SpaceX Forecasted to Burn $350B by 2030, How xAI Went From Chasing Anthropic to Powering It

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1:13welcome everyone to the information's ti tv my name is akash pasritcha it is friday june 5th we start today with some new revealing forecasts for spacex which is angling for the biggest IPO ever next week. We'll break down our exclusive reporting on new numbers that Goldman Sachs has modeled out for the company with our Deputy Bureau Chief of Finance. We'll then dive deeper into the cat and mouse game playing out between Anthropic and XAI. We've got exclusive new reporting on the relationship between the two companies. And we'll close out the show with our scoop that data center developer Switch is in talks to raise money at a valuation of at least$50 billion.

1:55We'll look at what that means for the broader data center capacity crunch. It's going to be a fun Friday show, so let's get right on into it. SpaceX is planning what will be the biggest IPO of all time next week, most likely, but the information has exclusive reporting that Wall Street analysts suggest the company might need to raise even more money in the years to come. I want to bring on Deputy Bureau Chief of Finance Corey Weinberg to break down his reporting. Corey, welcome back to the show. It's great to have you here. So SpaceX is going to go out. It's going to try to raise$75 billion. And your reporting suggests that Wall Street thinks they're going to have to raise even more?

2:37That's exactly right. These are numbers that the investment banks are forecasting, specifically Goldman Sachs. And I've reported on these types of numbers before in the run-up to, you know, sort of significant IPOs. You know, it's pretty standard practice for the analysts at the investment banks to get their cues from the companies themselves on what their forecasts are. And then the analysts and the bankers at the investment banks essentially pass those on verbally to sort of accredited investors in the IPO. And then we get our hands on them. And usually it's, you know, it's an interesting exercise because, you know, who can really see the future?

3:29You know, are these forecasts super regressive? Are they conservative? regardless, the company is going to be held to this standard. And what I found most interesting about these numbers was how revealing they were in terms of just how much money Wall Street expects SpaceX to burn in the coming years, so much so that the largest IPO of all time won't get them through 2028 if their cash flow numbers are correct. You know, it's funny, Corey, because we don't know how much goes into these models. I mean, these are a lot of conversations, a lot of number crunching, but really what I'm imagining is, you know, some senior banker looking at the forecast and looking at some growth rate for, you know, expenses or something, you know, and maybe a little something around the line.

4:24This looks a bit low. Let's, you know, let's raise it a bit. I mean, it's a modeling exercise really at the end of the day, right? Right. It's a model. It's a modeling exercise. But, you know, usually the analysts and the banks want to, you know, sort of be within some sort of realm of consensus. They want to be around where the company themselves have told them that they're modeling. And usually they tweak it a little bit and they, of course, have their own intellectual assumptions around around the numbers. But but But yeah, no, it's the reason why I think folks should take these numbers at least somewhat seriously.

5:04And it's not just an exercise to be like, well, they're just trying to pump up the IPO. They're just trying to make everything look really good. Is it because after they go public, we're going to be looking, everyone's going to be looking back at these numbers. The banks are going to publish these numbers after the IPO and the company, you know, SpaceX, and then obviously any other company that goes through this are held in some ways to this standard. You know, so they are worth taking seriously. So let's talk about then the details of this forecast. So most of this burn is coming from the AI business and the capital investments that the company is going to have to make?

5:41Yeah, 100%. I think about three quarters to 80 % of the CapEx is for AI in the coming years. Which is notable because, you know, there's a bunch of things they're spending money on. There's Starship, there's Starlink. And how do you figure that SpaceX would then raise this additional sum of money than after the IPO? I mean, probably the debt markets or they would tap the equity markets again. I note in the story that in conversations with Wall Street investors, SpaceX executives, including Elon Musk, has sort of played down the idea that they would raise even more equity and dilute shareholders further after going public.

6:23We'll see if that's actually true. And we'll see what the relative ease of raving debt versus equity would be for them going public. And so these are the latest forecasts that we have from the bank. What's your – from a bank, I should say. The lead bank. The lead bank. Okay. So it's what's setting the pace here. What is your – what's the temperature then on – I mean, these are the numbers. What's the temperature on how analysts feel about these forecasts? What investors are feeling? I mean, was this sort of an unwelcome surprise to them or were they expecting this? Yeah, I talked to one in a large buy side investor, you know, who said like, oh, our, you know, obviously our people are doing our own models based on the S1, based on feedback from the company.

