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Making Sense of SpaceX's First Earnings Report · In the Loop AI

0:00
Ejaaz: Last week on the show, we said August 4th was the day that SpaceX had to prove themselves.
0:05
Ejaaz: The first earnings report, every analyst on Wall Street basically was bearish.
0:10
Ejaaz: They said that Elon Musk could not pull this off, that this thing is a money vacuum.
0:15
Ejaaz: Turns out the opposite was the case. SpaceX absolutely smashed it.
0:19
Ejaaz: The revenue is up to $7.81 billion, which is 92% year on year,
0:25
Ejaaz: which is crazy for the size that they're at.
0:27
Ejaaz: And Starlink numbers doubled to 12 million subscribers. That being said,
0:31
Ejaaz: the stock is still down this morning. People are worried about the major unlocks
0:36
Ejaaz: that are happening tomorrow where $100 billion worth of SpaceX stocks goes live.
0:40
Ejaaz: But Josh and I are here to tell you why that may not be the case and why the market could be wrong.
0:45
Josh: Yeah, well, I understand why people are bearish. Like he was on the earnings
0:48
Josh: call yesterday, which I sat in and listened to.
0:50
Josh: And he's claiming he's like, all right, we're going to build robots with mass
0:54
Josh: drivers on the moon and we're going to 1000XR economy on Earth because of it.
0:59
Josh: And it sounds ridiculous. And I was looking through the numbers and as I was
1:02
Josh: reading this, I was like slowly starting to inform myself on what large companies look like.
1:07
Josh: And Ijez, I want to start with a question to you, actually. do you know what
1:10
Josh: company had the most annual revenue ever? Like what company is making the most
1:14
Josh: money every year? This was really surprising to me.
1:16
Ejaaz: Like currently? Like right now? Yeah.
1:19
Josh: Like total revenue per year. Like who's making the most?
1:21
Ejaaz: I would have to say it is either like an NVIDIA or an Amazon.
1:26
Josh: It's not even a tech company. It's Walmart. Walmart topped out at $680 billion
1:34
Josh: of revenue, which seems outrageous.
1:36
Josh: And I mean, it gets into the pricing thing. Walmart's not the biggest company
1:38
Josh: in the world. Why is that? Well, because their profit margins are low,
1:41
Josh: their multiples are lower.
1:42
Josh: But SpaceX and Elon went on this conference call and he said,
1:45
Josh: hey, we actually ran the numbers. And instead of 2031, by the year 2030,
1:50
Josh: they expect to have a trillion dollars in revenue.
1:52
Josh: That is 40% or 32% more than the largest company on earth today.
1:57
Josh: I think we kind of have to unpack what that looks like because I mean,
2:00
Josh: that is a tremendous amount of value given the fact that they actually just
2:03
Josh: reported a net loss of half a billion dollars,
2:06
Josh: which is an improvement, but still a net loss you could kind of break down the
2:09
Josh: company's earnings report into these three pillars first it is connectivity
2:12
Josh: which is like starlink and all their satellite situations then they have ai
2:17
Josh: which was up 250 year over year and then they had space which was up 30 year over year and
2:23
Josh: i mean the important thing that you noted you guys is that 32
2:26
Josh: growth year over year is huge sorry 92 growth is huge because for companies
2:30
Josh: with 30 billion dollars of annualized
2:32
Josh: revenue, typical growth is like 5-10%. So clearly they're doing something right.
2:36
Ejaaz: I was keeping an eye on his social media yesterday. And one of the things that
2:40
Ejaaz: he said is we are on track for $100 billion ARR by the end of this year, 2026.
2:48
Ejaaz: Now, the only other company that I've heard that projection being made for is
2:52
Ejaaz: Anthropic. Now, when I look at SpaceX and look at Anthropic,
2:55
Ejaaz: I'm saying, okay, they may be competing in the same sort of field,
2:58
Ejaaz: but I don't think SpaceX is quite caught up on the AI side, but that's what most people miss.
3:03
Ejaaz: SpaceX isn't just an AI company.
3:05
Ejaaz: They are a computation company. They have the largest arsenal,
3:08
Ejaaz: largest GPU footprint of NVIDIA GPUs, might I add. And he signed a major partnership
3:13
Ejaaz: with Jensen, which we'll get to in a second.
3:14
Ejaaz: But he's the only person that's launching these things into orbital space.
3:19
Ejaaz: You know, he has the largest data center cluster on Earth, and he's also doing
3:22
Ejaaz: the Starlink connectivity thing. So all of these are different revenue drivers.
3:26
Ejaaz: And what I like about this report is he's proved a lot of the bears wrong simply
3:32
Ejaaz: by the numbers. Let's actually walk through some of these numbers,
3:34
Ejaaz: right? So revenue, the estimate was $6.93 billion.
3:38
Ejaaz: He smashed it by earning almost a billion dollars more than that, right?
3:42
Ejaaz: And then when you look at earnings per share, people were like,
3:44
Ejaaz: okay, they're going to be at a net loss of 26 cents per share.
3:48
Ejaaz: Nope, came in at 0.09. Is it profitable yet? No, but it is still much better than people expected.
3:54
Ejaaz: Then the net income, as you mentioned earlier, people were expecting a $2 billion loss.
3:59
Ejaaz: He shaved that down by 3x to half a billion dollars. Now, again,
4:03
Ejaaz: Is this the best earnings report that they could have come up with?
