Making Sense of SpaceX's First Earnings Report

Space just dropped it's first earnings report, showing strong Starlink growth and the company’s expanding role in AI compute and infrastructure.

In the context of heavy capital spending, the NVIDIA partnership, and share unlocks, short-term volatility is anything but an absolute guarantee. Our main concern though: what does the real, long-term future look like?

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TIMESTAMPS

0:00 SpaceX Earnings
4:48 Unlocks and Pressure
6:00 Data Center Economics
7:57 GPU Demand Explodes
12:13 Gigawatts
14:42 Training the Next Generation
17:09 Starlink
22:33 We Try to be Bears
23:36 Cautious Bulls
28:44 Repricing Risk
29:56 Closing

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RESOURCES

Josh: https://x.com/JoshKale

Ejaaz: https://x.com/cryptopunk7213

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Not financial or tax advice. See our investment disclosures here:
https://www.bankless.com/disclosures⁠

Josh works with Anthropic as a contractor. All views expressed are his own and do not represent Anthropic, its leadership, or its affiliates. Nothing in this episode is investment advice.

Episode Transcript

Ejaaz: Last week on the show, we said August 4th was the day that SpaceX had to prove themselves. (00:00):
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Ejaaz: The first earnings report, every analyst on Wall Street basically was bearish. (00:05):
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Ejaaz: They said that Elon Musk could not pull this off, that this thing is a money vacuum. (00:10):
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Ejaaz: Turns out the opposite was the case. SpaceX absolutely smashed it. (00:15):
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Ejaaz: The revenue is up to $7.81 billion, which is 92% year on year, (00:19):
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Ejaaz: which is crazy for the size that they're at. (00:25):
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Ejaaz: And Starlink numbers doubled to 12 million subscribers. That being said, (00:27):
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Ejaaz: the stock is still down this morning. People are worried about the major unlocks (00:31):
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Ejaaz: that are happening tomorrow where $100 billion worth of SpaceX stocks goes live. (00:36):
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Ejaaz: But Josh and I are here to tell you why that may not be the case and why the market could be wrong. (00:40):
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Josh: Yeah, well, I understand why people are bearish. Like he was on the earnings (00:45):
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Josh: call yesterday, which I sat in and listened to. (00:48):
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Josh: And he's claiming he's like, all right, we're going to build robots with mass (00:50):
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Josh: drivers on the moon and we're going to 1000XR economy on Earth because of it. (00:54):
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Josh: And it sounds ridiculous. And I was looking through the numbers and as I was (00:59):
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Josh: reading this, I was like slowly starting to inform myself on what large companies look like. (01:02):
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Josh: And Ijez, I want to start with a question to you, actually. do you know what (01:07):
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Josh: company had the most annual revenue ever? Like what company is making the most (01:10):
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Josh: money every year? This was really surprising to me. (01:14):
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Ejaaz: Like currently? Like right now? Yeah. (01:16):
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Josh: Like total revenue per year. Like who's making the most? (01:19):
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Ejaaz: I would have to say it is either like an NVIDIA or an Amazon. (01:21):
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Josh: It's not even a tech company. It's Walmart. Walmart topped out at $680 billion (01:26):
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Josh: of revenue, which seems outrageous. (01:34):
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Josh: And I mean, it gets into the pricing thing. Walmart's not the biggest company (01:36):
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Josh: in the world. Why is that? Well, because their profit margins are low, (01:38):
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Josh: their multiples are lower. (01:41):
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Josh: But SpaceX and Elon went on this conference call and he said, (01:42):
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Josh: hey, we actually ran the numbers. And instead of 2031, by the year 2030, (01:45):
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Josh: they expect to have a trillion dollars in revenue. (01:50):
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Josh: That is 40% or 32% more than the largest company on earth today. (01:52):
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Josh: I think we kind of have to unpack what that looks like because I mean, (01:57):
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Josh: that is a tremendous amount of value given the fact that they actually just (02:00):
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Josh: reported a net loss of half a billion dollars, (02:03):
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Josh: which is an improvement, but still a net loss you could kind of break down the (02:06):
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Josh: company's earnings report into these three pillars first it is connectivity (02:09):
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Josh: which is like starlink and all their satellite situations then they have ai (02:12):
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Josh: which was up 250 year over year and then they had space which was up 30 year over year and (02:17):
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Josh: i mean the important thing that you noted you guys is that 32 (02:23):
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Josh: growth year over year is huge sorry 92 growth is huge because for companies (02:26):
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Josh: with 30 billion dollars of annualized (02:30):
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Josh: revenue, typical growth is like 5-10%. So clearly they're doing something right. (02:32):
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Ejaaz: I was keeping an eye on his social media yesterday. And one of the things that (02:36):
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Ejaaz: he said is we are on track for $100 billion ARR by the end of this year, 2026. (02:40):
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Ejaaz: Now, the only other company that I've heard that projection being made for is (02:48):
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Ejaaz: Anthropic. Now, when I look at SpaceX and look at Anthropic, (02:52):
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Ejaaz: I'm saying, okay, they may be competing in the same sort of field, (02:55):
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Ejaaz: but I don't think SpaceX is quite caught up on the AI side, but that's what most people miss. (02:58):
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Ejaaz: SpaceX isn't just an AI company. (03:03):
