinking they're "not part of their core architecture" and it will thus be money wasted.

(I thought for sure the title was backwards - it's a strange world)

sipjca• 2 months ago

inference code is effectively trivial to port at this time

everyone understands cuda well enough anyway

KnuthIsGod• 2 months ago

So now Google is supporting fascism...

hoppyhoppy2• 2 months ago

Google had already donated $1 million to Trump's second-term inauguration fund.

BobbyTables2• 2 months ago

I serious doubt Google is doing this for the spare datacenter capacity.

This is a ridiculous amount of money.

Have to believe a non-tech company could hire an entire team/company to build datacenters for this kind of money.

Make no mistake - this has to be “do evil” territory.

_HMCB_• 2 months ago

That’s a lot of moolah.

latentframe• 2 months ago

All important technologic revolution can turn into an infrastructure revolution => the railroads, electricity etc … so the technology can be a transformation while the capital cycle becomes in excess

whatever1• 2 months ago

The Ponzi scheme that Elon has set up is one for the books. Fail forward. Unbelievable skill.

mikewarot• 2 months ago

The agreement in question is quite short[1], and includes no penalties for failure to provide the required compute amount other than pro-rating things. There's nothing in this that you couldn't sign even if you had no GPUs to offer Google.

I'm not a lawyer, but it seems to me that this is like Google agreeing to buy a billion dollars of lemonade from Tim's lemonade stand, Inc, and Tim is 8 years old.

I don't see how this provides any cover to xAI/SpaceX as far as SEC rules go for getting into the top 100 stock index.

[1] https://www.sec.gov/Archives/edgar/data/1181412/000162828026...

zerop• 2 months ago

Neither Nvidia nor xAI owns those chips on paper. Valor, the shell company holds legal title.

https://x.com/BullTheoryio/status/2061029970236133554

sarjann• 2 months ago

My understanding is google owns a pretty decent stake in spacex (around 6% end of 2025). Booking revenue now will probably help Spacex's valuation.

effnorwood• 2 months ago

how many ads per month is that?

burnerRhodov3• 2 months ago

at 2.4B a month they get buyback on both C1 and C2 in one year... or, over the useful life of their datacenters (around 7-10 years before swapping to latest tech) they will make around $201B-$288B off these two deals alone.

Elon is the greatest capital allocator of all time.

FireInthepants• 1 month ago

Where is their TPU? So why GPU now?

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

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