Gavin Baker: SpaceX Might Be the Greatest Company of All Time

0:00Welcome to the show. How are you doing? Doing great, man. How are you guys? Fantastically, right? SpaceX IPO. It seems like everything went just flawlessly to a tee, like to the point where it wasn't even dramatic. Let's give a round of applause for the banker. The banker. It's like 20 % perfect. 20 % pop almost to a tee. Yeah, what I mean by that is like, it would have been more dramatic if it had like popped up 70 % and then went down 30 and then went up 50 and it was drama. drama, but it was just like perfect execution from start to finish. Was that how you interpreted it? I thought Goldman Sachs and Morgan Stanley did a very good job.

0:37Yeah. What do you think the market is looking for SpaceX next? Is it all eyes on the first earnings report? Like, where do we go from here? Because there's so much of the SpaceX story pre-IPO that was a decade out, five years out, two years out. But is the market going to be processing quarter by quarter plays like many other companies? Well, I think the market is always, you know, quarters matter. Yeah. You know, the runners on X, you know, it's like they're these reply people at X for any topic or experts. Yeah. But somebody once told me a marathon is 26 one-mile runs. Yeah. And so, you know, and then all the runners were like, no, that's not true at all.

1:19running you know obviously running miles different than running a marathon but you know every quarter matters uh but at the same time i do think if you look at how um the market has has looked at tesla over the last five six years you know amazon during kind of the days of you know when they were building out aws and then um you know kind of their their retail distribution infrastructure when they'd go through these investment cycles i do think the public market has a much greater or tolerance for investment and a much longer time horizon than a lot of people in the venture ecosystem give it credit for.

1:58By the way, this is Foxy in the back. He's one of the analysts here at Atreides. I was just listening to him on the Brad Gerstner podcast. I think he chimed in on that, right? You brought him with? There we go. Yes, he did. But he did the work on SpaceX. So So I thought you guys might want to talk about that. But I do think that I'm not sure the story is as far out as you made it seem to be. I think there are two variables that are going to matter a lot over the next year. The first is just how quickly can they bring on terrestrial compute? It does seem like they monetize gigawatts at a higher rate than anyone else.

2:37and we know from Jensen that they bring on data centers faster than anyone else, per Jensen's words. And everyone in the ecosystem is really incented to get land power in the hands of people who can energize it because everybody starts making more money when the GPUs are energized. um so you know if they can what what are what what was the altimeter figure for how what they were monetizing gigawatts at foxy do you remember for what you do well i think it was like two to three wasn't it like at least two times higher than like average neocloud pricing and that's partly due to scale and customer quality and things like that but it was meaningful yeah so they're doing 50 billion gigawatt on google deal so how quickly they can add gigawatts really matters.

3:28If you can energize two, three, four gigawatts in the next year, that's a lot of revenue. Now, you know, that prices may go up, they may go down, but that's really going to matter. So all eyes on Colossus 3, 4, 5, 6, 7, 8, 9, 10, et cetera, at least in the short term. Yeah, or macro hard, macro harder, macro... Hardest. to that macro artist. And then I think Cursor is another big variable. We talked about it with Brad about how Composer 2.5, after three weeks of RL and supervised fine-tuning Colossus 2, it's kind of Pareto dominant. So what's going to happen when it's applied to a bigger, better bass model?

4:16I do think cursor being in you know half the fortune 500 is interesting so I think those two things you know well I mean I'm super excited for going to Mars and asteroid mining and yeah and you know a city and mass drivers on the moon like all that stuff is awesome and I think there's a you know decent chance it happens in my lifetime I just think there is there's much more tangible near-term drivers here. Yeah. How do you think about the tension of the cloud business versus their own application and model business? I think a lot of people were surprised when the initial Anthropic deal happened purely because knowing Michael Truel, he would have been very excited.

5:02That's my compute. Yeah, yeah, get access. He's like, hey, you got to share? I'm the only child around here. And it feels like you can imagine SpaceX bring on a lot more compute very quickly. But at the same time, every lab has had to go through this tension of how much compute do we allocate to training versus inference. A way to interpret that is that maybe the team at SpaceX is pretty confident in their ability to bring gigawatts online. Yeah, that makes sense. And the altimeter figure that they've ordered 20 % of the Rubens, and the Ruben is an epic chip. Like Blackwell, it was really hard to get it online.

