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?

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.

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…

Because SpaceX has excess capacity.

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.

Even Google does not use GCP…

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

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

how many ads per month is that?

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

the road goes ever on and on.

what a crock

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."

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

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

This is such a disgusting economy

$$ taking another circular financing lap.

So now Google is supporting fascism...

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

It's all about the money.

I don't care either way but I got curious.

Not an easy thing to gauge. X/Twitter stopped publishing MAUs after the acquisition.

External estimates vary, some point to growth, some to stagnation. We know that revenue suffered. LOTS of partisan and emotional opinions for either.

Google trends does paint a bleak picture for X but I am also questioning how much google itself can gauge that after LLMs exploded in popularity.

Anecdotally I did notice that references and embeds to X are way less prominent and common than before. My usual news used to be filled with them. My consumption of the platform also plummeted after not being able to read threads when not logged, its much harder for me to get drawn into it.

Still without data, I would be surprised if the changes to verification and logged out access did not massively hurt new adoption. With tiktoks prevalence amongst a new generation I would bet its a matter of time before X gets grouped to tumbler/facebook, not dead, but way past its peak and cultural relevance. If that has not already happened.

Impact in the zeitgeist. Twitter was everywhere. Regularly referenced on live news television statins. Was considered a major news source. Shows had segments dedicated to it. Everyone and every brand had a Twitter. That is not the case today. Not by a long shot.

Reddit has more monthly active users than twitter and reddit isn't really culturally relevant at all (neither is twitter either IMO).

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?

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

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.

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"

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

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?

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

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

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?

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

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.

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

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

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.

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.

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

Fellowship of the Ring.

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

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.

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

Google owns 5% of SpaceX fyi.

That’s a lot of moolah.

Where is their TPU? So why GPU now?

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.

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

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

> 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?

"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.

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

He moved as fast as he could with known financing

No, but I was thinking it might be possible that your account is specifically afflicted by some storage problem. For example, it could be homed in the wrong part of the world, compared to where your browser is hitting frontend applications. Or a million other possibilities. When logged out those wouldn't be factors.

It has been leaked the have a huge open bill with AWS....

They have unused capacity in their Tennessee datacenter. We don't know everything but the backend of Grok probably runs in the TN datacenter. Grok is not as popular as hoped, so the TN datacenter has unused capacity.

There are other companies besides Google and Anthropic that are considering renting capacity in xaispacex's datacenters.

Global capacity for GPU hosting is tight at the moment. That TN DC is the only one not totally 110 percent already allocated for five years in the world .

Holy shit:

> This article was amended on 16 January 2026 because a megawatt is a unit of power, not energy as an earlier version suggested.

> If building data centers in space is cheaper

So you don’t have an argument because everything you are saying is based on some absurdly speculative nonsensical premise?

> costs for space tech keep going down

How do you measure the cost of something which does not and has not ever existed. These data centers are a hypothetical concept nothing else.

Building excess capacity from the start and selling it for a billion a month to constrained competitors. I only wish I could be so dumb.

Huh? That's just basic history of xAI. At no point was xAI being sold as a Coreweave-like middleman leasing out data centers to hyperscalars. That's a boring, regular business. The pitch was that xAI would develop groundbreaking AI models for Grok which would attract actual users and generate revenue.

That evidently did not work out, otherwise these deals wouldn't be happening. OpenAI and Anthropic aren't leasing out their datacenters, if they did it would be obvious something was grossly wrong with their projected growth.

would you invest in vending machines

> their core internet service seems really solid

If you ignore data caps the core service itself does seem to be much better these days than it was 10 let alone 25 years ago. But then again my sample set consists exclusively of locations where they have one or two FttH offerings as competition so it's not as though they could have remained in such markets without upgrading.

Somewhat tangentially I find it surprising how fast MoCA is when you consider the cables it runs on top of.

This chips will still be able to process tokens in a few years and you'll still be buying them

"Stocks, bonds, etc" are nearly the entirely of the real economy. 95% of the value of gold is "you own a monkey image". The value of gold for catalytics is tiny. If gold wasn't used as a reserve currency for the world economy, it would be extremely cheap for industrial and jewelery uses.

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

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

It's really just a debt transfer to make one company look good while the other is saddled with debt. Should be illegal

I.e., fraud.

It’s a supply and demand thing. Google would definitely be buying from nvidia and setting up themselves if nvidia had the capacity.

SpaceX/xAi/musk are currently in a good market for “happening to own 100k cards we have nothing to do with”, and are exercising that control as hard as they can.

They might do that in 16 years when the next reactor comes online.

While you’re not wrong at all in the concept of your post, I wouldn’t call AOL a particularly innovative company. They basically innovated once and then went straight into lazy rent-seeking for the rest of their existence.

I don’t know if I would put Cisco or Nortel in that category, either. They were like gold rush pickaxe companies. The pickaxes themselves weren’t particularly innovative in their case.

A lot of the innovative companies from the dot com era are still around.

For now. SpaceX will be acquiring Tesla as soon as Elon gets around to it.

Sorry, I was unclear. With that I did not talk about this particular deal. This particular deal seems sane. XAI built more compute that they can use themselves since Grok is not very successful so to not just have the hardware standing there they rent it out to competitors. Makes total sense.

It is other things Musk has gone with Twitter and SpaceX which are shady.

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

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.

> 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.

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.