7:15Like, we're going to do our own work, not just listen to the banks. And basically, he was like, yeah, it was like everything was 10 times larger than we thought. Everything was a lot larger than we thought. Revenues, cash burn, they sort of turned up the dial on these numbers. Because let's talk about some big numbers. Let's sort of set the foundation here. Last year, SpaceX had about$18.6 billion in revenue. It burned about$14 billion. So that's$23.5 billion. Its revenue is expected to more than double this year. That's in part thanks to Elon's new friends at Anthropic. and they're renting out Colossus Compute.

7:56But revenue is expected to go to about$38 billion. Cash burn also more than doubling to about$30 billion. And then let's fast forward to the end of the decade or to the start of the next decade in 2030. Revenue is expected to be$474 billion. So up from$18 billion this past year. So that's quite the jump. And then over that time period, They're expected to burn$350 billion. That's largely from CapEx due to AI. That's from data centers in space. That's from TerraFab. So, yeah, the numbers are really big. So$75 billion of what they're hoping to raise in the IPO, the$350 billion that they are slated or forecasted to burn through 2030, did the models have any indication in there?

8:49I mean, beyond the$75 billion, how much they might seek to raise then in the years after? I mean, they're not going to be able to raise. No, there's not that level of detail and modeling. And let's be clear, these are coming from, there's multiple steps removed here, remember. It's the companies forecasting what they think are going to happen, the banks then taking those cues and making their own assumptions about what's going to happen, and then the banks telling the investors verbally these are not like these are not uh numbers handed out on a page across wall street leafleted around uh these are these are like phone calls and so um you know take them with sort of that sort of grain of salt i suppose but uh they're not usually that level of specificity or or color as they as they say on the street right corey i want to ask you about another headline this week so the s &p 500 came out and said that they will not fast track the process for spacex to join the index was this a surprise to you a little bit um only because it seemed like there had been this freight train of all these index providers saying we're going to allow you know sort of these newly listed huge companies into our index um you know you've seen most notably first one to do it was the nasdaq 100 which is obviously part of nasdaq which is uh the exchange that spacex is listing their shares on um and so there's like a clear no no one sort of has like no one's written the story or proven that like nasdaq changed their rules to allow spacex in to get the listing so let's just be clear about this they have their own rationale now.

10:35But people raised their eyebrow at that decision. And lo and behold, they did change the rules and SpaceX is listing on NASDAQ. The S &P has always been seen as a little bit more, I don't know, by the book conservative. They have a little bit less of a commercial incentive to change the rules. And from what I've been noticing online, and also from talking to folks on wall street like there's been a bit more pushback on this idea of uh sort of uh getting rid of sort of various rules around seasoning periods after an ipo to you know sort of and also not requiring them to hit any kind of level of profitability and so there's been a bit of a pushback and so we don't have visibility into why you know exactly why smp um sort of did this but uh what about the implications of this though so i mean the reason it happened is unclear but But now looking ahead, it's not saying SpaceX will never make it in, but in terms of investor uptake, even just marketing just at the outset, what are the implications for it?

11:43It means they won't, you know, in the months ahead after the IPO, when there is going to be a significant unlock of insider shares available for sale, when employees, former employees, these investors are finally going to be able to sell. There won't be this sort of wall of automatic or passive demand to scoop up those shares at whatever price. There's going to have to be more active managers or active retail investors making the decision themselves to buy the shares and saying, this is a good deal. It's not just going to be an automatic decision that sort of an ETF does because the index then owns it.

12:35And so that's pretty big. And S &P is obviously the big kahuna there. Right. And they'd have to look at those projections,$350 billion in burn through 2030. They'd have to make their own decisions saying, you know what, I'm willing to invest in that. It is certainly an interesting dynamic to watch. Corey, I want to thank you for coming on. That is Corey Weinberg, our Deputy Bureau Chief of Finance, here at The Information. For more coverage on the SpaceX IPO, I want to go deeper on XAI. The Information's Elon Musk reporter Grace Kay has a story out this morning unpacking the complicated dynamics between XAI and Anthropic.

13:17She has some great inside details on their relationship. And to put those details in broader context, I want to bring on co-executive editor Martin Pierce for this week's edition of The Editor's Cut. Martin, welcome back to the show. It's great to have you here. Hey, Akash. How are you? I'm doing well. So we know that Anthropic is renting compute from XAI. What else did we find out from Grace's reporting about the relationship between these two companies? Well, her story kind of revealed how over the last year or so, XAI has played this kind of cat and mouse game where they were tapping into Anthropic's AI to help develop their own models and how Anthropic tried various things to cut off people who were doing that.

