SpaceX Just Filed to IPO — The Numbers Are Ugly

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2:31Welcome to Prof G Markets. I'm Ed Elson. It is May 21st. Let's check in on yesterday's market vitals. The major indices all climbed more than 1 % after President Trump said talks with Tehran are in the final stages. Brent crude declined, even though Trump also said, quote, we're going to do some things that are a little bit nasty if a deal wasn't made. Treasury yields also stumbled. Tech rallied ahead of NVIDIA's earnings. More on that later. And finally, speculation swirled all day in anticipation of IPO filings from SpaceX and OpenAI. We will get into that right now. SpaceX has officially filed to go public.

3:16In a prospectus filed with the SEC yesterday, SpaceX said it will list on the NASDAQ under ticker SPCX. The company is looking to raise$80 billion or more, which would make it the largest IPO in history. The prospectus offers the first peek into SpaceX's financials before the company goes public on June 12th. So lots of numbers to discuss here. Today, we're speaking with Patrick Boyle, professor at King's College London, former hedge fund manager and host of one of the most popular finance YouTube channels. Patrick, thank you so much for joining us again on the show to discuss again SpaceX, the filing for which literally came out about 15 minutes ago, 20 minutes ago.

4:03So we've had that amount of time to get up to speed on it. But there are some interesting things here. I'll just start with some of the financial data that we learned. $4.7 billion in revenue in Q1 2026,$4.3 billion in net losses in Q1. Revenue grew 15 % from last year. But plenty of other things that we could talk about. Where would you like to start? What strikes you? Yeah, I mean, you know, to be honest, It's a fairly interesting IPO document. I mean, I'm sure you saw the first 15 or 20 pages were photographs of rockets, which is a little bit unusual and somewhat reminiscent of the WeWork, you know, IPO document where, you know, there were lots of photos in there.

4:52You know, other things that were interesting, the company has lost$37 billion since inception. There's lots of stuff. There's some new business stuff in there. There's talk about point-to-point travel, where people will be able to travel from place to place on rockets rather than airplanes. There's talk of, I believe I saw, in-orbit manufacturing, or at least manufacturing on the moon. But I've noted down in-orbit. I'm not sure if that's correct. Asteroid mining is another business that they expect to make money from as well. So, yeah, I mean, when we spoke with you on this topic, one of the things you pointed out is that the financials here are just a little bit concerning, especially if you're looking at a company that's going to go public at two trillion dollars.

5:43That's at least what people are expecting, close to two trillion. One thing that struck me is they are losing money, but they also included their adjusted EBITDA, which they reported was over$1 billion in Q1 2026. And I couldn't help but notice the fact that they, you know, in order to get to that number, you have to add back almost$2.5 billion in depreciation and amortization costs, which, to your point, is their whole business because they're building rockets. Yeah, because it's the cost of the rockets. You know, there's huge R &D to build the rockets. And then the depreciation, you know, they put all those Starlink satellites up there.

6:24They last about five years and then they fall out of the sky. And so that is your depreciation. They have to constantly replace them. So it's not, EBITDA is not an interesting number for a company like this. Like you want to look at basically, you know, is it profitable or is it on the path to profitability? It doesn't seem to be. There's other stuff in there as well. I don't know if you noticed that Elon Musk will get, I think, 85 percent of the voting shares. There's, you know, he doesn't like, as we know, shareholder lawsuits. And so that has to go to arbitration. So essentially, if you're buying like this, this is very much an IPO for the Elon Musk fan.

7:13Like you're not necessarily that worried about profitability. Right. You know, it's sort of, you know, it's what it used to be sort of rockets. Now it's rockets, Twitter, AI in space, you know, space manufacturing, transportation by rockets and asteroid mining. And not all of these businesses are functioning at the moment. Even if you look at the, you know, the Starship thing, the Starship, they're talking about, what is it? Sorry, I've got the numbers down here. Basically, they're talking about hourly launches of Starships in order to get, I think, something like a million tons of stuff into space.

8:03per year. At the moment, you know, I think the next Starship test is tomorrow. It's never gone into orbit. It's never carried any cargo. I think it's going to carry some dummy SpaceX satellites tomorrow. But this is, you know, this is very much a vibes-based IPO. Like, it's for people who are excited about Elon Musk. It's not really for people who are going to scrub through the numbers and ask questions about profitability. Yeah, just on that point, some of the company statements that we saw at the top of the document, the mission of this company is to, quote, ensure species-level redundancy and that the light of consciousness will not be tied to a single planet.