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

> Starlink generated over 10B last year

An entire one-hundredth of their proposed valuation!

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.

Smoking crack and investment fraud.

With a light sprinkling of space.

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

A datacenter that also provides connectivity/Internet

Elon Musk.

What is a "hedged equity fund"? Can you provide an example?

The main problem is that nobody is building new power except China. In space solar panels are 5x more efficient and run 24/7 and you don't need the kind of permits you need to build on earth. That, and you've got NGOs funded by China connected billionaires that relentlessly sue to stop data centers and new power in the United States, and you don't have to deal with that B.S in space because it's federally regulated and there isn't any environmental impact to sue over.

> 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

Not at all surprising that the US in 2026 has degenerated to the point of turning the equity market itself into a bucket shop.

Strangely, these limitations don't seem to have been present on the European platforms. (Although I've never bought shares in an IPO myself, so I'm not certain about this.)

e.g. with https://www.nordnet.dk/kampagner/ipo/spacex for Denmark.

The minimum is 1 share (~$135), the FAQ on "when can I sell" says "Once trading begins in SpaceX, you can sell your shares at the current market price, which can be both higher and lower than the IPO price."

I would think that for training Google has optimized their entire setup for TPUs so I can’t see how this would be used for anything but inference

A company can have poor fundamentals compared to its stock price, and also have an enormous P/E multiple if it has committed investors. We've seen this with multiple meme stocks and Tesla. I have no doubt SpaceX will fly high for a while and people will make a lot of money, but I don't think the company is going to make $320bn/year in AI services (with 74% profit) by 2030 as the S-1 suggests. At some point the market price will coincide with real earnings.

Trillionaire

There are lots of US companies that pay dividends. Another commentor lists some tech companies that do, and there are lots of other types of businesses that do. A quick internet search will give you a list.

You are correct that stock buybacks are another way that companies reward their shareholders.

What about swapping the SP500 for VT (total world equities)?

Comcast is not a rapidly growing company, though.

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

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

That's what the IPO salesman and pamphlet said anyway.

Can you provide a good example of something that is currently hosted in space and distributed via satellite?

But they did need to shore up that p/e ratio. Got to assuage our inner Ben Graham.

EC2 may have higher margins than that.

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

It's an opportunity to pay off early investors who are unhappy with him cratering Twitter, xAI, etc.

True. The amount of free float increasing dramatically will probably also depress the share price.

It's not that complicated, and the 'datacentres in space' is a myth.

They have rapidly depreciating assets in GPUs and they can't use them.

Because Grok is failing.

They are licensing out their unused capacity.

XAi is not strongly related to Space X - they were folded into one thing because XAi was losing money and failing (the Social Media part is worse).

XAi isn't really some kind of strategic advantage for Space X and even though revenues from the data centres may be positive - it's a 'stop gap' - it's probabaly not a 'net positive' thing to do.

The best thing for Space X would have been to never merge wht XAI.

The second best thing for Space X would have been to close XAi/Twitter lines of business a long time ago.

The 'Wrench in the Logic' is that by putting these things together, EM is able to dupe so many people into so many ridiculous concepts.

Data centres in space, 1M people on Mars, all sorts of crazy things.

It's a bit like Putin's and Steve Bannon's Media Strategy: 'Flood the Zone' with nonsense, and people speculate as to all kinds of things.

The Space X IPO is a 'retail push' meaning he needs to get all the Dentists in America and their Private Bankers to want to 'Hold the Bag' and then keep holding it for a long time.

Space X - at it's core - is a decent company, wrapped in layers and layers of hyperbolic nonsense.

All it takes is a bit of rational thinking to wade through what is plausible, and what is not, and we can see how overvalued this is.

Note: this is different than the other 2 AI IPOs which have some sketchy economics - but the premise is not far fetched, 'that people will want AI in large quantities'.

As of now, most people haven't figured out how to use AI productively. It takes time. Maybe 1 in 20 developers have come up with a good workflow to get AI-assisted coding done without a lot of slop. The remaining 19 either got burned a few times, or still use AI in a 2023-style: ask AI for a code snippet in a chatbox, then copy-paste it to the code base.

But one or two years from now, many more people will have learned how to be productive with AI. Knowledge will percolate.

And for all those people, the companies will ask themselves: is this guy's 20% increase in productivity worth $200 per month? If that increase in productivity is actually worth $2000 per month, then the answer will be an unequivocal yes. Not only that, but the need to switch to lower cost AI providers, so the $200 is lowered to $20 will just not be worth the extra headache of having to go through all the approvals to onboard a new vendor.

That is the Copilot's moat.

So… data centres in space it is.

> So maybe long term this isn't a great business, but _right now_

Exactly! "Maybe not a long term great business" is exactly the opposite of what you want to buy in an IPO.

This is a "private equity can squeeze out a ton of cash from this asset portfolio" situation, and very much not a "in a few years this will be a trillion dollar business competing with the biggest companies in the world" bet.

There is no evidence they can deliver anything competitive based on their past performance, though.

Even if their model is competitive or even surpasses e.g. Deepseek (which is far from given) how would that justify a huge valuation?

> 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

Still doesn't make it circular financing. If SpaceX issued Google a dividend right after Google paid SpaceX, that would be circular.

Does the thing where it wanted to move every conversation onto the topic of "white genocide in South Africa" not count as a filter on the output?

