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?
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.
from the linked article
>After this year, the agreement can be terminated by either party provided they give 90 days’ notice.
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?
They’re getting compute. There was a free for all period when xAI did one smart thing and that’s build like there’s no tomorrow. Because tomorrow is today, and today jurisdictions are racing to pause datacenter construction.
This deal can't just be financial engineering, since that wouldn't make sense. They must be getting something out of this, i.e. compute.
Google is buying compute because they need it. That explanation works a lot better to me than one where Google is doing this purely for unrealized future gains on a minority stake in SpaceX.
the ironic thing is if the parties involved were bullish on xAI winning or near term ODCs undercutting compute costs this deal wouldn't have been attractive. But as it is, Google probably only slightly overpays for boring ground-based datacenter space they actually need to hit internal goals, and it looks even better if IPO investors in a stock they hold pick up some of the the tab.
Even if your 94x multiple held perfectly (a big if), Google's "return" here is unrealized appreciation on an illiquid, minority stake. They can't spend it. And if they try to sell post-IPO, the act of selling a large block would push the price down, shrinking the very gains you're describing.
Meanwhile, the $11B/year in cash going out the door is very real and liquid and hits Google's income statement immediately. So the actual trade is: guaranteed cash expense now, in exchange for speculative paper gains later on a stake they can't easily exit. Even if you assume bad faith on Google's part here, no CFO in their right mind would see this situation as an easy 5:1 return.
The simpler explanation is the one Google gave: they need bridge compute capacity because Gemini Enterprise demand is outrunning their own datacenter buildout, and SpaceX has 110K GPUs available now.
This site is turning into conspiracy central
but if they boost the spacex stock for the right amount of time, they can get that compute for free instead of for $11B. Google's own announcement of the deal frames it as a short-term agreement while they scale up their own datacenter capacity.
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.
You keep saying this even though you don’t present any evidence that it will make SpaceX profitable. Where are your numbers?
As a comparison point, CoreWeave’s most recently reported operating margin was 16%.
Either way, 500% return on the spend would be amazing