4:06
Ejaaz: Probably not. But these things take time for.
4:09
Ejaaz: A CapEx-heavy company such as SpaceX, I'm really impressed with what they've been able to pull off.
4:15
Ejaaz: And I think it just kind of shows that Elon has pretty crazy statements.
4:20
Ejaaz: I remember when he pitched the Starlink robot GPUs in SpaceVision about,
4:25
Ejaaz: what was this, like 12 months ago for the GPUs in space.
4:29
Ejaaz: And everyone thought he was absolutely insane. But every step he takes,
4:32
Ejaaz: every earnings report he takes, we're starting to see a different picture start
4:35
Ejaaz: to form. And I'm not saying he's there yet.
4:37
Ejaaz: I just want to be very clear. Like, I don't think we're anywhere near there.
4:40
Ejaaz: But this is a step in the right direction. And I think that,
4:43
Ejaaz: you know, after listening to the call yesterday and after seeing a lot of the
4:46
Ejaaz: reporting, I think he might be there.
4:48
Ejaaz: But of course, something that people are worried about is the unlock that is
4:52
Ejaaz: happening tomorrow. And I don't know if you have any thoughts on this,
4:54
Ejaaz: Josh, but like $100 billion is flooding the market.
4:57
Josh: Yeah, well, I mean, there's going to need to be a lot of shares that are moving
5:00
Josh: because SpaceX is also among the most shorted companies in the marketplace right now.
5:04
Josh: So there's a lot of short positions on it. There's a lot of people that are bearish.
5:08
Josh: There is a lot of unlocks happening. Whether or not those unlocks become bullish or bearish is TBD.
5:13
Josh: But my expectation is like, I don't really care. Like as an investor over a
5:16
Josh: long period of time, like, okay, maybe it sells off for the next couple of days.
5:19
Josh: Maybe it sells off for the next week, maybe the next month.
5:21
Josh: But I mean, the numbers are pretty amazing. And you could see why people are
5:24
Josh: getting scared. You mentioned the CapEx.
5:26
Josh: CapEx was 39% higher than what people thought. It came in at just under $18.5
5:30
Josh: billion, which NASA's annual budget is $25 billion.
5:34
Josh: So they spent almost the entirety of NASA's budget in a single quarter.
5:37
Josh: That also means that they spend $2.35 for every dollar that they made in revenue.
5:42
Josh: And you have to ask the question, where is that going? Why are they spending
5:44
Josh: so much? Because this sounds like lunacy.
5:47
Josh: Imagine a restaurant, you're investing in a restaurant, and they come and they spend $23,000 a night.
5:53
Josh: Even though they're only making $10,000 a night, you say, what on earth is going on here?
5:56
Josh: This makes no sense. But then they tell you, wait a second, we're,
5:59
Josh: we're building out new restaurants.
6:00
Josh: We're building a higher profit margin menu items. And that's kind of what SpaceX
6:04
Josh: is doing on the data center front. So one of the smaller things that I think
6:08
Josh: a lot of people overlooked is the fact that they already have a backlog of about
6:11
Josh: $50 billion of revenue. That's already signed.
6:14
Josh: Like no one even has to pick up a phone and they're collecting $50 billion just
6:17
Josh: because of their ability to build these data centers.
6:20
Josh: And this is where we kind of talk about data centers for a second,
6:22
Josh: which is their very much an unfair advantage.
6:25
Josh: On the earnings call, I was listening to their CFO, Brett Johnson, I think his name is.
6:28
Josh: He said that all CapEx isn't the same. Sun CapEx is much more lucrative than
6:33
Josh: others. In the case of SpaceX, it's about as lucrative as we've heard.
6:36
Josh: A lot of companies, let's say you invest in an apartment building and you build
6:39
Josh: this huge piece of real estate. It takes about 15 to 20 years to pay itself back.
6:43
Josh: SpaceX's data centers paid themselves back in a single calendar year.
6:47
Josh: So in terms of return not invested capital it's like this unbelievable opportunity
6:51
Josh: where it feels like they they have this unfair advantage being that they're
6:55
Josh: the only ones that could build these data centers quickly and efficiently and
6:58
Josh: then go off and sell these huge unbelievably large contracts to companies
7:02
Josh: that can't do the same and my favorite quote from the earnings call my favorite
7:06
Josh: one by far is what elon was asked about terrestrial data centers this is after
7:10
Josh: he concluded about the space data centers which we'll get up to in a minute
7:14
Josh: But the terrestrial data centers he's like this is like the New York Yankees
7:17
Josh: playing in a Little League.
7:18
Josh: It feels like they're just night and day difference in terms of their ability
7:21
Josh: to execute on these things. And their return on the invested capital
7:25
Josh: Huge you can't buy a blackwell gpu
7:28
Josh: period so that's why people are paying premiums in fact if you are currently
7:32
Josh: signed to a blackwell contract you are trying to extend the length that as much
7:36
Josh: as you can because if it renews it's going to renew at double the cost because
7:39
Josh: the cost of this compute is so expensive
7:41
Josh: the only people that are able to build it at scale as quick as they do is spacex
7:45
Josh: and i mean return on invested capital on an investment this large being 12 months
7:49
Josh: you can very quickly see why their revenue models are guiding towards something closer to a trillion
7:54
Josh: than where we currently are over the next four years or so. It's unbelievable.