14:06and XAI tried to various ways to get around that, including by having their staff access Anthropic through personal accounts. So, I mean, I think what the story is a really good reminder of is that XAI's AI development is a mess. I mean, we all know that Elon has fired most people who he originally hired at xai he has a tendency to set unrealistic deadlines um and when they not met he just fires people um and i you know why this is hugely important is that spacex in what they are telling investors they are projecting that ai will make up i think uh in corey's story last There's no two-thirds of the projected revenue that they will earn by 2030.

15:01And yet their AI business is a mess. And, you know, certainly right now, the only revenue they really have in the AI unit is actually coming from X, which is a non-AI service. It's, you know, mostly advertising. So if you're investing in SpaceX for its AI angle, think again. So let's go back to Grace's story for a second. So this idea that Anthropic is cutting off access to XAI from using its tools. I mean, they are rivals. They're two competing AI labs. Is that common? I mean, I'm thinking about like cloud service providers. It's not only XAI. They also cut off OpenAI. I mean, this is, I think it's fairly common for AI labs to rely on other people's AI to help within the development of models.

16:02It just seems that Anthropic tried to cut off people doing it. And Elon Musk has admitted under oath that XAI has done this. I think he talked about how they used OpenAI's tech, but Grace's reporting details how they were also using Anthropic. And all that was, I think, before XAI decided that they had all this spare computing capacity, they might as well rent it out to Anthropic. So that is the irony of that rental deal. Right. But I guess, I mean, if you just think about all the other waves of technology, innovation, like, have we seen a version of this story before where rivals use each other's technology without them knowing it, cut off access?

16:52You know, and I'm maybe thinking about the corporate data wars too. You know, there's that rivalry playing out. Is this a common thing that happens with rivals, cutting off access to each other's tools? Oh, I mean, the data wars, as you mentioned, is the best recent example of that where software firms tried to stop their customers from getting access to data stored in their apps because the customers wanted to use it in other apps that competed with them. But I think there's a long history of tech firms using other companies' tech to develop their own. I think the most famous example might be Apple using Xerox's technology to develop its original user interface.

17:42So it's not – I mean, I think people build on each other's technology. The real point here is that XAI isn't really in a position to be competitive in developing its own models, largely because Elon doesn't have the patience to allow researchers to do the work. He sets these deadlines, they don't meet the deadlines, and he fires them. And this came up during the OpenAI Elon trial, where I think Greg Brockman made the point that when Elon was at OpenAI, he didn't have the patience and he didn't have the temperament for the long times that it takes to develop AI technology. And this is hugely important for people who are looking at the SpaceX IPO because they are pitching themselves as an AI firm.

18:38And, you know, if you think Elon Musk is going to develop new AI, then maybe you should think again. Now, the other interesting detail in Grace's story was the cursor integration here with XAI. It sounds like they are increasingly looking to Cursor for maybe some of the answers here. And there was even the detail that Cursor staff are spending more time at the office even. Right. And that's something I think we've actually reported before, that Elon brought in the Cursor people to talk to ex-AI engineers. And shortly after that, they fired all these ex-AI engineers. So I think it's just more of the same as what I'm talking about, is that his frustration with the rate of development manifests itself by him just firing people, which, you know, maybe that works for Tesla.

19:33It certainly did not work at Twitter, where he basically destroyed that business, and he's hidden that by merging it into XAI and now merging XAI into SpaceX. But, you know, that is it.

20:16play out. Well, I know you're aware of this, Akash, because you talked to the Netscope CEO about it yesterday. So, you know, the takeaway is that these cyber security executives love the fact that we're moving into AI because AI is going to allow hackers to much more easily infiltrate corporate data systems and threaten everyone's data and maybe steal the money out of their bank account. No one likes me talking about that because they don't really want to believe that could happen, but believe me, it will. And so the security people think this is a great opportunity and that's what they've all been talking about.

20:59The point I was making in a column earlier in the week was, well, if that's happening, why is their revenue growth not speeding up? In fact, for many companies, it's actually slowing down. The answer might be that it's still to come. They're all meeting with companies now to talk about mythos and AI. So maybe we'll see more growth in the next year. Maybe what will happen is that businesses will cut back on spending on some kinds of cyber tech and replace it with AI defense. We just don't know. But investors certainly are very hopeful they've been really they've lifted the stocks of CrowdStrike and Palo Alto by 50 percent so far this year and yet the so far the impact on revenue is not that great so right yeah well and and the I mean the point that uh the Netscope CEO made to us is he said we're just training our teams it's coming we're training you know the point that I made back to him was but you're still it's still de-seller, you know.