3 years is quite a short horizon when it comes to semiconductor fabs. Also this article is a dupe, when it was previously discussed it surfaced that after some time either party can cancel with only 90 days notice.

No its not.

"Both SpaceX and Google have the option to terminate the agreement with 90 days’ notice after December 31, 2026"

They know allocation they have from TSMC for TPUs production they know allocation they have from Nvidia they see demand curve.

I'm with you the 5B loss for 18B overall revenue shouldn't grant a valuation anywhere near 1.7 trillion.

was just answering the question.

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

It’s exceptionally fast at it too. I love using it for looking up things where recency matters.

> to be fair, we already had the GPUs

Most businesses don't have the GPUs, or the knowledge necessary to do self-hosted inference. So, they'd have to rely on OpenRouter, or Ollama, or some other inference provider, but there are lots of problems with that. With Microsoft, people could get comfortable with the compliance side of the problem. They already use Outlook, and Office365. Copilot is just one more point where things can go wrong, but it's less scary than your emails being captured and held for ransom, and you already think Microsoft can take care of that. But with Ollama or OpenRouter, you have no idea what is happening with your data, and you also are not sure if they are serving the real models, or quantized versions.

To be sure, there will be plenty of people finding alternate solutions, but 80-90% of the businesses will just pay the higher price to Microsoft.

> It's circular since Google owns part of SpaceX

Not what circular financing means. Buying from a company you own stock in can be a conflict of interest, but it's only circular if you invest in the company and then they use those proceeds to buy your stuff. A past investor buying services from a company they are affiliated with is pretty par for the course in business.

Their exposure is more than just their ownership of SpaceX.

If the SpaceX IPO bombs (or even merely underperforms), the expectations for the Anthropic/OpenAI IPOs collapse, and with that, everything else AI.

AI companies can't afford to let any AI company go down.

Demis Hassabis - head of Google DeepMind.

Yeah, crazy for a company with nothing but the largest civilian satellite network and what amounts to a monopoly on space flight.

80% of the space launch business is putting starlink satellites into orbit, so it's all internal funny money. They could very well be letting the space launch business take losses to make the satellite internet business look better (only profitable part of the whole thing).

Wasn't starship supposed to be funded by the NASA contract?

Orbital datacenters sound like a dangerous bet. I couldn't think of a worse place for a lot of delecate electronics.

No, the point is to implement laws that foster holistic growth, not gamesmanship that ends in terminal illness.

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

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

> What is the alternative?

If the point is to be cancer, then the alternative is to kill it.

Things are getting so out of hand, this former-libertarian is getting to the point were he'd support any market regulation that makes libertarians cry.

Look at cloud spend - how many of your employers have measured the ROI of using cloud vs. self-hosting? At a certain point these things just become the cost of doing business I suppose.

There would be some benefits, assuming you could do it for a reasonable cost. For one, you have effectively uninterruptible power using solar panels in space. And it's free, too, once you have the hardware in place.

And you don't have to deal with any of the site selection stuff you have for terrestrial data centers. No NIMBYs. No politicians trying to extort bribes. No water problems.

In space there are no earthquakes, tornadoes, or floods.

I'm still skeptical. It's hard to believe it costs so much to build a data center on the ground that putting it into orbit is an economically viable alternative.

Grokipedia would be way better launched into space.

Wow…sounds like some kindergarten stuff

Why 4-5 companies instead of one then? I thought the goal of SpaceX was to get to Mars, why does xAI need to have that same goal? Or he didn't think xAI was suitable for that goal, then changed his mind so merged the companies?

I'm just as dumbfounded about Tesla's stock value vs what it does in the market and will trash talk Elon all day long but SpaceX is a different beast. I know of whole industries that are just waiting for the ability to get more stuff into space for less. The company will succeed despite him once Starship is established.

Ok, you might be right about all of that. None of that changes the actual fact on the ground that the IPO valuation is currently being set at nearly 100x sales, and for god-knows-what-reason, enough people appear to be willing to actually pay it in order to justify that valuation.

Go argue with the entire market. I'm just the messenger.

The bet is that demand for AI tokens will continue to grow exponentially. And that SpaceX will be able to deploy and rent out GPUs to serve those tokens faster than anyone else.

The wrinkle is that they are planning to deploy those GPUs in space. That’s what people are most skeptical about, I think!

Google and friends continue to see increased demand for their wares. The bet is probably that SpaceX is one of the best-placed companies to deliver incremental compute. They've shown they can build data centers fast.

SpaceX cannot report Google’s investment as revenue on its balance sheet. Full stop. Equity investments are reported as shareholder equity. If you don’t believe me, read FASB ASC 605-606, ask your friendly neighborhood CPA—or, perhaps so you’ll earn a valuable lesson about confidently spreading bullshit about subjects in which you are clearly uneducated (or, at best, superficially educated), try it yourself in a public company and go to jail.

You don’t know what you’re talking about and are way out of your lane. Stop now. In fact, you should retract your parent comment and apologize to the community for leading them astray.

Did you even try to ask even ChatGPT or Claude about this first?

I rreally dislike how big corp figured out that the can sell stuff to each other without actually moving some good. Looking at you, Nvidia... I have a feeling that the ordinary people will again pay for that.

I am comparing SpaceX’s datacenter-and-GPU leasing business to aircraft leasing.