7:58
Ejaaz: Just to focus on the GPU point for a second, right?
8:01
Ejaaz: I think a lot of people are worried. The doomers for the AI bubble say that
8:06
Ejaaz: the bubble is primarily formed in GPU CapEx specifically. So all these trillions
8:11
Ejaaz: of dollars that is being committed and spent on NVIDIA GPUs, AMD GPUs, whatever that,
8:16
Ejaaz: is where the bubble is inflating because these machines will eventually depreciate.
8:21
Ejaaz: They won't actually be in demand once the cost of tokens go down,
8:24
Ejaaz: et cetera, et cetera, et cetera.
8:26
Ejaaz: What we've seen from every single quarterly earnings report from all of the
8:30
Ejaaz: major hyperscalers, which are the ones that are investing the most,
8:33
Ejaaz: including or aside to SpaceX.
8:35
Ejaaz: So if you look at Amazon, Google, they're all reporting record revenue numbers.
8:40
Ejaaz: In fact, all their cloud service provider platforms like Azure,
8:44
Ejaaz: like Google Cloud, like AWS,
8:47
Ejaaz: that not only is their revenue increasing by like, I think it's like 40 to 45%
8:52
Ejaaz: compounded every single quarter, by the way. That's every three months.
8:57
Ejaaz: I don't think people understand how absolutely insane that is.
9:00
Ejaaz: Not only is it compounding their revenue specifically, but their margins are expanding even more.
9:06
Ejaaz: So they're making more money on the money that they're earning,
9:09
Ejaaz: which is just like an insanely good business. So Elon saw this and was like,
9:14
Ejaaz: well, I have more GPUs than any of you, and I'm building these data centers faster than any of you.
9:19
Ejaaz: It would make sense for us to become like a NeoCloud service.
9:22
Ejaaz: And that's why he's selling upwards of $50 billion of AI compute to the likes
9:27
Ejaaz: of Anthropi, Google, and whoever that might be going forward.
9:30
Ejaaz: So he's seen that it's a hugely profitable business.
9:33
Ejaaz: And what I love about one of the major announcements that he made yesterday
9:37
Ejaaz: is he came out and said, wow.
9:39
Ejaaz: We are going to be exclusive to Jensen. We're going to be exclusive to NVIDIA.
9:43
Ejaaz: And verbatim, he quotes, going forward, we've decided to build exclusively on
9:48
Ejaaz: NVIDIA because we think that the Vera Rubin architecture is the best architecture.
9:53
Ejaaz: We think it's the best AI computer. And so we're going to be exclusive to NVIDIA.
9:57
Ejaaz: Now, the craziest part about this is what he committed to buying.
10:01
Ejaaz: He is basically going to double his existing or SpaceX's existing GPU fleet by the end of next year.
10:09
Ejaaz: I cannot emphasize enough how crazy of an attempt that's going to be.
10:13
Ejaaz: That is going to be in NVIDIA's pocket. Let's say he pulls this off,
10:16
Ejaaz: right? Let's say he gets to the 10 gigawatts cumulative worth of GPUs by the end of next year.
10:22
Ejaaz: That is $200 billion from SpaceX alone in NVIDIA's pocket by the end of next
10:28
Ejaaz: year. Now, let's be realistic. Let's say he's at two, two and a half gigawatts,
10:32
Ejaaz: he'll get to three by the end of this year.
10:34
Ejaaz: Let's say he gets to like six gigawatts by the end of next year.
10:38
Ejaaz: That is an extra $100 billion in NVIDIA's pocket.
10:41
Ejaaz: He is going to be his number one customer, and he's taking a massive commitment.
10:46
Ejaaz: With Jensen. And this is interesting because a few days earlier,
10:49
Ejaaz: Anthropic signed this major deal with AMD. They're signing major deals with
10:52
Ejaaz: other cloud service providers.
10:53
Ejaaz: Elon has basically said, Jensen, if you can guarantee me the allocation,
10:57
Ejaaz: we will take the compute. And that is my commitment to you going forwards,
11:01
Ejaaz: even when we launch them into space, right? So I'm just massively bullish on
11:05
Ejaaz: the cloud business, on the compute business that he's built.
11:07
Ejaaz: I think even if everything falls to the wayside,
11:10
Ejaaz: Elon still has a very profitable business, and people are discounting that massively right now.
11:15
Josh: This deal is pretty interesting to me, too. It's because we're seeing a lot
11:17
Josh: of these accelerator chips. We're seeing, like, the training chips and the TPU chips from Google.
11:23
Josh: And everyone's kind of focused, even OpenAI is building their own vertically integrated chipset.
11:26
Josh: And it's interesting to see SpaceX going the other direction.
11:29
Josh: They're saying, well, we are going to build our own chips to some extent,
11:31
Josh: but we're also going to work with NVIDIA to use their new architecture.
11:34
Josh: And we've talked a lot about how this new Blackwell era of models is unbelievable
11:40
Josh: the vera rubin era of models is going to probably be like remarkable and spacex
11:45
Josh: will be using that exclusively which is
11:48
Josh: very bullish because then i assume
11:50
Josh: it works both ways right it's like nvidia gets this amazing showcase to share
11:54
Josh: with the world like hey look what our gpus can do look how fast they can be deployed
11:58
Josh: And the SpaceX team gets a much more tighter feedback loop with the team when
12:01
Josh: it comes to development of the software architecture, the hardware architecture.