5:42Ruben is kind of a more drop-in replacement. It's a really, really good chip. You'll have the Grok LPUs integrated at some point in the next six, nine months. So one way to interpret that is they're pretty confident that they can bring data centers online pretty quickly. um but i also i i don't remember all all of the details but i do think there there was an out in the anthropic agreement that if yeah and the and the google and the google deal could be short term that's what i just meant it's like it is there is like a tension there where if you you know there's a moment where maybe you want to compute but you don't necessarily have all the revenue yet.

6:25And so you could see anyways, I'm very confident they can figure it out. On the topic of like Elon web services, is there a world where SpaceX winds up building out more of what looks like AWS? Like we've seen between OpenAI and Anthropic, there's this tension of like, you got to be on AWS because ITAR or, you know, the ecosystem or enterprises just want to be on AWS. They won't even go over to Azure or Google cloud for whatever. And you could imagine like it might, is it enough to just be a token factory or do you need to have, you know, a database and an in-memory storage and, you know, cloud storage and cold storage and all the things that ABS provides?

7:06My thought is that being a token factory is more than enough for the next five to 10 years, man. We are, yeah, we need more token factories, but we'll, we'll see. And if they need that stuff, like they will build it. Yeah. How are you thinking about the other hyperscalers, the other big tech companies, we were sort of puzzling over meta strategy at this point. Tons of resources, cash flow, data centers, they have experience there. Maybe they're not as fast as SpaceX, but there's a lot there. But it's a completely different motion to go into token factory. And yet there's still a lot of demand.

7:43So how do you think all of that plays out? Well, I think there's many ways to go to the token factory business. You could, if you're meta, You could just say to someone like Fireworks, hey, here are 100 ,000 GPUs. We'll take a revenue split and we'll see what happens. I am increasingly looking at EV to net PP &E as a valuation metric. Just with the idea of being installed atoms on Earth, I think are going to appreciate in value. This is a little bit that halo trade that I think maybe Goldman Sachs came up with. you know, high asset value, low obsolescence. Yeah. But Meta, you know, Meta's EV to net PP and E multiple is in an interesting place.

8:29It just suggests that the market has an immense amount of skepticism about their ability to monetize their own asset base. Interesting. And I think that's, I think that's warranted given that all we've really got out of management is this concept of personal super intelligence. and it would be different if meta AI was like at the top of the app store and everyone you were talking to was like yeah you know i'm using meta AI or there even there was like a killer feature within instagram yeah like oh people are shopping in instagram now and i think no one no one doubts that like once zuck has an ai product with a billion dollars of revenue he can take it to to tens of billions but it's unclear i feel like you know going into enterprise like you know what is this api business gonna gonna look like we know they can use the gpus just on making the ads product better at the end of the day and um but there's a lot of questions look i think a few things i do think if i look at the way different players are behaving it feels like everyone thinks we're entering the end game everybody you know loves to use these chess analogies and it looks like the end game maybe here sooner than we think i think that's why open ai is cutting codex pricing simply because coding you know coding tokens are so valuable and if you don't have enough of them you may not be able to get into this rsi loop that that everyone is you know pushing for um And I think if you're Zuckerberg, you feel that acutely.

10:03I thought Muse, what is it? Muse spark. It was, to me, it was an upside surprise. And it made me feel like, you know, what's the, what's from Talladega Nights? Or what is it? So you're saying there's a chance? Hell yeah. So you're telling me there's a chance? I mean, the other quote from Talladega Nights is, if you're not first, you're last. There's so many good books in Tel Aviv. Show the windshield. Yeah, 100%. But I think if I'm pretty confident Mark Zuckerberg has proven to be a good entrepreneur over time and has been willing to pivot. It's so funny. Right now, Facebook is telling investors there's no chance that we're going to monetize GPUs externally.

10:59Well, like 10 days before, they announced all those layoffs, which I think was at the end of 22. If not, I don't remember when they started to announce the layoffs. It was shortly after Brad, maybe two months after Brad wrote that letter to Mark where he said, you're the king you can do whatever you want but this is what i might respectfully encourage you to do um you know they went from saying we're not going to do that we're going to keep investing to you know super focused on opx in a couple of days man so it's like people they meet with meta and they hear oh you know we're not um we're not going to monetize our gpus externally well i don't know check back in a few hours yeah yeah no it's like everyone it comes down to like everyone has a price you look at you look at elon and anthropics relationship four months ago uh and then you look at kind of kind of as the opportunity unfolded it made sense for them to partner i wanted to ask how on the meta thing i think there is one point that's important what ultimately drives behavior for all these big cap companies like getting to ai i think that does feel um existential for all of them but the stock price also really matters because if you don't if the stock goes down you know you gave people a grant at this price stock goes down you know your engineers are unhappy and it's tougher to get to where you want to go if you don't have you know these you don't forget the 10x engineer people are talking about the 10 000x engineer you know you're not going to get there if you don't keep those 10 000x engineers yeah so just i think like we'll see we'll see what's better yeah yeah uh how did this ipo uh update your your general kind of framework for the role that retail is playing in capital markets uh a lot of uh it was very funny last week to see people like uh say like oh the ipo is only 2x oversubscribed by retail yeah they're jumping all these other you know three billion dollar ipos were 10x oversubscribed it's like no we're We're talking about, you know, a very order of magnitude difference here.

