SpaceX IPO Multiple Times Oversubscribed

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2:10Bloomberg Tech is live from coast to coast with Caroline Hyde in New York and Ed Lovellow in San Francisco. This is Bloomberg Tech coming up. Wall Street can't get enough of SpaceX, with demand from big institutional investors and the biggest IPO in history way oversubscribed. Plus, Google backstops anthropic data centers as Silicon Valley races to build AI infrastructure with ever more intertwined deals. And Oracle reports after the closing bell, it's a race between building data centers and booking AI cloud revenues. AI, AI, AI and space. SpaceX's oversubscribed IPO is where we have to start, Ed, because the geographical reach of the level of demand, we've been mesmerized by this record-breaking thing.

2:56Yeah, it's out of this world. I don't apologize for that for one bit. The state of play is this, right? The order book for institutional investors closes 4 p.m. Eastern today. And as we've reported, there are several long-only asset managers, basically, that want$10 billion worth of shares. Of$75 billion an offer. Right, so somebody is going to miss out. Now, the retail investor can still place orders, I think, through Thursday on whatever platforms are available, but they're not guaranteed to get hold of those shares either. So that's the state of play. And believe it or not, there is a roadshow happening in the background.

3:26And we're learning ever more on that roadshow. That's the entire point. We're understanding the transparency of the business model. Are we learning much about those orbital data centers? Yeah, I think the focus and the pitch has still been, let us explain orbital data centers. That brings us to today's big number, 250 billion. That's the total amount of SpaceX IPO orders. We've reported this morning one to five billion of which is coming from Saudi, Kuwait, other Middle East funds, sovereign funds. That's according to sources. That's the absolute latest. Joining us now to talk all things SpaceX, its IPO, also the general landscape, Peter Singlehurst, head of private companies at Bailey Giffen.

4:01We just know, you know, SpaceX is a really important investment for you guys prior to the offering. Let's start there. What does this, the biggest IPO in history, represent to you and to the firm and to, I guess, support the thesis when you first made the investment way back when? I think that the SpaceX IPO needs to be seen as the culmination of a trend which has been playing out now for 15 years or longer of companies staying private for longer. And this is something that we started to see in 2012 when we first started investing in private companies. Now, we didn't think that companies would get this big and stay private this long.

4:46But here we are with SpaceX going public at something like a$1.8 trillion valuation. That's 900 times larger and more valuable than Tesla was when it went public in 2012. So on the one hand, this is a story of a truly exceptional company which has compounded its growth at a very high rate. On the other hand, it's a story of a bigger structural trend of companies staying private longer and more and more returns accruing within the high growth private markets. And Peter, to that end, when you think about Tesla after it's gone public, it was a volatile ride, but it's 25 ,000 percent higher than when it listed.

5:25And so will we see a level of returns, do you think in the public market? Or does that have to be in some ways pushed against? Are the meat and bones of returns going to have happened to private investors? I think mathematically, it's very hard to see how you could see SpaceX delivering the same kind of returns as a public company as Tesla did. But I think what this speaks to is a requirement for investors to have exposure to growth in both the private and the public markets. The world has been set up to almost divide these things and say there's kind of private growth and there's public growth, and these things are different.

6:05And we've taken a different approach. We've sort of taken the view that actually, if you want to do growth equity investing, you want to do it properly, you have to do it in the private markets, and you have to do it in the public markets. And what our clients are and beneficiaries, who are predominantly pension funds, what they need and what they ask from us is that we give them exposure to the world's best growth stage companies, starting in the private markets, earning the returns that we can generate there, and then also earning those in the public markets from within our public funds to make sure that they're still capturing that growth, even once companies transition into the public markets.