12:05
Josh: And I assume that's going to turn into like a pretty nice partnership from both
12:08
Josh: of these companies. I mean, both founders love each other.
12:10
Josh: Both are at the top of their game. It's very exciting to see this happen.
12:14
Josh: And the tangent of planning, as you were talking about how many gigawatts they
12:16
Josh: were planning to deploy.
12:17
Josh: On the conference call, Elon initially said 10 by the end of 2027.
12:21
Josh: And then when people pressed him by the end of the decade, around 2030,
12:25
Josh: he is guiding towards roughly 20 gigawatts of power with
12:29
Josh: a floor of 15 gigawatts so he's like all right well even if everything goes wrong we can at least
12:33
Josh: get to 15 gigawatts for reference we've talked about this a lot but like a singular
12:38
Josh: gigawatt of power is equivalent to roughly 800,000 homes it's like cities worth
12:44
Josh: of power and they're planning to do 15 of these in the next
12:47
Josh: four years like that's that's really fast the other thing is i mean jensen has
12:52
Josh: his own kind of rule of thumb when it comes to deploying gigawatts of energy.
12:55
Josh: He says you can guide for around $40 to $50 billion of annual revenue per gigawatt.
13:01
Josh: So if SpaceX does get 15 gigawatts of sold out capacity by the end of the decade,
13:05
Josh: that alone is worth $600 to $750 billion of revenue.
13:09
Josh: And that doesn't include the other pillars of this company, which are space and connectivity.
13:15
Josh: So there's this like unbelievable bull case, even if you disregard all of the
13:19
Josh: other pillars of the business.
13:20
Josh: But in addition to this, there are these pillars like ai data centers in space which again
13:25
Josh: They are being built with jensen huang and nvidia and the idea i found this
13:29
Josh: really interesting for their ai1 satellites is
13:31
Josh: they're basically going to build the same thing on earth as they are going to
13:33
Josh: be in space the only difference is they're going to put some solar panels on
13:36
Josh: this bad boy and send it off into space so this vertical integration of the
13:40
Josh: hardware stack as it relates to terrestrial as it relates to space it's just
13:44
Josh: remarkable and then if they actually figure out
13:45
Josh: how to get payload into space at scale oh my god like you start to put the numbers
13:49
Josh: together, you're like, wait a second.
13:51
Josh: They actually could do this thing. And like, what is the stock gonna be trading at if they get
13:55
Josh: terrestrial data centers 15 gigawatts online in four years and also they start
13:59
Josh: putting mass into space at scale like this is gonna be a pretty huge opportunity
14:04
Ejaaz: The biggest critique uh that i hear from a lot of you listeners and that watch this show is
14:09
Ejaaz: that this vision this plan is just too insane to pull off and honestly like
14:14
Ejaaz: i agree with you but you also have to look at the evidence of things that can
14:18
Ejaaz: actually make the company money that will help fuel
14:21
Ejaaz: elon and spacex getting to some of the more crazier visions, right?
14:25
Ejaaz: And one of the main ones is this compute revenue business that he's kind of
14:29
Ejaaz: showcasing and saying, hey, this thing makes money and we're going to be the
14:32
Ejaaz: biggest bettors on this, right?
14:33
Ejaaz: We're going to be able to pull this off. And if he's able to secure that capacity
14:36
Ejaaz: with the likes of Jensen and NVIDIA, and Jensen loves Elon Musk so much.
14:41
Ejaaz: He will be able to pull this off.
14:42
Ejaaz: Now, just to kind of translate kind of like what this compute means for Elon,
14:47
Ejaaz: it's not just a way to kind of like earn money by selling compute to competitors.
14:51
Ejaaz: He's also very much using this to train some of the best AI models in the world.
14:56
Ejaaz: And of course, like you might listen to that and like laugh.
14:58
Ejaaz: But if you kind of like span out the timeline over the next kind of six to 12 months,
15:02
Ejaaz: the only thing that is consistent across every single model,
15:06
Ejaaz: different model architecture, whatever, like, you know, different weights that
15:09
Ejaaz: you use, it is compute, you need more compute to pre train, you need so much
15:14
Ejaaz: more compute to post train.
15:15
Ejaaz: And then you need compute to serve this to people at like perfect speeds and
15:19
Ejaaz: quality of service, you just need more compute. And in order to do that,
15:23
Ejaaz: there's two things you need to look at.
15:25
Ejaaz: You need enough capital to buy the GPUs, but you also need enough capital to
15:30
Ejaaz: buy the best GPUs. Tuakash had an amazing blog post. I don't know if you read
15:34
Ejaaz: it, Josh. He basically said the better the GPUs get,
15:38
Ejaaz: the better AI models these GPUs can unlock, which means that NVIDIA will basically
15:45
Ejaaz: sell these GPUs to the highest bidder. Who are the highest bidders going to be?
15:48
Ejaaz: I like this example. There's two companies, okay? Company A wants to use 100,000
15:54
Ejaaz: GPUs to cut down a bunch of, let's say, administrative workload at their company by 30%.
16:02
Ejaaz: That is a really meaningful impact, right? And they'll save a ton of money and
16:05
Ejaaz: they'll be able to generate millions of dollars. Great.
