[manlymuppet]

But Google loses $11 billion per year, and they gain $50 billion... in stock?

As far as I know they really will be paying $11 billion annually in liquid cash to SpaceX (not a small ask) starting this year, and all they get in return is more money on paper?

What incentive do they have to help SpaceX out like this at great cost, if they're not actually buying something valuable? Why are they incentivized to do this if it's just an empty deal and financial engineering? Genuine, good faith question: what are they getting out of this?

[tristanj]

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

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

[clusmore]

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

[tristanj]

My mistake, I'm running on a lack of sleep.

[sirsinsalot]

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

[otterley]

> 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?

[tristanj]

SpaceX announced $26B/year in compute deals with Anthropic and Google in the past week. The margins on both deals are incredibly high, Google is paying around $11.75/hour per GPU. Infrastructure costs are far below that, SpaceX likely has 70-90% margins. These two deals are around $20B/year profit. In the preliminary S-1, SpaceX reported a $5B loss in 2025. Combining these numbers, that's a $15B profit, assuming losses are constant. Likely expenditures will increase, but even if losses double, that's a very healthy $10B profit.

[otterley]

Where did you get your costs and margins from? I have direct experience in this business and I can tell you they’re usually not that high. These machines are also not cheap to power, cool, and house.

As a comparison point, CoreWeave’s most recently reported operating margin was 16%.

[adestefan]

And Google will exit at 12 months when the S&P seasoning period and 4 quarters of profitability are satisfied.

[simonebrunozzi]

I would bet that there is a nice clause in that contract that gives exit options to Google at year 1, 1.5, 2, etc.

Perhaps they only need to pay $11B, or $16.5B, before exiting the contract.

Plus, instead of getting nothing for these $11B/year, they surely get some compute power that should have some value.

[notatoad]

>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.

[manlymuppet]

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?

[JumpCrisscross]

> must be getting something out of this deal

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.

[manlymuppet]

I agree with you--this is my whole point.

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.

[JumpCrisscross]

> 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.

[notahacker]

yeah

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.

[tristanj]

Because Google owns a sizable stake of SpaceX, and for every $1 they give SpaceX they get $5 in investment return.

[manlymuppet]

That $5 return doesn't actually materialize the way you're framing it.

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.

[dmix]

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

[notatoad]

they're spending $11B on compute because they need the compute and that's the market rate for it. it's the same price Anthropic is paying to spacex for compute.

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.

[krupan]

I can't imagine why so many people would be looking for conspiracies now days /s

[nouveaux]

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

[s1artibartfast]

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

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