6:36Peter, I think it's important to pose the question, why is SpaceX going public? And when Elon Musk spoke to Jamie Dimon, he eventually got to the answer, which is they need capital for this growth phase. But what we are seeing outside of just this fixation on IPOs is a race for capital through equity. How comfortable do you feel as a firm at Bailey Gifford that whatever mechanism it is raising money at that volume, but it basically then goes directly into capital expenditure? That's what's happening here. you want to invest in companies that are able to deploy capital at high rates of return so i don't think there's anything wrong per se in investing in capital intensive businesses in fact what you want is a company that can deploy large amounts of capital but where you can earn high returns on that capital and ultimately that's what separates a good business from a bad business it's return on equity and so when we're looking at a company whether it's spacex or anthropic or any other company that we invest in privately or publicly.

7:36Ultimately, what we're asking is how do you get to high returns on equity? And it's building those theses that then leads us to invest in companies. And in the case of SpaceX, increasingly that thesis is going to have to rely on AI. They've shown that they can invest capital at high rates of return in rockets, in Starlink. And of course, the next leg of that is going to be in AI data center build out, quite possibly in space. But that's where it becomes so fascinating, particularly, Peter, for Bailey Gifford, which in the private markets backed SpaceX on a thesis of space, backed Anthropik on a thesis of AI.

8:11And now they're all overlapping in terms of business models. What is your perspective of commoditization or a winner takes all or is there room for all of these giant AI players to be winning in the technology as well as perhaps in the public markets? I think what your question gets to is this very important question of where does value accrue in the AI stack? Now, hopefully lots of value is going to accrue to the end customers. That has to happen. Historically, we've seen value accruing to the chip manufacturers initially with NVIDIA, but now increasingly to memory manufacturers. But I think what we're also starting to see is value accrue at the foundational model level.

8:49And I suppose with the Grok acquisition, SpaceX is making a bet not just on the foundational model level, but also on the infrastructure level. And I think what we're seeing with the deal that they did recently with Anthropic is that they have options in terms of how they can monetize in the AI transition, both through their own models, but also importantly through the infrastructure itself. I have so many questions about this. You know, let's be honest, the hedge that SpaceX has put in place in the interim is to become a hyperscaler and cell compute. played a blinder with that. We got the design or at least the renderings of Orbital Data Center.

9:25I think the team are going to put them up on the screen now in that presentation that Elon Musk made. We're like, there's the body, there's the solar arrays, there's the radiator. Which part of the thesis, Peter, is most important to you, right? It is a long way from the TAM of 26.5 trillion that they're basically packaging it as enterprise AI. And in the interim, this plan for Orbital Data Center, like it needs to work. That's what they're telling people on the roadshow. So there's absolutely no question that the Orbital Data Center sort of strategic moves that they're making widens the range of outcomes for SpaceX.

10:03On the one hand, if it works, it increases the potential upsides for the business. On the other hand, if this doesn't work, it's going to increase the downside for this company. And investing ultimately is about ranges of outcomes, it's about probabilities, and it's about payoffs in those range of outcomes. What we've seen with SpaceX over the years is that they have continuously tested and validated a series of outlandish hypotheses. The very notion of the business starting off as a private rocket company was itself an outlandish hypothesis that they validated. Then the idea that you could have reusable rockets was also an outlandish hypothesis, and they validated it.

10:39They did the same with Starlink, with satellite-based broadband. They've done the same with rockets on the scale of Starship. And the orbital data center is the next hypothesis that they are seeking to validate. But everybody should be totally aware of the risks that are involved in this. It is unproven. In the event that they prove it, the payoffs will be large. But as we've already touched on, the amount of capital that is going into this means that in the event that they don't validate it, it's going to increase the scope of downside in the investment as well. And investors just need to understand the range of outcomes and the payoffs that go with that.

11:14Can I ask about payoffs, Peter? Because I don't want to go into the granularity of how much SpaceX exposure you have, etc. But how long do you think you'll hold it? And how much do you think it's a worry or an anxiety that all these other big public companies are selling equity into this market at the same time? Alphabet trying to fund its own capex in the equity market. Meta might be doing as well. And does that take oxygen out the room? I think that's probably part of the thinking that's going on for these different companies trying to raise these large amounts of capital. They're sort of trying to soak up what available capital there is.

