[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