8:48It's also to, quote, understand the true nature of the universe to ensure that humans don't have the same fate as dinosaurs. By the way, that phrase, the light of consciousness, is mentioned 10 times in the filing, and AI is mentioned over 1 ,200 times in the filing. Just looking at profitability again, they break out each of the businesses into space as a business, connectivity, which is like satellites, and AI. Space lost$662 million in Q1. Connectivity turned a$1.1 billion profit, and it seems that actually the satellite business is pretty good, AI lost two and a half billion dollars. And that really struck me that maybe this AI thing is perhaps the problem.

9:39And I think that's per quarter, isn't it, that loss? That's the quarterly number. Yeah. What do you make of those numbers? So, yeah, you're looking at, and I think that was growing as well, like the loss from AI is growing. And the whole story of SpaceX, it's no longer about space flight. It's kind of about this data centers in space idea. There are a lot of people who've done research. It's not clear why it would be cheaper to put a data center in space than somewhere on the Earth. It might be cheaper to put one on the bottom of the sea. It's not clear why this is necessary, but I think it's a mistake to ask too many questions about this.

10:24You just have to go with your feelings, you know. So this, I mean, what do we think this will mean for this IPO? I mean, they're looking to raise $80 billion, biggest IPO in the history of business. But it sounds like you are not really convinced at all. I struggle to be convinced. I like the idea of space travel. I'm excited by sci-fi stories in general. But I mean, looking at these numbers, personally, this seems insane. What do you think this means for the IPO? Do you think that this stock will actually perform well? You know, firstly, I think they're kind of rushing it out largely because it's burning so much money, like$37 billion in losses since inception.

11:06And, you know, the VCs and whatever only want to keep putting more money in for so long. And there's a very hot market right now. You know, S &P is near highs. And people are excited by Elon Musk stuff. They're also excited about AI. And I think, you know, Elon for years said that he would never take SpaceX public until he had reached Mars. I think there was like a colony on Mars. So we're a little bit early for that. I think the real reason is just VC funding is kind of drying up for this sort of stuff. They've, you know, this is worth a lot and they want their money back. On top of that, you've got big IPOs coming from OpenAI and coming from Anthropic.

11:54And even, you know, there's an argument, you know, that they basically want to get out first because the question is, will there be appetite, you know, if investors have to liquidate something in order to buy these new things? At what point do they not necessarily want to buy the next AI thing coming out? So I think to a certain extent, this is a race to get this stuff out before the others. For the people listening who are fans of SpaceX and who plan to maybe purchase this IPO or believe in the company, I mean, what is your honest bull case for this company like in what world what would it take for this company to make sense um and for it to be you know a a profitable and sustainable business that is worth investing in um well a much lower price to start with but that's that's not what's going to happen right because of course this is the whole thing with investments like it's the you you're buying a thing and the question is how much are you paying for the thing yeah and this is the most out there valuation of any company you can think It's way beyond the valuation of NVIDIA, and NVIDIA is hugely profitable with massive margins.

13:09SpaceX just isn't. It's a money furnace, especially with all this. XAI, the AI company, I think he paid$250 billion for it. SpaceX bought that from Elon Musk. um then within a few weeks he announced that the tech stack within um within xai was not working basically it wasn't very good and it had to be rebuilt from the ground up and he said well that happened with tesla as well and it's like yeah but you just you just got people to pay 250 billion dollars for this right they bought it from you um and so you know this is uh you know the thing is, would I bet on the price falling? I mean, in the long term, yes, just because I think it's, you know, this sort of gravity can only be overcome for so long.

14:06But, you know, there's the funny thing, as last time we spoke, we spoke about the NASDAQ inclusion. So 15 days after the IPO, passive investors, whether they like it or not, will become shareholders. And that is an incentive even to get in at the IPO because you know 15 days later there's sort of some new bag holders to take it off your hands um in the long run like any company the value of any company is the the cash flows like you're buying cash flows you're buying the the profits of a company um you know is there a version of the world where it could become profitable yeah um but it it doesn't look like an amazing business at the moment.