11:48But to your first question, different funds within Bailey Gifford are going to be in very different positions. For those funds that have owned SpaceX since 2018, since it was a$30 billion company, those funds have very, very large exposures and large positions in SpaceX. Now, it might make sense post-lockup for those funds to start selling down, even if they want to maintain a meaningful exposure, because ultimately we are beholden to our clients and we have to provide them with a level of diversification within their funds. And then, of course, funds that don't own it, funds that are solely public funds, they then are faced with the question of whether to buy it for their funds.

12:27So it might well be that you see different funds within Bailey Gifford doing different things over the coming months. And that will be a function of the history of the portfolio context. I think there's universal agreement that SpaceX has been an exceptional company. The real question from here is what is the right price and what is the right position size in SpaceX? From 30 billion to potentially 1.8 trillion this week. Peter Singlehurst of Bailey Gifford, a joy to have you on about all things SpaceX and the IPO landscape more broadly. Let's get, though, also to geopolitical tensions. They are continuing to whipsaw markets.

13:01We are down a percentage point again on the Nasdaq 100. S &P is under pressure. You're seeing really hardware off by 2 % if you're looking at the semiconductor index. President Trump is saying that Iran would pay the price for delaying peace negotiations. Let's get you up to speed with Bloomberg's Tyler Kendall, the latest one in the White House. What do we need to know? Hey, Caroline. Well, at this point, President Trump is renewing his threat, really just underscoring that this White House has mounting frustration with the ongoing negotiations, as the U.S. has repeatedly maintained that they are trying to prioritize a diplomatic solution to end the conflict.

13:36Now, President Trump's remarks aren't totally clear if this means that we're going to see an end to the ceasefire agreement. after we saw the worst flare-up in fighting between the sides just overnight, with both the U.S. and Iran exchanging strikes after an American military helicopter was shot down. After the strike from the U.S. then on Iranian military assets, we saw Iran put forward some strikes in attempts to hit American military assets. It's really been escalating from here, but our own analysts at Bloomberg Economics say perhaps this is a bid to escalate and a bid to de-escalate. And one positive sign for the negotiation front, Iranian state media reported within the last hour that a Qatari delegation has landed in Tehran in a bid to keep diplomacy on track.

14:23But Ed and Caroline, I want to highlight this renewed risk that we are seeing. Moments ago, flashing across the Bloomberg terminal, India is now condemning an apparent attack on a commercial vessel near the Strait of Hormuz off the coast of Oman. So definitely still very high intentions contributing to the situation that we're seeing on the ground. Bloomberg's Tyler Kendall. Thank you very much. So coming up, Google steps up to backstop a massive$35 billion financing deal for Anthropic. We have the details next. This is Bloomberg Tech.

14:59Supermicro is targeting public markets for a massive$7 billion equity raise. Sales to Supermicro servers fitted with NVIDIA chips have surged for AI workloads. The server manufacturer is moving quickly to fund a staggering$39 billion in orders using the fresh cash injection to pay for the equipment needed to make the servers. That's greasing the wheels. Google is backstopping a massive$35 billion financing deal. For Anthropic, the creator of Claude is leasing AI chips across five different data centers with help from the long-established tech giant. Doomvers Scott Carpenter joins us now. To break down the mechanics, to our audience, what does backstopping mean?

15:40I think what we're saying is guaranteeing the funds for it in the event that something goes wrong. But just go with the basics. Right. So first of all, Broadcom is providing a huge guarantee on the chips themselves. This is the biggest part of the 35 billion. Yes, these are Google's TPUs that are going to be involved. So Broadcom is backstopping the debt itself. Now, the chips, when they are delivered and they have to be manufactured, are going to be used in these five data centers that we identify in the story. The leases on those five data centers are backstopped by Google. So you could think of it as two different forms of guarantees being involved in this to put together this deal.