13:11But it still feels like retail is going to play a very, very important role over the next 12 months, maybe more so than ever, given that the hyperscalers are now running, you know, cash flow negative. You have the conflict in the Middle East, right? There's rebuilding efforts that needs to happen. And so I feel like retail, this is kind of retail's moment now, maybe more than ever. Yeah, well, so a few things. One, people say retail in a pejorative way. And I would just say stupid is as stupid does. And like, you know, we track, you know, there's all these indices of retail favorites. And man, they're up a lot.

13:53And they're up a lot in 25. And they're up a lot in 24. You know, so kind of stupid is as stupid does. So I'm not, you know, like I think retail is probably outperforming the overwhelming majority of professional money managers, whether they're, you know, private equity managers, venture, you know, public equity managers, whatever. So like retail, I don't think it's a majority. I do actually think in the case of SpaceX, I'm not sure, you know, you process so much information. I'm not sure where this comes from. But I actually think after the IPO, you know, for whatever reason, some of that retail stock may have gotten allocated to people who weren't flipping it.

14:36Because my understanding is there was more institutional buying. I don't know where this after the IPO was retail buying. Now, I'm sure, you know, retail is very sensitive to momentum. So maybe what's happening today changes that. But I think another really underappreciated thing about the SpaceX IPO is that over 10 ,000 SpaceX employees bought on the IPO. And that's just, you know, everybody does all these lockup analyses and, oh, how much stock is going to come to market. And, you know, for sure, there's all these triple layer SPVs or whatever. Or maybe there are, there are, people speculate there are.

15:15And I'm sure some of that will get unwound. But the reality is that SpaceX employees own a lot of this. And if you're an employee, or even if you're an investor who has an SPV or you're directly on the cap table, you've had a chance to sell every six months for the last 10 years. If you wanted to sell, you could have sold in whatever when they did that offering in the second half of last year. So I think the supply-demand dynamics here are going to be very interesting. But with retail in general, yeah, man, they've been a more powerful force in the market over the last three and a half years than at any other time in my career, including the year 2000 bubble, which I think this is nothing like, by the way.

16:09But yeah, they matter. And stupid is and stupid does. I'm interested to go a click deeper on the idea of like value will accrue to companies that are in the token path. I think that phrase is extremely powerful right now, but I want to sort of expand it and understand the fringes of the token path because we talked to Matthew Prince at Cloudflare, stocks at all time highs. It's delivering tokens at the edge and obviously there's an immense amount of AI agents that are interfacing with different websites, they need to be distributed. So there's a lot of value there. But is Cloudflare in the token path if they're the one finally sending you the packet of tokens at the edge?

16:57Or does that not count? How do you think about that? Every CDN has this business. Akamai, they signed, what was it, a$1.8 billion with Anthropic. And if you have all these points of presence and you can deliver really low latency tokens to high value users, I think what's interesting for all these CDNs is they're getting a massive premium for that latency. It turns out one of the lessons from Cerebris is people are willing to pay for speed. And you see that in the prices these guys are commanding. But I do think, I mean, my gut is in terms of tokens consumed on planet Earth, these CDNs are delivering less than 1 % of them.

17:42I mean, maybe less than 10 basis points of them. Most of the tokens are happening internally, and then you just get the result. Would I say that these guys are in the token path? I mean, I would say they have a path towards being in the token path. And they have part of their business that's in it today. And like everyone, they're trying to move it more and more there. Yeah, I mean, Matthew was talking about co-locating NVIDIA servers on the edge, specifically for the delivery of voice models, because you want those to be very low latency. Maybe you want your coding model to go off and cook in Virginia for 20 minutes or an hour and then come back to you with the final result.