14:49Like, it's a wonderful, it's a cool science experiment, but that doesn't mean that, you know, it's not obvious how you convert all of this stuff into dollars and cents. You mentioned earlier the other company that is set to go public, which we actually just learned is going to go public as of yesterday, that is OpenAI. There were questions over whether this was going to happen. Even the CFO was saying that we needed more time, that the company needed more time before it goes public. But apparently, now that the Elon trial is out of the way, they are going to go public. Just before we let you go, I'd love to just get your top line thoughts on OpenAI as a business, your expectations for this IPO.

15:29And then hopefully we can have a longer conversation about it at some point, too. Yeah, I mean, you know, once again, all of this AI stuff, it's really early in this business and it's really hard to know who the winners and losers will be, you know. So the question with OpenAI, with Anthropic, with any of these is sort of are they the sort of Google of search, you know, or are you investing in the Yahoo or the AOL or whatever, you know, because being first doesn't necessarily make you the big winner. You know, it's not something that I'm excited about just because it's kind of a roll of the dice and a hope and pray kind of thing.

16:09um you know also it's not obvious even if ai is a huge productivity booster it's reasonable to think it could boost the product the the productivity of all the people using it but that doesn't mean they get to charge that because there's sort of 10 models out there they're all reasonably equivalent to each other and so the question is will ai be a winner-take-all model like the way internet search was or will we have kind of 10 you know it's a bit like uber you know where there's sort of you know in every part of the world there's uber and then there's a few other ones and the problem with if there's always a few other ones you never really get to crank up your prices and so people benefit from the affordable taxi rides which is great but the companies themselves never get that profitable so with these huge valuations the assumption is that one of these things is going to win the whole market and is going to be able to charge an awful lot of money for their services in the future.

17:15Very exciting time in the IPO markets. I mean, it's just incredible what we're going to see this year. It is. For years, people have been saying, you know, there's no companies going public. In fact, they were all going private, right? And also, people said, you know, all these companies, they're hoarding cash, they're not investing. Now we've got all of, you know, big tech are spending a fortune on building data centers and all of this stuff. And we've got all of these companies going public. So, you know, people wanted it. Yeah, but the scale of them is sort of beyond anything we've seen before.

17:49So people are getting what they want, which is the opportunity to invest in this stuff and these companies investing in stuff rather than hoarding cash. Yeah, big win for the bankers that are underwriting these companies too. Patrick Boyle is a professor at King's College London and a former hedge fund manager. And he is the host of one of the most popular finance YouTube channels. Patrick, thank you so much for joining us again. Appreciate it. Yeah, thank you for having me on. After the break, NVIDIA reports earnings. And by the way, we're heading out on tour next week. So for more info and to get tickets to a show near you, head to ProfitMarketstour.com.

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20:48Terms at aka.ms slash college pc.

20:56We're back with ProfG Markets. NVIDIA posted earnings last night and the entire economy was watching. The chip company had beaten earnings expectations for 18 of the previous 20 quarters. And this time was no different. Total revenues came in at over$81 billion, up 85 % from the same period last year and beating analyst expectations. NVIDIA also authorized an$80 billion stock buyback and a massive dividend hike, signaling a confident outlook for quarters ahead. Still, investors weren't entirely impressed. The stock whipsawed after hours. So here to give us a breakdown on NVIDIA's earnings, we are speaking with Zed Francis, CIO and co-founder at Convexitas.

21:46Zed, thanks so much for joining us. Just some of the numbers here,$81 billion in revenue, up 85 % year over year. The data center revenues up 92 % year over year. These numbers are just astounding. Give us your initial read on these NVIDIA earnings. Yeah, I mean, ultimately, NVIDIA has turned into an established veteran company in comparison to what it was a handful of years ago. So as you alluded to, the beaten race is basically what's baked in the cake. That's what everybody's expecting at this point, because that's what they've been doing in the past. And we see this stock moving, but kind of benign, ultimately.

22:26Like, I'm a volatility guy at the end of the day, and the options market was pricing in a 5.5 % move in NVIDIA on these earnings. And, you know, the entire range of after hours were obviously well inside of that. So I think we're kind of at the point where NVIDIA is the new Apple. Almost, it's just a boring event, even though it used to be the main show for the last handful of years. Right. Yeah. In that sense, I mean, the fact that they are authorizing$80 billion in new buybacks, they're raising the dividend from one cent to 25 cents per share. I kind of see that and I love that. It's like they're owning the fact that they are an established, profitable company.