It’s possible, and common, for one large company to have multiple business lines, each worthy of a very different P/E multiplier. In principle you end up with a weighted average of some sort.

edit: Matt Levine has some great articles about this phenomenon and how some companies try to juice it.

I would short xAI but the market can remain irrational longer than I can remain solvent. Plus all the foolishness to prop it up with other businesses just seems like bad accounting.

I don't think you can short it before the IPO happens. Well, unless you've got a few millions and go to a bank and have them make a product for you specifically. But for normal people, for now, not happening.

He can’t do with rockets what he says SpaceX has to do to meet its goals, and he isn’t raising enough money to get the job done either.

It’s another misdirection.

'generational company'? Are you on drugs or so?

All of Musks business stuff highly depends on first mover advantage.

If people now selling it as a 'generational company' than it becomes even more stupid.

He didn't invent an unkown solution he is hiding to transform something into gold, he only put a lot of money into rockets.

And the rockets right now don't even have enough payload to have unlimited potential. If Space-X knows how to build a rocket very efficient, 10 years later other companies can do that too.

>I would bet that there is a nice clause in that contract that gives exit options to Google

from the linked article

>After this year, the agreement can be terminated by either party provided they give 90 days’ notice.

That's what I'm saying though. They must be getting something out of this deal, otherwise why would they be going through with it?

The explanation that this is just financial engineering (which to me, means neither Google nor SpaceX is getting anything out of this other than looking better on paper) doesn't make sense to me. How does this financial engineering benefit Google?

Even if they have an exit option, why is Google (a private, separate, self-interested firm) giving a single dollar to SpaceX if the deal isn't mutually beneficial?

The charging networks will be largely irrelevant in the long run. People go to gas stations because there is no supply of petrol to homes/offices. Electricity is available at every building, where people live and work. Cars are parked for 22+ hours a day, and eventually you can charge anywhere you park. No need to going to a special place just to charge cars.

That value is only growing as new supercharger builds are now compatible with almost all EVs in the US. Supercharge.info is a good 3rd party website for tracking superchargers, and is interesting to play around with filters to look at how the supercharger buildout has progressed.

That's what many said when they were ramping the S/X, the 3/Y, and energy storage.

https://www.wired.com/2009/10/audi-etron/

That doesn't mean they can't make a mess of things all by themselves. But comparing their infra investments/growth strategy to snake oil when they've gone from nothing to $100 billion/year in 15+ years might be short sighted.

So you think Google is going to spend $11B in hopes it will boost the value of the SpaceX stock, while pretending to public investors it's a multi-year thing, and then after 1yr sell off their SpaceX stock after the value rises while also ending the contract early?

This site is turning into conspiracy central

Musk is a walking and talking financial fraudster and criminal and somehow keeps getting away with it.

that's not circular though

Grok is just DOA. No need to beat a dead horse. Even Musk got that thus the reason why he is renting the stuff it planned for Grok.

lol, not sure if this is a joke, but Teslas do not have anything close to the necessary hardware to run grok locally.

Teslas spend a tiny percentage of their life at highway speeds, and a major selling point of the platform is that their compute would be used to pilot the vehicle.

If they could train using Teslas they wouldn't have needed Dojo.

Who’s going to be paying for the energy? People have been floating using the cars as compute for years and it just doesn’t make any financial sense for anyone.

I don't think so, considering a substantial proportion of their comments on this site seems to be fanboying for SpaceX in particular and anything AI in general.

Things to think about: the russian satellites currently already in orbit and being tested to jam global GPS signals: https://youtu.be/tz23G_UXCGA?si=Jkg7hYnwER39-FXf (Veritasium). In all these sci-fi space datacentre scenarios, has anybody considered that astrolaw is in no way currently equipped to deal with datacenters in space? Neither are international relations.

Personally I can go without owing money to Saudi royals.

Yeah, there are too many people happy to sacrifice principles for a buck...

Wouldn’t it be easier and cheaper simply to focus building your data centers in other poorer countries where your permits won’t be blocked? Why would the next most logical choice be “let’s put it in orbit”?

    > Tesla shorters always lose.

This is categorically untrue. Look at a chart of their stock from 2020 forward. It has massive spikes up and down. Plenty of shorters made good money in those falls using put options.

> They shut down production of S & X to make more capability for cars that they want to focus on and which sell way more, AND Cybercab.

Which Tesla models sell more than the S and X?

> Tesla shorters always lose

Isn't that true more often than not no matter what company you try to short? It's a tough game to play.

Robotaxi failed so now it's Optimus bots.

The truly terrifying thing is that someone could short the Musk companies, and with one bullet can cause them to drop 50-90% right away (thanks to meme-ness). And they are valued so high that such a person could make billions overnight, maybe 10s of billions. Terrifying to be Must or anyone that shares a car or plane with him.

It is in fact very hard, and LEO is not "solar orbit". You want your datacenters in sunlight 100% of the time, to not need heavy batteries, which is possible, but cooling is in fact very hard

I don't think so. It provides some nice optionality for Google and I am guessing this opportunity only exists because Grok is not popular and xAI does not really have any other use atm.

It all was many years ago after the great depression, and similar. Then people kept voting in republicans who's life mission is to gut the SEC and all related regulation keeping them from doing things like this.

Maybe there wasn't enough damage, either economical, financial or societal?