18:22But if you're trying to actually talk to a model, you probably want it as fast as possible. What about on the opposite end? Wasn't there that startup that NVIDIA just invested in that will pay some money to put a 4GPU server on the outside of your house? GPUs are going everywhere. Going in your bed eventually. I mean, it's full circle, too. Wasn't Jensen talking about stuff like that back during the original crypto cycle, being like everyone's going to be mining? Yeah. The Tesla Powerwall is a version of that for storing energy. It doesn't store compute, but it stores energy locally on the edge, off the grid.

19:01There's a lot of powerful things that get unlocked by that. What about land? Is land in the token path at some point on the extreme other end? Because people are obviously searching for going further and further upstream. They found a toilet company that makes a particular material that goes into semiconductor supply chain. People are hunting for the final ingredient. Maybe it's just sand that turns into silicon. Yeah, I do think the bottleneck bros, as they are called, are... The bottleneck bros. This bottleneck trade is kind of nearing its end. Okay. And, you know, I did... You know, the Wall Street Journal had this story about this Japanese company that makes...

19:42I forget what they make. Isn't it Toto? Ajinomoto. Yeah. Ajinomoto. And, you know, everybody's in this because they thought they were going to raise prices. And then they just said, we're actually not going to raise prices. This is the wrong thing for us. And I almost posted yesterday on X, welcome to Japan, to all of the bottleneck people. But, you know, everybody's, you know, having claw and run. What's the next bottleneck? Yeah. That was the game for the last year. The next game is what has enduring franchise value kind of on the other side of these bottlenecks, whenever that is. As far as land, is land a bottleneck?

20:23Man, I do think the math for orbital compute, to me, once they can reuse Starship, I think the math for orbital compute becomes pretty compelling. You know, it's just$60 billion to bring on a gig terrestrially. 25 is power and cooling you don't need that it's based and so the right comp for that 35 billion of kind of you know it equipment gpu cpu switches um you know memory storage is is that 25 billion versus the cost of launch and one starship is reusable i think the cost of launch is 5 billion so 20 that means you can put a gig into space for 30 billion and the gig on And Earth is$60 billion.

21:06And that$25, the power and cooling, feels reasonably inflationary to me. So I don't know that I would say land is in the token path. Maybe beachfront property, but that's about it. Beachfront property is beachfront property, airplanes, really nice cars. Firmly in the token path. All that stuff is in the token path. I got you. How do you think the events of last week with Anthropic and DC update different countries on their own sovereign AI play? Because there's been attempts. It doesn't feel like many of the attempts have... You can have a powered shell and you can have the best GPUs, but if you don't have the talent, it's going to be really hard to get to the frontier.

21:57And now if you don't have massive usage, it'll also be really hard to get to the frontier. And so do you think the ship has sailed? No. Well, look, look, I think every country is going to want to have their own sovereign AI strategy at a minimum for national defense. I think where that ends up is I saw today that the EU had restricted exports of mixtrall's. I think that's a joke. I think that's a meme. So people have gone so far on the Mastral-Lachette thing, Lachetan, that they're saying it's like mythos is distilled on it and it's breaking all the benchmarks. I think it's a good model, but I don't know that it's quite there yet.

22:35Yeah. But you can imagine that we get there for sure. Yeah. So I think what sovereign AI will look like for essentially all countries really other than the United States and China, although I think China is going to fall further and further behind, is just some sort of you do, you use, you know, you use one of these providers to do some reinforcement learning on your language, your culture, your values. You have a system prompt, you do some supervised fine tuning, and you run that on whatever the best open source model is. I think that's where sovereign AI ends up. And then you run it in your own data centers.

23:14So you feel like it's safe and whatever defense questions you're asking it or whatever, forget questions, whatever, defense and intelligence and maybe policing activities your sovereign AI agents are doing 24 hours a day, you feel like they're safe. Yeah. So I think that's where sovereign AI ends up. And I think there'll still be a big build out for that. But man, sovereign AI at the frontier, I don't see it. Yeah. What do you think the drivers are of the widening gap between Chinese open source models and American closed source models is? China has made a terrible mistake not, you know, taking it.

23:54It feels like the administration has been willing to let them buy H200s or B30s. Oh, yeah. And I think they're on this like, you know, they have this crazy belief that, oh, you know, our own internal chips are good enough. They're not. And then, you know, I think what's making them think that is that Chinese labs are very, very good at distillation. Somebody told me it only took 160 ,000 reasoning traces from 01 and 03 to get the original DeepSeek. You know, they're very clever at industrial scale distillation, running it through multiple APIs, pegging each API from, you know, we've all seen those iPhone farms in China.

