Space X is barely Space and mostly X | The Verge
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Elon Musk’s exploding rockets are a front for the real moneymakers.
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Once, I had some questions about why Space X, Elon Musk’s healthiest company, acquired x AI, his sickliest one. Now I have some questions about why we’re calling the whole thing Space X.
Look, what we have here, by revenue, is primarily a telecom company and a company that rents compute, according to Space X’s first quarterly earnings statement as a public company. The space sector of the business didn’t break a billion dollars this quarter and contributed only a touch over 10 percent of the company’s revenue. Space X remains its own biggest customer. There just aren’t enough other people who want its rockets. And, I dunno, maybe if the rockets were a primary focus of the company, Space X wouldn’t be in danger of blasting a new crater into the Moon with its space trash.
The lion’s share of the spending (and the hype) is nonetheless around what is graciously being referred to as “AI”
The telecom part — Space X calls it “connectivity” — is Starlink, the satellite internet service, which had
It was hard to miss how important leasing data center space was to Space X. Not only did it make more money than Space X’s rockets, it also drove more spending — $15.8 billion on AI alone in the second quarter. (By comparison, spending on the space and connectivity sectors was a touch over a billion each.) That business makes it a competitor with neocloud companies such as Core Weave and Nebius.
Musk built Space X’s Colossus 1 data center in Memphis for Grok, his also-ran AI that also occasionally refers to itself as Mecha Hitler and has a penchant for undressing women and children without their consent. But x AI had trouble running the complex, and decided to rent it out instead. In addition to encountering latency that made it hard to train in-house models, the center employed a mix of newer and older chips that created bottlenecks. On the earnings call, Musk said that only 10 percent of the compute Space X builds will go to Grok.
Revenue isn’t profit, and building data centers is expensive
Space X now has deals with Google, Anthropic, Reflection AI, and Cursor, an AI company Musk eventually chose to acquire. On the second quarter earnings call, Space X chief financial officer Bret Johnsen said those deals put the company “on a trajectory, including contribution from Cursor, to reach
That’s very nice. But revenue isn’t profit, and building data centers is expensive.
There are some problems with being in the bare-metal business of renting out compute — specifically, inevitable obsolescence, the vagaries of construction, and the fact that compute is basically a commodity, which means that companies compete on cost. The more data centers that get built, the more compute is available. With more compute available, companies can’t charge as much for their chips.
Musk has claimed that he took Space X public because he wanted to build data centers in space. Now, I might think that if I had trouble running a data center on the ground, I’d get better at it before I tried to do something an order of magnitude harder — something that had never been done before, even. But that is not how Musk thinks, I suppose.
Space X has even proposed an orbital data center consisting of as many as 1 million satellites to the Federal Communications Commission. The application is light on technical details — we have no idea about satellite size or deployment schedule, for instance — which makes me think that it’s more for PR than anything else. Musk has also released a few details about the satellites — or, at least, some drawings of them. In this vision, a Musk-owned chip producer called Terafab will produce one terawatt of chips every year. A billion Optimus robots will do the work, at least once Musk figures out hands.
This all sounds expensive, doesn’t it? The end goal, Musk claims, is to build a mass accelerator on the Moon.
I don’t put much stock in this kind of thing, any more than I put much stock in Musk’s claims that Starlink will deliver “a majority of the world’s internet,” as he said on the earnings call. It’s all part and parcel of Musk’s general habit of talking about a sci-fi future as imagined by a bunch of mid-20th-century writers. Sure, there are a bunch of scientists suggesting Musk’s proposed space data centers are a bad idea. You can even argue about the feasibility of space data centers if you want. Remind me, did the Hyperloop ever get built? Say it with me now: It’s all vaporware till it ships, babe.
If we take away the pseudoscientific big talk, we are left with a company that launches rockets mostly for itself, has a fairly successful satellite internet business, and is basically running the risky and capital-intensive bare-metal business we’ve seen from a bunch of the neoclouds, as a result of its failures of its in-house AI. That’s not quite as dreamy as getting to Mars in six years, is it?
Space X’s insider lockups start expiring on August 6th, which is tomorrow
What it does do, however, is provide Tesla with an important customer, one that buys $295 million in Tesla Megapack battery storage. Space X has also been buying a bunch of Cybertrucks, Musk’s historic flop of an automobile. As of this writing, Tesla stock is down 25 percent since January of this year.
Musk can maybe charge a premium on his compute because of his political connections — I don’t think he’s planning on splashing out $100 million on the midterms for nothing. Maybe those political connections will make it easier for Musk to build terrestrial data centers — though those seem to be wildly unpopular across the entire political spectrum. Who knows, maybe the game plan is just, That’s a nice AI business you have there. Would be a real shame if something happened to it. Perhaps you should buy my compute, so nothing happens.
But maybe I’m just thinking too long-term. After all, Space X’s insider lockups start expiring on August 6th, which is tomorrow. If those insiders sell — as short-sellers expect them to — the already slumping stock will be even worse off. So reminding everyone of the mass accelerator on the Moon is maybe meant to rally the troops. Good thing Nasdaq changed its rules for Space X, so those losses will hit everyone with an index fund!
Actually, I have a science fiction thought about that. Hey Elon! Why don’t you take a flying fuck at a rolling donut? Why don’t you take a flying fuck at the Mooooooon?
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