16:07
Ejaaz: There's a problem. Company B wants those same GPUs to train and cure cancer, right?
16:15
Ejaaz: Over a month. And they know that if they can do a one training run with their
16:18
Ejaaz: data, they'll be able to cure cancer.
16:20
Ejaaz: Who's going to bid more? It's going to be company B.
16:23
Ejaaz: So these GPUs are like very, very scarce. And at the end of the day,
16:27
Ejaaz: the people that have the most capital will buy those GPUs and train the best
16:32
Ejaaz: models. They'll train the best features, product services, whatever that might be.
16:35
Ejaaz: And Elon is at the front of all of this. It's not even Anthropic or OpenAI.
16:39
Ejaaz: He has secured the most allocation. He has the largest arsenal of GPUs right now.
16:43
Ejaaz: So it goes to say that he could potentially create the best AI model,
16:46
Ejaaz: Grok 4.6, Grok 4.7, and Grok 5 is going to be coming out by the end of this year.
16:51
Ejaaz: And he said it's going to be trained on all of SpaceX's data,
16:54
Ejaaz: which would technically make it like the best engineering AI model.
16:58
Ejaaz: So there's a lot of these things that are kind of like in the oven,
17:01
Ejaaz: they're cooking, and we don't quite see them right yet, but it's good to be
17:04
Ejaaz: just generally aware of i don't know i'm just very optimistic about like where
17:07
Ejaaz: this could be in six to twelve months.
17:10
Josh: Yeah there's a lot of really high quality shots on gold that they're taking
17:12
Josh: where even if one completely and catastrophically fails there's still many others that are doing well
17:16
Josh: and it's funny hearing a space company talk about terrestrial data centers they're
17:21
Josh: talking about like they're actively trying to send these things into space that
17:24
Josh: are actually trying to blow themselves apart and it's just like
17:26
Josh: how easy is it that you could just drop these things on earth and it's easy
17:29
Josh: and the atmosphere is easy to handle and and it just seems like going back to
17:33
Josh: the baseball analogy it's like when you
17:35
Josh: go up to bat with like a weighted bat and then you use like a normal bat and
17:39
Josh: a normal bat is the data centers that are terrestrial and those will probably
17:42
Josh: be used for training when we think about training
17:44
Josh: where latency matters those are probably for training the satellite layer where
17:47
Josh: there is like downlink latency happening that's probably more for inference
17:51
Josh: where latency matters a little bit less but we're going to start to see this
17:54
Josh: star mind constellation launch as soon as
17:58
Josh: Next year with starlink version 3 being launched as soon as the next starship
18:04
Josh: so the plan for the next starship launch is to follow up what they did with
18:07
Josh: the previous launch which was get these starlink v3 satellites into orbit
18:11
Josh: um now they're actually going to deploy them put them in orbit turn them on
18:14
Josh: make them work and that takes us to the starlink part of the engine which is
18:17
Josh: pretty unbelievable as well the growth curve of this service is the about as
18:22
Josh: pure of an exponential curve as you can get
18:24
Josh: they doubled their subscribers year over year they are now at 12 million they
18:27
Josh: just added 1.7 of those 12 million this quarter alone so it is just a vertical
18:32
Josh: hockey stick and i think this is one of the more underrated parts of the earnings report
18:37
Josh: Gwen shotwell she had a lot or a little bit to say on this as it relates to the
18:43
Josh: ability to deploy a network similar to a verizon or at&t i mean currently there's
18:48
Josh: on earth there's about 5.5 billion users of the internet um so
18:52
Josh: they are talking about being the pipeline for a large majority of that
18:56
Josh: and totally removing dead zones and making it direct to sell and the starlink
19:00
Josh: mobile fly i think is really interesting i remember last year we recorded an
19:03
Josh: episode where they bought a fixed amount of spectrum to start deploying once they have
19:08
Josh: their plan seems to be that they are going to continue to buy these dedicated
19:12
Josh: pieces of spectrum until they own enough bandwidth to truly compete
19:16
Josh: and then they have these ground base stations which are able to kind of handle
19:20
Josh: a lot of the bandwidth and work in higher density areas
19:23
Josh: and one shot well all she said on the call is that they have a foundational
19:27
Josh: competitive advantage and won't really go into the like
19:32
Josh: secrets and strategies that they're going to go with but what i expect is that this time next year
19:36
Josh: on our iphones we will have like pretty high
19:39
Josh: bandwidth internet connectivity and for that to happen that quickly seems like
19:44
Josh: a very bullish thing to me and it's just like who wouldn't sign up for a service
19:48
Josh: that has good internet anywhere in the world with no dead zones i just went
19:51
Josh: to national parks the last two weeks. I had no service at all.
19:54
Josh: The only thing connected me was Starlink terminals here in
19:57
Josh: there. But direct to sell would be such an awesome thing. And the business is growing so quickly.
20:01
Ejaaz: For context here, I couldn't reach Josh for like six to 12 hours at a time.
20:06
Ejaaz: It was absolutely insane.
20:07
Josh: Like he was in the dark surrounded by sequoias and redwoods.
20:11
Ejaaz: I thought he'd, you know, suffered some kind of fatal injury or something like
20:14
Ejaaz: that. I was, what was that movie? The 100 hours or whatever.