> Many people think their claimed TAM is total fiction, and attempting an actual realistic TAM relies far more heavily on starlink.

Then either the TAM for Starlink is ~20x bigger than reported by SpaceX (I doubt they would downplay themselves in such a way) or the whole SpaceX TAM is ~5x smaller (much more realistic, if not more than that)

I have no love or hate for Elon Musk. I wish him luck with his space endeavours.

What's desperate is announcing a temporary (allegedly) doubling of revenues days before an IPO that has been criticised for being overpriced at 93 times sales.

These data centers were supposed to serve xAI. Now suddenly they get rented out to others. Why the sudden change of plans?

It's either an emergency accounting gimmick or the effective shutdown or repurposing of xAI.

I am a Tesla driver and I never knew it had a limit, which tells you how much I use it.

Gemini, Claude, and ChatGPT all offer web search integrations in order to get recent data.

Grok 3 and Grok 4 have a 2024 knowledge cutoff. https://docs.x.ai/developers/models

> Google is buying compute because they need it

The fact that Google owns a stake in SpaceX doesn't hurt. But the multiple math is specious, and profitability math plain wrong.

> which actually lead to a #1 spot on openrouter usage

that was only because it was free

More to the point, allegations of circular financing are about following cash. When NVIDIA invests in a company so they can buy NVIDIA chips, that raises a unique set of questions distinct from other types of conflict of interest. Affiliated parties doing business, as is the case between Google and SpaceX, has its own host of conflict-of-interest concerns. But they're distinct from those that arise in circular transactions.

A minimum of 2030? That seems excessively pessimistic.

I think your point still stands, but a correction that 1% of $6-7T is $60-70B, not $600-700B.

Not doing much to beat the accusations of circular dealing are they?

> This deal increases SpaceX's revenue by 30%, and pushes SpaceX into profitability. With this deal, SpaceX is eligible for S&P inclusion.

You keep saying this even though you don’t present any evidence that it will make SpaceX profitable. Where are your numbers?

Anthropic is buying a lott of inference from SpaceX. Where else could they have turned?

According to their IPO S-1 draft they are 93% an AI company and 4% a space company. Its the remaining 3% of the company that is profitable, the Starlink stuff.

Given the amount of compute rented I doubt there’s anything meaningful left for the people there to do any AI.

The profit center, to the extent any division makes money, is Starlink, yes, but what we have always known as SpaceX is just a tiny side project in the combined company.

Maybe they'll become an AI company again after they've abused their privileged access as hardware providers to reverse-engineer Google and Anthropic's weights and operations.

I’m pretty sure he’s just trying to become the world’s first trillionaire at this point, these deals are obviously gimmicks to boost the SpaceX share price and his less-than-critical-thinking fanbase will happily oblige.

Heres the way I understand it as a child could understand.

You are google. I am your friend who wants to sell lemonade.

You have invested in my stand and own a piece. You propose a deal, You'll buy $11 of lemonade from me every week.

Does my stand look like it sells way more lemonade, than it would in reality? And since you own a piece, your own piece has appreciated. You ran the numbers and that spending of yours helps appreciate it considerably more (feel free to plugin the actual spaces-google numbers here and change the analogy).

Are the people who invest in my business after you, on its new valuation, aware that you are the one buying most my lemonade? And are you going to keep buying or will stop buying soon (probably as soon as you can unload your investment on strangers). So the fraud and lie as you said, is the behavior is not as real as it looks.

Am I thinking this through wrong, what do you think?

Edit: my definition of fraud is simpler and different from yours. a "lie" need not be there. fraud is any intentional misrepresentation (i.e. misrepresenting income to the public).

The whole of the space part of SpaceX is like 10% of the claimed business according to their S-1. And most of that is Starlink, not launches for third parties.

If you are asking for government and research needs rather than commercial then ISRO (Indian space research organization) beats SpaceX

That being said, ISRO focuses more on research and scientific world as compared to the commercial world but they were the least expensive option out there before SpaceX and the only differential which causes the pricing is actually re-usability aspect of SpaceX rockets/launchers and ISRO is actively working towards that too.

And another thing as brainwad said here but Space part of SpaceX is just 10% of the claimed business according to their S-1

SpaceX's launch business is great, but does not justify the majority of the valuation.

We will see China comming up soon i would argue.

But otherwise yeah SpaceX one that one for now. Only issue with this: We don't have enough payload for SpaceX to expand that much more.

> SpaceX could rise to be a major winner that makes people a lot of money

Based on "sane"/traditional metrics that and much more is already priced in into the IPO valuation.

e.g. Google had a many times lower P/S ratio at their IPO and was actually profitable (and software companies usually have higher valuations than capital intensive ones like SpaceX anyway). SpaceX is already valued at more than Google was 10 years after its IPO while barely making a tiny fraction of its revenue.

Alternatively you may want to be a passive investor using the current rules for index inclusion, rather than having them altered to favor this loss-making trashcan on fire.

Or you could mitigate the next dot-com style crash (which wiped out nearly 80% of the NASDAQ composite).

Back then, it was "day trading" that was one of the warning signs that a bubble was ensuing. There are certainly shades of the day-trading phenomenon in the "r/wallstreetbets" gambling, and wildly overvalued meme stocks like Tesla. And this mad rush to relax the guardrails for what appears to be wildly overvalued IPOs.