22:10I listened to the interview and he definitely avoided answering the question, which is what all CEOs do when they are confronted by reality. Right. I mean, and so, you know, we'll have to see how the forecasts come, but it's certainly something to watch. Martin, I want to thank you for coming on. That is Martin Pierce, our co-executive editor here at The Information. The Information has exclusive reporting that data center developer Switch is in talks to raise billions of dollars at a valuation of at least$50 billion. My colleagues Anissa Gardizi and Valida Poe reported that story. I want to bring on our San Francisco Bureau Chief Jason Dean to break it all down.

22:55Jason, welcome back to the show. It's great to have you back. What is Switch, the data center company? They are just that. They're a data center company that had been around for quite a while and obviously these days all about AI. Are they helping the big hyperscalers develop data centers or how big are they? They're sizable, but no, they're not in the hyperscaler realm, although they have five locations. They're big in Nevada, where they were founded. They're also in Michigan, they're in Atlanta, they're in Texas. And, of course, they are trying to grow, which is why they want to raise more money.

23:39So do we know how much money exactly they're looking to raise? Looking at billions of dollars, we don't know exactly how much. And, you know, as Nissa and Valita reported, the details of the plans are not finalized. They're still in flux, so things could change. But billions of dollars at a valuation above$50 billion. But there are some big names who they reported are considering investing, right? That's right. That's right. They're talking to a range of investors, but including PE firms with big names, among them KKR and Brookfield. So, you know, those are obviously serious players in the investment world.

24:26And yeah, it's not entirely clear what the specific plans are, but presumably that money will be funneled into building more data centers and expanding the ones they have. Right. So, look, I think it's easy for these data center companies to sort of think of them as just another data center. But, I mean, if we just open the aperture a little bit, I want to ask you about this risk of overcapacity, which is something that all these data center companies face. Heyman Thanaja, the CEO of General Catalyst, was on the show last year, and he said there might be some pain. You know, some companies will suffer.

25:04When you think of the data center companies, is it the case that they lock in these long-term contracts and if you lock them in now, you're sitting pretty for the next three years? Or is it the type of business model where you start the project and then it could be interrupted in a year if the customer says, hey, we don't actually want to build it down the line? I mean, it's a great question. I think we don't know the details of their financial agreements with their customers, but I would venture to say that if we switch into, sorry, no pun intended, a period of overcapacity in AI data center worlds, I don't think anybody is going to be fully insulated from that.

25:46You know, we're just, the whole thing we're seeing right now, and this is a part of it, is an incredible go, go, go mentality that stretches from the biggest companies in the world to smaller niche players in the AI data center world that are able to build capacity and sell it, including to the hyperscalers, because there's just so much demand right now. If that changes, yeah, I think people re-examine contracts and companies that are sort of not front-center in the sense of the hyperscalers, but a little off further toward the margins will be at some risk. Now, Switch was once a public company itself, right?

26:32That's right, yeah. They've been around for a long time. This is a very established company. They were founded in 2000. They went public, I think, in 2017. And then they were taken private in 2022. They were taken private at a valuation of$11 billion, including debt. So they're looking at quite an increase in the valuation. They've also raised a lot of money from debt issuance in the past several years. Last summer, they said they had raised$20 billion just since 2024. And they've announced a bunch of additional debt issuance since then. So this equity deal that they're talking about is far from the only way that they've been raising cash to invest.

27:20and maybe they might go public in the future as well if they need to. That's right. Yeah, and he simply reported that this could set them up. Obviously, there are lots of caveats and ifs, but for an IPO as soon as next year. Great. Well, Jason, I want to thank you for coming on. That is Jason Dean, our San Francisco Bureau Chief, here at The Information. That does it for today's show. A reminder, we are on this stream Monday through Friday at 10 a.m. Pacific, 1 p.m. Eastern. If you can't make it then, episodes are available on theinformation.com, on our YouTube channel, or wherever you get your podcasts.

27:55Make sure to follow us on social media on X, Instagram, TikTok, and LinkedIn. I'm looking forward to our next show on Monday. Have a great rest of your Friday, and have a great weekend. Bye-bye for now.

28:17Thank you.

28:47Thank you.