24:37You know, they've got the same thing for distillation and they've got, you know, 100 ,000 endpoints distilling these models across every API available. They've gotten really, really good at that. But man, all that goes away if people stop releasing these models at the frontier. And I think Mythos is a side of things to come there. Yeah, yeah. It seems like they're getting much better at locking down the reasoning traces, locking down the espionage. It feels like back during the 01 days, the labs weren't even aware that distillation was so possible that that was something that was such a potential threat for sure.

25:17Jordan, please. Is any part of you worried that you'll never see another company like SpaceX?

25:27Worried is the wrong word. Not worried, but you have to appreciate that a moment like that, it's possible that you have an opportunity to invest in a company like that one time in your career. And thank God you did it, because there's plenty of people that had the opportunity and didn't. Well, I did own 15 % of the video when it was a sub -$2 billion market cap, but I owned 10 % of Tesla when it was a sub -$2 billion market cap. But, um, but SpaceX certainly it's been a special experience for me. And I think there is a chance that it is, you know, one of the most important iconic companies of all time.

26:11I mean, it already is. There's a chance it's the most. Um, and I think in general, it's just like, I kind of want to take a step back and like, all this trillionaire hate from the left it's like the you know there's a great post from my friend um kevin bahaffey saying like oh this is a bond villain who's decarbonizing the world last time i checked people on the left were like the environment connecting uh you know poor people in low-income countries schools and hospitals to the internet at very low cost and he's helping blind people see today and you know interact with the world that's a villain um and then just like there's so many parts of the spacex story like all of the you know blue collar workers who've gotten super well uh if you're opposed to data centers on earth because the environment well spacex is your is your solution so um you know there was another great post that just said And, you know, the left won and they don't even appreciate it.

27:20The world's first first trillionaire, you know, has done more to kind of solve the environment than like everyone else on Earth combined. Yeah, I saw there was another good one. It's like, yeah, Elon could solve world hunger by, you know, market selling every, you know, piece of stock that he has and send the world into a global economic downturn, losing, you know, millions of millions of jobs in the process. Yeah, somebody said that Elon, that the World Bank could solve hunger with five billion. He said, if you prove it to me, I'll do it. Turns out you can't solve world hunger for five billion dollars.

27:59But yeah, SpaceX is certainly, I would say, you know, SpaceX, Nvidia, Tesla, they've all been very special to me in kind of a different way. But man, there's nothing like a rocket launch. And so I just don't think has a visceral experience. I highly recommend everyone listening. You guys, if you have kids, take your kids to a lodge. You don't want to go with SpaceX. Everybody's always like, oh, get me the special tickets. You just literally, you can go to a beach at Boca Chica and be where the special SpaceX viewing area is. You could literally be closer to the lodge. There's hotels near Vandenberg.

28:37Take your kids, see a lodge. It's super inspirational that humans are capable of this. And it's much more visceral than you realize. You know, the sound, the blast of hot air. A lot of people cry. So go see a launch, but there will be a never, I don't think, I'm pretty skeptical that there will be another company that delivers a visceral experience like that. And then listen, if SpaceX puts a city on the moon and then Mars and enables, you know, becomes the British East Indy company, the solar system. I think this will, and there's a lot of hard engineering that needs to happen to go into all that.

29:20This will probably be the most important company of certainly my lifetime, maybe of all time. And so from that sense, I don't think there will ever be anything else like it. And yeah, I guess that is a little bit sad, but you know what? there's so much awesome stuff happening in the world that it's it's it's tough for me to get too down yeah hard to hard to hard to be hard to be too i have i have one last question we have uh um you mentioned owning nvidia sub two billion what is the health of the sub two billion uh market right now is there is there anything that you're excited about is there anything that the bottleneck bros haven't ran you haven't run up to a trillion yet bros have taken everything under 2 billion.

30:03Maybe not even public companies, but private areas. I mean, we're starting to see the knock-on effects of AI and bio and material science. Neuralink was sub 2 billion for a long time, right? And so there are more, not in theme, but accelerated by. So I don't know. There's also just like a SaaS company. There's loads of incredible venture companies, startups under two billion. Yeah. Like loads of them. Yeah. You know, I, I, I, I talked to them, you know, several times a week minimum in public, you know, until the bottleneck bros came along, until AI came along, there was not a lot happening in public small cap land.