Bubbles, and their inevitable collapse, are generally not as big of a problem for younger passive investors, but they can be for older ones. (Hence why I've got a "bond tent", value tilt, and other diversification. I'm at the stage where "underperforming the market" is less of a concern than "mitigation". :) )

OK, but SpaceX is not printing money out of thin air. And neither does the stock market. Somebody will be left holding the bag eventually.

Why do you think "Semi is DoA"? The current offering for heavy haul electric trucks is tiny (very few competitors), but the addressable market is huge. I think there is a good chance we will be surprised by its success. Even if you dislike the wild hype around Elon Musk (I don't care for it), it is hard to disagree that he has built an incredible EV company. The products they produce are excellent (minus the Cybertruck, too early to say for Cybercab), both from a hardware and software perspective. I think they can do the same for heavy haul electric trucks. The economics of diesel vs electric for heavy haul trucks is a no-brainer. Diesel is much more expensive per kilometer compared to electricity. And maintenance is much cheaper for electric vehicles.

Before finishing this reply, I checked for recent news about the Tesla Semi. I learned that they have a new separate factory (1.7m sq feet!) that has started production and has capacity to produce 50,000 Semis annually. It is next door to the original Gigafactory.

Technically, yes. Obviously stretches the normal definition of a server, but it is a computer controlled system "serving" a mostly digital signal.

https://www.baesystems.com/en-us/article/gps-iii-satellite-l...

I think their point is less that it really means something and more that enough customers think it means something to provide economic opportunity

Something which is inconvenient to trumptys

First step would be to prevent the regulators from profiting to begin with.

That's in the IPO documents. Starlink had $11.4 billion in revenue and $4.4 billion in operating profit in 2025. Falcon9 had ~$4 billion in revenue, so they didn't cheat by subsidizing starlink with Falcon9.

To be overvalued by an order of magnitude, it'd have to have a fair valuation of under $180 B.

At ~5 billion per year in profit, Starlink alone would justify a 100 B valuation at a P/E ratio of 20 (i.e. assuming a non-growth company). If you account for the fact that this is very much a growth company, the valuation of the space part alone is well above these $180B.

And they do happen to have the launch and AI businesses on top of it, which (as usual for growth companies) may not be obscenely profitable but aren't worthless.

If 90% of the value is from the AI business, it's grossly undervalued.

For SpaceX it’s critical to maintain a steady cadence. If they don’t, they lose institutional knowledge. If the cadence drops below a point, their effectiveness at reusing rockets will also drop, defects will creep in, and they’ll have higher fleet churn.

Yes. Amount is actually irrelevant, since if they underprice it SpaceX loses launch revenue, and if they overprice it Starlink looks less profitable.

The more important takeaways are that SpaceX's near-monopoly launch business is profitable but not nearly as big as Starlink, and Starlink is a good business but not one to justify a trillion dollar valuation

What you're saying about Semi and cybercab is what everyone said about S/X and 3/Y.

https://www.wired.com/2009/10/audi-etron/

They might might fail, but I wouldn't bet on it. Also cybercab isn't out yet, so any discussion is premature at best.

Cybertruck has been disappointing, but I think a big part of that is cost. They started in house dry 4680 cell/pack production a couple months ago, so we'll see how that goes over the next few years.

Even with China subsidizing cell production and being dominant in the world market, Tesla is still at 150gwh/year compared to 200gwh/year from BYD.

The big question is how the dry cell 4680 packs will perform and how well they can scale production if performance is adequate.

FSD is always a year away, but that's generally OK as long as it keeps improving and there isn't a comparable product in their cost bracket. If someone leapfrogs them, they're done. If not, they might be able to roll everything up all the way through Optimus.

the math doesn't work. a starlink satellite has ~10kw power consumption. A single ai optimized server rack (GB300) is 140kw. Starlink works because you get a massive benefit from putting networking in space for rural users. no one has made a convincing case as to why putting a data center in space is a benefit that can come anywhere near the drawbacks (inability to service, launch cost, cooling etc)

But the OP very clearly did not write anything of that sort. Their claim was:

> This deal increases SpaceX's revenue by $11 billion per year.

And that is pretty obviously correct. This deal is Google is buying a service from SpaceX for $920M/month, not investing in SpaceX. And that is revenue for SpaceX. I don't know why you're so insistent it isn't.

They are doing the same marketing garbage as Space-X and to no surprise, were founded by ex Space-X people.

You need companies actually wanting to send stuff up there.

Musk and K2 Space are desperate for customers and the fact, that they talk about datacenter in space, which doesn't make sense (for at least the next 30-50? years), should tell you everything you need to know.

It is very easy to just lay down energy cables and fiber somewere and build a datacenter. This datacenter can get upgraded hardware without any further big investments, is running for years without issues, can be maintenanced and the origianl infrastructure gets cheaper every single year.

Someone said Space-X is a generational company. Like wtf? Every normal datacenter on earth will always be cheaper on the ground than in space. The only advantage you have in space is solar energy efficency and these prices are still dropping on earth and you don't need to send these panels up in space. And batteries will have a fast RoT.

In space, you have to first even build and solve fundamental issues like "how do i cool reliable a lot of energy", "how do i send big payloads reliable to space", "How can i build datacenter hardware/rebuild datacenter hardware to be space stable".

And why are they doing this because they have to not because its more cost efficient.