20:17
Josh: Where you get lost out there.
20:19
Ejaaz: I was like, damn, is Josh okay? Listen, on the, Starling side of things,
20:24
Ejaaz: I think the thesis, put very simply, is,
20:27
Ejaaz: in a world where you have these AI models, these AI agents running 24-7 on GPUs,
20:34
Ejaaz: getting work done, you need reliability.
20:37
Ejaaz: And reliability sits in the modern day world on the internet.
20:41
Ejaaz: Now, you can't have lines going down, you can't have connectivity issues,
20:44
Ejaaz: you can't have T-Mobile messing up some of their lines.
20:47
Ejaaz: What are some of the most consistent ways of beaming internet down?
20:50
Ejaaz: Well, you can do it via satellites, right? And I would love to have consistency
20:54
Ejaaz: with my provider as well.
20:55
Ejaaz: Like, to be honest, like if I could have an affordable Starlink connection right
20:58
Ejaaz: now on my phone, mobile package, I would move to that because then I could just
21:02
Ejaaz: use it on the plane or whatever that might be.
21:03
Ejaaz: So I don't think that this is just a temporary trend. I think this is something
21:08
Ejaaz: similar to AI where everyone's just going to want consistent,
21:11
Ejaaz: strong, fast access to the internet. And Starlink is a very obvious win.
21:16
Ejaaz: And it goes back to my earlier point, which is,
21:18
Ejaaz: Elon has his hands in a lot of different things and they're actually working.
21:24
Ejaaz: They're working well individually, but they're working well together as well.
21:27
Ejaaz: And we're going to see that in future quarterly earnings reports.
21:30
Josh: Right, EJ, as you mentioned agents and speaking of agents, we have to talk about
21:34
Josh: a sponsor of the show Ledger because if you are building with AI agents and
21:38
Josh: you're worried about security, which a lot of people should be,
21:40
Josh: I mean, we've had a lot of AI models recently that have broken out of their
21:43
Josh: sandboxes. It's a little scary.
21:45
Josh: An agent with untracked access is very scary. So Ledger has this three-step
21:49
Josh: process to solve this in which an agent proposes, a human approves,
21:53
Josh: and then a Ledger signer enforces.
21:55
Josh: This technology works with cloud code, codex, cursor, all of the things that we are used to using.
22:00
Josh: And it's also open source to be fully audited. Basically, they use this thing
22:03
Josh: called a Ledger agent stack, which has a series of four open source tools.
22:07
Josh: There's a wallet, there's an enterprise solution, there's a multi-sig so that
22:10
Josh: you don't get compromised for any of your transactions.
22:13
Josh: And you could basically just talk to it normally. You could say,
22:15
Josh: rebalance my wallet and it'll do all the math and do the transactions on your
22:19
Josh: side while letting you approve and be in the loop the entire time.
22:22
Josh: So I just want to shout out Ledger for a responsible way of building with AI
22:26
Josh: agents. Thank you so much. You can find the link to the description down below.
22:30
Ejaaz: So before we wrap up this episode, Josh, I...
22:34
Ejaaz: We need to talk about the bear case of all of this going on.
22:37
Ejaaz: Now, we've mentioned this on a previous episode.
22:39
Ejaaz: There is a very constricted supply of SpaceX stock that is available for people to currently trade.
22:46
Ejaaz: And the number one bit of critique is it's going to flood the gates tomorrow.
22:50
Ejaaz: Actually, as you're listening to this episode, it should be today on the 6th,
22:54
Ejaaz: $100 billion worth of SpaceX shares goes live.
22:58
Ejaaz: And the big question in everyone's mind is, where's the buying power coming
23:01
Ejaaz: for this? Because to keep the price at its current level, you need someone that
23:05
Ejaaz: is buying all of those shares, right?
23:08
Ejaaz: And what we've seen, and maybe this is reflected in the stock action today,
23:11
Ejaaz: is people don't believe that that will be the case.
23:14
Ejaaz: Now, whether they're thinking over a short-term period of time,
23:17
Ejaaz: whether they're thinking of a long-term period of time is another question.
23:20
Ejaaz: If you're common listeners of this show, you will know that Josh and I think
23:23
Ejaaz: on pretty mid to long-term time horizons. So we're kind of bullish in SpaceX
23:28
Ejaaz: over the long-term, of the short term we kind of like don't care too much we
23:31
Ejaaz: want to kind of like see it as an opportunity to.
23:33
Josh: Access it but
23:34
Ejaaz: Nevertheless it is a concern or.
23:36
Josh: Worry yeah no i understand why people are concerned and worried and in fact
23:40
Josh: i remember viscerally feeling this with uh the tesla story
23:44
Josh: because tesla i'm a lot of people don't know was the most shorted company in
23:47
Josh: the stock exchange for two or three years like everyone was just pounding on
23:52
Josh: it was just the the most diabolical company ever like no one was going to it
23:57
Josh: was never going to work and
23:58
Josh: now i haven't driven a car in
24:00
Josh: like a couple years and these like seemingly sci-fi impossible things that
24:04
Josh: are sold a lot of people are uncertain of their ability to happen and that's
24:08
Josh: like totally fair there's the key man risk in the sense that like there is a
24:11
Josh: singular person at the helm who is in charge of driving all this value that
24:15
Josh: is a serious risk there is the
24:17
Josh: risk on timelines oftentimes these timelines are very optimistic is there actually
24:21
Josh: going to be 15 gigawatts of compute deployed by 2030 and
24:25
Josh: If there's not, what does the revenue look like? But even if these things are
24:28
Josh: fractionally wrong, the trajectory of this company is one way.