23:09And it does seem quite Apple-like in that regard. Did that stand out to you, the fact that they are returning that money to the shareholders? Yeah, I mean, it's a very interesting sector, right? Because ultimately, semiconductors are viewed as hyper-cyclical. But NVIDIA has kind of disrupted that concept over the last handful of years, right? And I bring up Apple because I think it's a reasonable parallel. Like Apple started as hardware, then started building their network, and then started building services. So even though hardware is the main driver of Apple's business in terms of top and bottom line, there's more confidence in reoccurring revenue from that business than a traditional cyclical hardware company.

23:52And NVIDIA is trying to follow that game plan and has reasonably been successful over the last couple of years to establish that concept with the market as a whole. And the reason they're kind of able to do that is they're the highest value add in their space and a decent amount of why folks are purchasing their chips versus somebody else outside of them having this spread in comparison to the rest of the market in terms of the value add is also software. So they've been trying to make that pivot to have the market view them as more reoccurring revenue business rather than a pure cyclical, which traditionally the semiconductor space has been.

24:29Yeah, what is the argument on that front? Because, I mean, on the one hand, they're just printing money right now, but so are many of sort of the memory stocks, sort of the SanDisk as an example. And the concern there is, you know, there's a gold rush for data centers right now. Everyone's trying to build a data center. Once they're built, though, maybe that's it. At which point, what is NVIDIA going to sell? Is that a concern for the company? Is that something that they are addressing and talking about? Yeah, so you bring up a perfect point. It's very much a barbell industry within the same exact sector.

25:07So you have NVIDIA trying to become less cyclical. They're definitely the least cyclical of the group. And the memory guys on the other side are the most cyclical. So what does that mean in terms of valuation and how you think about the business? Well, NVIDIA has more forecastable revenues in the out years beyond, you know, years one, two, three. And so because of that, years ago, they were the first mover in terms of valuation because people gain confidence in the, you know, out years, you know, the years three plus and their ability to produce those revenues. And thus, you get a higher valuation.

25:43If folks believe that a decent amount of your ability to produce those earnings is actually reoccurring, then you're naturally going to get a higher valuation, which is exactly what happened with Apple, again, from kind of 2013 through live. It went from a teens P stock to a mid-20s plus simply because the confidence of those reoccurring revenues were grown, and NVIDIA is trying to follow that path. opposite side, those memory folks, you know, they have a click, right? You know, it is a purely commoditized business where right now they're on the right side of the supply demand dynamic where they're raising prices dramatically, expanding those margins.

26:24But the market's belief is there is a hard cliff where eventually they will go back, you know, to where they were before. And that's why when you look at a, you know, a micron, their forward P is like a 12-ish, But ultimately, that's because, well, we have confidence in the next 18, maybe 24 months of earnings. But after that, very, very little confidence. So it's all about discounting what we know right in front of us versus that longer term kind of DCF valuation of something with reoccurring revenues. What do you make of the NVIDIA valuation at this point? I don't have the multiples in front of me, but the stock's trading at around$220 a share.

27:03It's up 18 % year to date. It's up 66 % in the past year. How are you feeling about the valuation at this point? Yeah, I mean, it's a Ford valuation in mid-20s is about in line with the S &P, technically a little lighter than the market as a whole. So it still has a little bit of that cyclicality priced into it. But I would say it's in the reasonable realm. You know, it's the largest company in the world. It's tough to grow exponentially, even though they continue to do so in the short term when you're this large. where the memory folks are on the opposite end. It's the expectation of that massive decline in earnings has successfully been pushed out over the last six, seven weeks.

27:49And that's why we've seen massive moves in those specific stocks. But they're always going to be hyper-cyclical where the earnings that you're going to hopefully earn as a shareholder are right in front of you rather than over the next couple of decades. Yeah. Final thing that is kind of interesting, no shipments of chips to China this quarter from NVIDIA. They shipped$4.5 billion in the year before. I mean, this in context with Jensen Huang jumping on the plane with President Trump going to China. I believe that was last week. I think that's right. Did we learn anything on the China front? Is China going to be a business for NVIDIA?

28:32Is it not? Where are we on this? Well, I think we're a little in between whether or not China is actually receiving the end product via different routes rather than directly that might still be happening on the side. But that is a potential growth engine, right? If we actually get some more level-headed relationships with China, that may reopen that market directly for them. But I wouldn't be surprised if they're getting a decent amount of that revenue through other sources. Zed Francis is the CIO and co-founder of Convexitas. Zed, thank you so much for breaking down these NVIDIA earnings. We appreciate your time.