16:30There's the Broadcom one and there's the Google ones underneath. So in a way, Broadcom is saying almost Alphabet is going to get its money from Anthropic for buying the chips. Is that right? Meanwhile, who's getting the money for the leases? And who, therefore, is Alphabet saying, like, you're good for the money, don't worry. Is that the people actually constructing the data centers, owning the land? It's the leases are to FluidStack, which is a company that Anthropic has said it's been working with to develop these data centers. So you see how it's complicated, right? There's many different ways.

17:03I see how it's complicated, yeah. Yeah. I mean, to pull off a deal of this magnitude, which I think is the largest private credit deal in history, definitely the largest chip deal. There's a lot of moving pieces. One of the key things is that these chips are not, I mean, they need to be created. They don't exist right now. But, yeah, there's a lot that goes into this. Who's the manufacturer? I mean, questions around Intel versus TSMC. Absolutely fascinating. Scott Carpenter, you broke it down so clearly. We so appreciate it. Meanwhile, look, let's turn our attention to SoftBank. Its attempt to leverage its massive AI bets is hitting a bit of a wall.

17:41Sources told Bloomberg that talks have stalled with potential creditors to raise at least$6 billion from a margin loan backed by its OpenAI stake. Though it's unclear why. The pause comes just weeks after SoftBank slashed its fundraising target from$10 billion, and SoftBank shares have tumbled nearly 10 % on the news today. This is the firm's alternative funding options. Coming up, we are going to be speaking with Sophia Noble, Professor Director of the Center of Resilience and Digital Justice at the UCLA, to discuss bias discrimination within this world of AI. We keep talking. More on that next.

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20:48Member FDIC. This week, as OpenAI filed its S1 confidentially, CEO Sam Altman was also out with a sweeping long-term vision for generative AI's alignment with humanity. and warned that transformative technologies such as AI can concentrate power, stating OpenAI is, quote, clear-eyed about the risks as it aims to build powerful systems that remain safe, subject to human control. But critics have long-voiced concerns about AI risks, such as algorithmic bias, inequality. Joining us now is Sophia Noble, UCLA professor, author of the acclaimed book, Algorithms of Oppression. Clear-eyed. Is that enough?

21:25Are we seeing some of the risks being digested and answered for within these models? I don't think so. I don't think we're anywhere near a call for or an ability to realize safe AI. What we see, in fact, are chatbot technologies and large language models that, for the most part, don't have markets. I mean, they were built for corporate America to reduce labor costs, but corporate America is moving away from them because they're very expensive. They're not really reliable. They are incredibly negatively impactful on the environment. They're moving away from them? You think corporate America is moving away from large language?

22:05I do. We've been seeing studies where companies are saying that it's more expensive for them to use these chatbots because human beings have to check the efficacy and the reliability. There are so many errors, factual errors that are proliferating through these technologies. So if the technology itself is that flawed and it's being pushed now on the public as some type of solution, I think we're in trouble. And of course, we know that we have the racial bias, the gender bias, the kind of geographic and political concerns about what comes out of these technologies. I think that we are moving into very dangerous territory, trying to bolster our society on large language models.

22:53Professor Noble, the large body of your work looked at the data issues for commercial search engines, basically. The net result is that the search engines, as per your book's title, reinforce racism. Yes. What was the underlying issue in the search engine case study? And what is different or the same about the large language models that I think you're saying yield a similar result? They do. So what we've seen over the last 15, 20 years is that all of the discrimination that's in our society, all of the kind of stereotyping, all of the inequality just gets packaged up and then used to train models.

23:36It's within the data. It's within the data, but it's also the people who are designing the models are really not aware. They don't understand the kind of social, historical, economic processes. These are software engineers who don't even think about, they don't even ask the kinds of questions that let's say a sociologist like I would ask. And so we have discriminatory data that is training models. But what's different now is that these models obfuscate the inequality. They appear to be factual and reliable. And if you don't know, if you don't have deep expertise, you're not gonna know that the kinds of things that are being served up in these products are actually faulty.