24:32
Josh: And when I think about other companies, it's like, as a person who has like
24:36
Josh: cash, if you have any cash sitting in a bank account, you have a problem because
24:39
Josh: that cash needs to earn money.
24:41
Josh: Otherwise you're going to get outpaced by inflation. And when you think of the
24:43
Josh: places to deploy that cash, where the upside is the greatest and most exciting
24:48
Josh: and most aligned with like an optimistic vision of the future,
24:51
Josh: it's hard to find something more interesting and exciting and mispriced
24:56
Josh: um than something like spacex is and it's not like things aren't working like
25:00
Josh: we are seeing progress the starship launches you can go and watch you could
25:03
Josh: literally go to texas and sit on the highway and watch them in person and they get better every time
25:08
Josh: and the the um the heat shield which is the biggest part of rapid reusability
25:12
Josh: finally works for the first time ever with the last starship launch
25:15
Josh: and soon they're going to land both parts of the rocket
25:18
Josh: and then at the very least that
25:19
Josh: means they'll be able to deploy starlink version 3 satellites at scale.
25:23
Josh: These things are already built. It's just a matter of a few more iterations to getting there.
25:27
Josh: The data centers thing, we saw that they have a tremendous amount of data center
25:31
Josh: capability to build these things quickly. So they can do it.
25:34
Josh: Can they build 15 gigawatts worth? We don't know.
25:36
Josh: But currently, I mean, I'm looking at the stock right now. It looks like it
25:39
Josh: is trading down at the time of recording right now, about 9% down to $115 as
25:44
Josh: the unlocks are happening today.
25:46
Josh: And that seems to me just fine. It's like, okay, one and a half trillion dollars. That is about
25:51
Josh: I don't know, a little more than one-tenth of their expected revenue in four
25:55
Josh: years, it is very highly risky.
25:57
Josh: In the case that they can figure out how to actually convert that into revenue
26:01
Josh: and actually deliver on these timelines, there's no way this doesn't go absolutely
26:04
Josh: nuclear. So it's mostly a matter of if, not when, or perhaps if and when.
26:10
Josh: It's just like, I understand, I could understand the case for both people,
26:13
Josh: for the bulls and for the bears. I think just as someone who has a very low
26:17
Josh: time preference, seeing the progress that's being made and just very clearly mapping that out.
26:22
Josh: It seems very obvious to me that barring any catastrophic problems,
26:27
Josh: this is just going to be a one-way trajectory up. And sure, there will be bumps along the way.
26:32
Josh: Sure, maybe they're unlocks and it sells off another 10% for a couple more times.
26:36
Josh: But the reality is that a company five years from now who is just continuing
26:40
Josh: on this trajectory without any of these optimistic outlooks is worth more than
26:44
Josh: the company that they are today.
26:45
Josh: And that's just kind of what I'm basing all this off of.
26:48
Ejaaz: There's a key man risk with all of this, which is...
26:52
Ejaaz: Can Elon focus all of his attention to actually be able to pull this off?
26:55
Ejaaz: Does he have the chops to basically execute on the vision that he's kind of
26:59
Ejaaz: like laid out on his earnings call?
27:01
Ejaaz: That's pretty much the main thing that you have to kind of like believe in.
27:04
Ejaaz: The other thing is on the point of like below time horizon, I think that you
27:10
Ejaaz: can equally be very bullish SpaceX over the long term and be bearish over the short term.
27:16
Ejaaz: And that could be an opportunity for you. It just depends on like how you want to frame it, right?
27:20
Ejaaz: Like, for example, you might want to wait and see how the share unlocks happen
27:24
Ejaaz: over the next couple of months. I think something like 25 to 36% of the entire
27:30
Ejaaz: share supply gets unlocked in that period of time.
27:32
Ejaaz: Maybe you expect to see a lot of volatility during that time.
27:35
Ejaaz: And maybe that's like the time for you to kind of like load up to your point
27:38
Ejaaz: earlier, Josh, like Tesla was one of the most shorted stocks ever.
27:42
Ejaaz: And it was that case for two to three years. And maybe we'll see a similar profile
27:46
Ejaaz: for SpaceX. You know, these valuations are huge.
27:48
Ejaaz: Society is very unaware or uncomfortable with these large numbers.
27:53
Ejaaz: And, you know, we saw the same transition when we saw the first $100 billion
27:56
Ejaaz: company, right? So Meta went through this, Uber privately went through this as well.
28:01
Ejaaz: And so we're probably going to see the same on SpaceX in particular.
28:06
Ejaaz: But I agree with the trajectory in general. I think these companies are going to do very well.
28:10
Ejaaz: SpaceX has a very bright future ahead of it. And to be honest.
28:13
Ejaaz: In terms of like where the risk curve is, it is on the furthest end out there.
28:17
Ejaaz: Like Elon could be doing this with just one company, but he's doing this with
28:20
Ejaaz: like four or five combined into one.
28:22
Ejaaz: And now there's like rumors that like they might merge with Tesla.