Leo orbit is a lot better than what we had before with 30km but your mobile phone can't suddenly do realtime and low latency internet just because starlink sells it like this. The current starlink mobile phone service is still slow and they need to even prove they can do it. For this they need starship because the starlink v3 satelites, they need, are to heavy for falcon 9.

And it doesn't make it better for Space-X if they already have other companies who also want to do this as it lowers their margin and they need to recup their R&D.

Space-X Starlink satelites are the main driver of payload increase in the last few years. Starlink itself!

If you bribe five members of the Supreme Court, the Constitution can be whatever you want it to be.

China's equities aren't really tradable. If they were it would be nice.

China is not considered a developed market nor "free". Also, in most developed markets, when the economy is strong, the stock market will boom. China has many, many years when the stock market is weak, but the economy is strong. It is hard to be excited about the Chinese stock market.

If you look at the IPO filings you’ll see that Spacex as we know it is just a small part of the expected revenue generator. It is supposedly Grok and AI, hence Google competitor.

They’re both AI companies

> Maybe you are right, maybe not..

About what precisely?

Asteroid mining alone could be huge.

No, your definition does not align with mine at all. All elements I listed must be present for it to constitute as fraud. You cherrypicked the first part of the definition and then ignored the rest. The legal requirement for fraud is far stricter than the one you came up with.

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

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

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

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

Why do you give Elon such influence. He doesn’t have to do anything. SpaceX employs engineers. I think that’s one thing that’s keeping the discussion from being rational whenever it is brought up online. Too many knee jerk reactions to the personal feelings people have with Elon, quick to share sound bites they heard that reinforce their position. I don’t like the guy and even I see this as a huge game changer in the scope of space and technology. It’s no wonder to me that Google would invest in this along with other companies and soon, lots of retail investors.

Your points about whether or not some aspects are sound or safe are valid and worth bringing up but it doesn’t change the nature of how these technologies are and will be developed.

> changing from land permitting (where you can pick the location to be wherever you want) to launch permitting (where you have to coordinate with the federal government for airspace and water closures)

One of these is orders of magnitudes longer and more complicated than the other. Land permitting always involves multiple layers of government. And most of them are causing months- to yearslong delays. (Power hook-up is another source of delay.) Launch permits are predictably issued by, essentially, a single regulator.

> a rocket explosion can easily lead to a multi-month mandatory safety review that blocks all new launches

Which is equivalent to a regular permiting delay.

The tradeoff is between the cost to launch radiator mass and the delays local and state governments cause in permiting. The first is mediated through launch costs. The latter through interest rates. And right now, the former is going down and the latter going up.

The problem described isn't companies buying goods and services. It's buying from an entity they partially own and then profiting as that entity becomes more valuable because of the purchase.

Yes, if it's done with an intent to defraud the general population, which could be the case here. Effects and intent really matter when deciding actions.

it's not about that. it's about how it gets reported in their financials.

My preferred fix is "corporations can't buy stock, their own or others".

I think SpaceX should be valued on rockets n space n stuff, not how many magical calculator dollars they bring in.

Surely Google can "make compute go" for $1b/month. Nice way to avoid holding the bag, maybe?

the problem:

The Nasdaq 100 and FTSE Russell made a rule change that allows SpaceX to enter index without mormal time for price discovery. Most index funds have rebalance day just 5 days after IPO. S&P also made rule change for S&P Total Market Index and Dow Jones US Total Stock Market Index, but left SP500 intact.

Nothing wrong with SpaceX or Anthropic getting into indexes with fair rules, this rule change is pure creed+corruption.

Are there really 10-100x undervalued companies listed on indexes that haven’t been noticed?

I don't understand this logic. Does whole market mean scamming companies too?

Laying the blame for the transparent financial manipulation we are observing at the feet of regular people (who are putting their savings into their pension funds, a system that we incentivize because of its pro social outcomes) and saying they should just opt out because they should know better, is at best callous, most people should not have to think about that issue at all.

Also, there’s a long history of companies that people yell about being overvalued being the drivers of index returns, because one of the major drivers is growth rate, whereas retail investors tend to look mostly at current state.

The question on my mind is-is this IPO designed to rip off recreational passive investors and those of us that invest in retirement accounts?

> Sidenote: 3 is actually high.

Do you mean low? AAPL has a ps of 10.

Number like this might appear when a company is expected to create a revolutionary thing that upends multiple markets. I would consider a number much larger than 3 in SpaceX’s case, but 94 feels, indeed, excessive.

It’s almost like the future we were promised in the 1960’s would immediately materialise the moment launch costs drop. Starship will be revolutionary if it pans out the way we expect (as the shuttle would have been, had it kept the low cost promise), but that’s not enough to warrant that 94 number.

    > the innovative China

Can you give some example listed stocks that you consider (1) innovative and (2) not a member of CSI 300?

I’m not. But this particular example is so beyond the pale for everyone, that it simply isn’t going to happen.

Oh yeah, these are definitely circular financial games but you have to be wary about putting in insane regulations that will break growth.

Everything that has actually happened so far with the Semi is that it didn't work as advertised and was deeply unpopular. As ever, the future that Tesla paints is extremely rosy, and suggests we should disregard what has happened so far. There is nothing whatsoever to indicate that Semi will actually work to the extent advertised and actually be desired by anyone - especially in the current anti-green climate in the USA, with no subsidies for electrification of the kind Pepsi used to buy the tiny pilot program.