28:25
Ejaaz: It might become a whole kind of like megacorp type situation.
28:27
Ejaaz: So if that plays out, there's going to be even more scrutiny that's going to be placed on him.
28:31
Ejaaz: But overall, I think I am very bullish long term, but maybe over the short term,
28:36
Ejaaz: I'm going to say that I'm tentative. I'm sitting there with my cache and seeing
28:41
Ejaaz: whether there is a better time to deploy and we'll see over the next couple of weeks.
28:45
Josh: Yeah, you just maybe don't want to miss the repricing. I'm looking at that Tesla
28:48
Josh: chart between 2020 and 2021 and how the stock 13X'd over the course of a year
28:54
Josh: as it ripped in like the largest short squeeze ever.
28:57
Josh: If you go to the all-time chart, that 2020 to 2021 is a pretty violent repricing.
29:02
Josh: And that's just the world coming to grips with the fact that the technology
29:04
Josh: and the thesis actually played out.
29:06
Josh: In the case that that does happen again, that's the expectation,
29:08
Josh: but there's lots of reasons to be bearish. I mean, just today for reference,
29:12
Josh: there's 911 million shares unlocking. That's $100 billion of potential sell side pressure.
29:18
Josh: They guided for 39% higher CapEx this year with no guidance given for next year,
29:24
Josh: which is interesting. They didn't guide to where CapEx is. So that's a huge unknown.
29:28
Josh: There's the like average revenue per user compression on the Starlink side,
29:31
Josh: where Starlink revenue per user fell 22% as they doubled year over year because
29:36
Josh: they're trying to move into cheaper international markets.
29:39
Josh: So even though the subscribers are doubling, their revenue per user is decreasing.
29:42
Josh: So there's a lot of these definitely things to look out for.
29:45
Josh: But on the upside, I think of like moats and competition,
29:49
Josh: Peter Thiel's the big monopoly guy. They have a monopoly on so many different
29:52
Josh: industries, even if one of them works.
29:54
Josh: This is a remarkable outcome for a one and a half trillion dollar company.
29:56
Josh: So that's, I think it, that's the SpaceX update. That's the earnings report.
30:00
Josh: I don't know, trying to be a little sober about how we view this,
30:03
Josh: but like, God damn, there's no company in the world that's more exciting than this one.
30:07
Josh: It's so sick. Like, okay, sure. The mass drivers on the moon,
30:10
Josh: like that's a long shot. That's going to be like, I'll be excited to live through
30:14
Josh: that and hopefully see that one day.
30:15
Josh: But today, today, Starlink, incredible.
30:18
Josh: Starship, incredible. their ability to deploy data centers at scale and break
30:22
Josh: even after just 12 months.
30:24
Josh: Incredible. There's no one else that can manufacture at the scale.
30:26
Josh: So just in terms of manufacturing monopolies, it seems to me like there's China
30:30
Josh: and then there is Tesla and SpaceX.
30:32
Josh: And that's kind of the people who are most able to move the amount of atoms
30:35
Josh: in a coherent way that generates value.
30:37
Josh: And that is worth a lot. So yeah, I think that's everything.
30:40
Josh: That's the SpaceX update. This went pretty long. If you listen to this,
30:43
Josh: I, if you made it this far, like, please let us know how crazy this sounds to
30:48
Josh: you? Like, is this a little too far over indexed on one side?
30:51
Ejaaz: So for us, please. Yeah.
30:53
Josh: Let's hear it either way. What's the strategy around SpaceX?
30:56
Josh: How are we thinking about this $1.5 trillion company? Because listen,
30:59
Josh: we're going to come back here.
31:00
Josh: Couple years on the show and we're going to reference this episode and be like
31:03
Josh: told you so or maybe not maybe we'll be poor maybe starship will blown up and
31:07
Josh: the show wouldn't exist but you know what we
31:09
Ejaaz: Just wouldn't have a camera in front of us yeah.
31:11
Josh: Yeah i'd have to point off my camera so that might be a worst case scenario
31:14
Josh: um but yeah that's that's the episode uh thank you so much for watching you
31:17
Josh: just any final parting thoughts before we let everyone go
31:19
Ejaaz: Yeah no if you are listening to us and you aren't subscribed to us please please
31:23
Ejaaz: do it helps us out massively whether you're on apple music or spotify.
31:26
Josh: Just on our way to 100k we're on our way to 70 i think subscribers on youtube
31:31
Josh: which is exciting we have a bunch of subscribers on all the other platforms
31:34
Josh: so like awesome thank you for the support so cool
31:37
Ejaaz: Welcome to all of you i think we added like 2 000 subscribers over the last
31:40
Ejaaz: 28 days hello it's lovely to meet you um,
31:44
Ejaaz: we are putting out shows and episodes about four times a week but we also have
31:48
Ejaaz: a newsletter that goes out to
31:49
Ejaaz: over a hundred thousand people we post twice one is a long form essay um,
31:53
Ejaaz: and the other is kind of like the weekly recap but as i was saying earlier wherever
31:57
Ejaaz: you listen to us leave us a comment give us feedback we're also on x dm us if
32:01
Ejaaz: you have thoughts if you disagree with us we'd love to
32:03
Ejaaz: hear from you even more give us a like thumbs up it helps us out massively and
32:07
Ejaaz: yeah i guess that's it we'll see you on the next one.