Note that they never announced that the original run of the Semi would be just tiny. When they unveiled it in 2022, they explicitly said that this was the production version, as opposed to the 2017 concept. They even had a few more (still small 100-200 count) contracts where they kept delaying because they couldn't deliver enough - again suggesting that they were having problems, not intentionally running a pilot program.

     > Everything that has actually happened so far with the Semi is that it didn't work as advertised and was deeply unpopular.

    > no subsidies for electrification

> As long as there are active investors in the market conducting price discovery. Which there always will be,

Passive funds dominate ow, don't they?

> but the Semi seems fairly popular where it's suitable.

What are you basing this on? Again, they have sold 200 trucks in 4 years. There are some hundreds of thousands of trucks being used in the USA alone. Tesla themselves are claiming they are going to produce (and presumably try to sell) 50k trucks per year. So, by any possible measure so far, Semi has basically 0 adoption. Maybe this is strictly based on production issues and there is huge un serviced demand - I admit this is a possibility, theoretically. But I don't see any reason to actually believe it, and certainly neither the current sales, nor the link you provided, in any way show that this demand will materialize. We'll see soon enough, I guess.

Can you share any credible reporting substantiating this theory?

> retirement accounts are heavily in on automatic indexing

Majority are not. A minority are, mostly towards the S&P. Most assets remain actively managed, including in retirement assets (which covers 401(k)s, IRAs, pensions, et cetera).

My understanding is that the s&p 500 were the only ones unwilling to change their rules.

FTSE 100 / Russell: changes happened. 5 days from IPO to inclusion.

NASDAQ 100: Changes happened: a) Allow inclusion in 15 days post-IPO rather than 3 months. b) Allow inclusion of companies with very small float. c) allow valuation (index proportion) to be 3x float rather than enterprise value.

S&P: no changes.

They became effective last month.

Well, the value of the stock for people who essentially do not have any meaningful control of the business must essentially be tied to the expectation of some liquidity event down the line -- future cash flows. So this could come in the form of dividends, sale of the stock, bankruptcy proceedings, or a purchase of the business.

If I knew for certain (big if) that a business would never have a liquidity event and I couldn't transfer my ownership then it's dead capital for all intents and purposes and you could consider its value essentially $0, right?

Among the oldest value models, the Dividend Discount Model, says that the value of a company's stock is based on the present value of its future dividend payments.

Even if a company doesn't currently pay dividends, it will eventually do so or be purchased by a company that does. That's the theory at least.

This makes no sense. Why doesn’t the “underlying value” of tulips change?

“Underlying value” is a meaningless word btw

> The value of the stock is your share in the underlying business.

Which for most investors with Class C/D shares is... the square root of zero.

They assert no control over the business, the only way to benefit from the stock is to find another shmuck to buy it at a higher price.

That’s the story, but it’s bullshit. The underlying intrinsic value of a stock can only be materialized if the company liquidates and you receive a share of the sell off of its assets. How many publicly traded companies abruptly decide they’re tired of the business, stop in their tracks, and liquidate their assets? This only really happens if the company is acquired or if it goes bankrupt. Acquisition is the closest the story comes to truth, but it’s also just forced sale to a greater shmuck. If a company goes bankrupt, a tiny fraction of the current stock price would be realized into cash for common investors because of all the privileged investors and lenders ahead of them, not to mention that the actual value of capital assets etc probably doesn’t cover all the losses (the company’s going bankrupt after all). The value of the underlying capital assets are essentially never returned to the common investors, and the idea that you own a portion of them is in practical terms a lie.

Bonds are no longer recommended. Current research indicates 100% equities to be the best composition leading up to, and past, retirement.

To point, the economic uncertainties around geopolitics, AI, and war, plus irresponsible debt spending by governments and the prospect of QE (and higher inflation), is pushing long term rates steadily higher. There’s a reasonable chance that 30y treasuries are nearing 6% by the end of next year. Remember that rates and bond prices are inversely related. Anyone who holds bonds in this market will likely lose money. Holding to maturity won’t help much either because if inflation continues to rise, as is a major concern, most or all of that 5% yield gets eaten.

I'm technically not really in pure index funds, I just wanted to avoid trying to complicate my thoughts. Nearly all of my investments are in VFORX or Schwab's equivalent, and have been for a long time. So they are really composed of total market funds, bonds, etc, and Vanguard changes the ratio a bit as 2036 approaches. So while not really an index fund, from my perspective as a lay investor I treat it like that and consider myself an honorary Boglehead. I just put money in and forget about it.

You absolutely need to get inflation adjusted bonds. Otherwise you’ll get wiped out. I am in the krugman, stiglitz monetary camp; so not prone to constant fear of hyperinflation but what the government is doing makes inflation certain and the only way out a fairly painful recession either of will be hard on equity and bonds.

The market of a good leader is a lack of chaos. We are seeing the effects of a chaotic mind untethered from an accurate view of reality. Buckle up

One of the lessons from 2008 is that even the contrary position gets obliterated when the whole damn system implodes.

So, the optimists all swim in the cash while your contrary position fails to keep pace with the bull market; and then the bear market hits and you all get obliterated equally.

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

    > As others have pointed out, bonds are barely (or not) keeping up with inflation.

    > "stable" dividend stocks are almost never really stable when the financial world crashes.