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Ejaaz: They are a computation company. They have the largest arsenal, (03:05):
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Ejaaz: largest GPU footprint of NVIDIA GPUs, might I add. And he signed a major partnership (03:08):
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Ejaaz: with Jensen, which we'll get to in a second. (03:13):
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Ejaaz: But he's the only person that's launching these things into orbital space. (03:14):
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Ejaaz: You know, he has the largest data center cluster on Earth, and he's also doing (03:19):
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Ejaaz: the Starlink connectivity thing. So all of these are different revenue drivers. (03:22):
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Ejaaz: And what I like about this report is he's proved a lot of the bears wrong simply (03:26):
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Ejaaz: by the numbers. Let's actually walk through some of these numbers, (03:32):
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Ejaaz: right? So revenue, the estimate was $6.93 billion. (03:34):
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Ejaaz: He smashed it by earning almost a billion dollars more than that, right? (03:38):
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Ejaaz: And then when you look at earnings per share, people were like, (03:42):
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Ejaaz: okay, they're going to be at a net loss of 26 cents per share. (03:44):
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Ejaaz: Nope, came in at 0.09. Is it profitable yet? No, but it is still much better than people expected. (03:48):
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Ejaaz: Then the net income, as you mentioned earlier, people were expecting a $2 billion loss. (03:54):
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Ejaaz: He shaved that down by 3x to half a billion dollars. Now, again, (03:59):
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Ejaaz: Is this the best earnings report that they could have come up with? (04:03):
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Ejaaz: Probably not. But these things take time for. (04:06):
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Ejaaz: A CapEx-heavy company such as SpaceX, I'm really impressed with what they've been able to pull off. (04:09):
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Ejaaz: And I think it just kind of shows that Elon has pretty crazy statements. (04:15):
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Ejaaz: I remember when he pitched the Starlink robot GPUs in SpaceVision about, (04:20):
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Ejaaz: what was this, like 12 months ago for the GPUs in space. (04:25):
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Ejaaz: And everyone thought he was absolutely insane. But every step he takes, (04:29):
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Ejaaz: every earnings report he takes, we're starting to see a different picture start (04:32):
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Ejaaz: to form. And I'm not saying he's there yet. (04:35):
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Ejaaz: I just want to be very clear. Like, I don't think we're anywhere near there. (04:37):
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Ejaaz: But this is a step in the right direction. And I think that, (04:40):
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Ejaaz: you know, after listening to the call yesterday and after seeing a lot of the (04:43):
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Ejaaz: reporting, I think he might be there. (04:46):
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Ejaaz: But of course, something that people are worried about is the unlock that is (04:48):
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Ejaaz: happening tomorrow. And I don't know if you have any thoughts on this, (04:52):
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Ejaaz: Josh, but like $100 billion is flooding the market. (04:54):
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Josh: Yeah, well, I mean, there's going to need to be a lot of shares that are moving (04:57):
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Josh: because SpaceX is also among the most shorted companies in the marketplace right now. (05:00):
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Josh: So there's a lot of short positions on it. There's a lot of people that are bearish. (05:04):
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Josh: There is a lot of unlocks happening. Whether or not those unlocks become bullish or bearish is TBD. (05:08):
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Josh: But my expectation is like, I don't really care. Like as an investor over a (05:13):
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Josh: long period of time, like, okay, maybe it sells off for the next couple of days. (05:16):
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Josh: Maybe it sells off for the next week, maybe the next month. (05:19):
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Josh: But I mean, the numbers are pretty amazing. And you could see why people are (05:21):
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Josh: getting scared. You mentioned the CapEx. (05:24):
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Josh: CapEx was 39% higher than what people thought. It came in at just under $18.5 (05:26):
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Josh: billion, which NASA's annual budget is $25 billion. (05:30):
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Josh: So they spent almost the entirety of NASA's budget in a single quarter. (05:34):
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Josh: That also means that they spend $2.35 for every dollar that they made in revenue. (05:37):
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Josh: And you have to ask the question, where is that going? Why are they spending (05:42):
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Josh: so much? Because this sounds like lunacy. (05:44):
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Josh: Imagine a restaurant, you're investing in a restaurant, and they come and they spend $23,000 a night. (05:47):
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Josh: Even though they're only making $10,000 a night, you say, what on earth is going on here? (05:53):
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Josh: This makes no sense. But then they tell you, wait a second, we're, (05:56):
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Josh: we're building out new restaurants. (05:59):
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Josh: We're building a higher profit margin menu items. And that's kind of what SpaceX (06:00):
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Josh: is doing on the data center front. So one of the smaller things that I think (06:04):
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Josh: a lot of people overlooked is the fact that they already have a backlog of about (06:08):
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Josh: $50 billion of revenue. That's already signed. (06:11):
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Josh: Like no one even has to pick up a phone and they're collecting $50 billion just (06:14):
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Josh: because of their ability to build these data centers. (06:17):
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Josh: And this is where we kind of talk about data centers for a second, (06:20):
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Josh: which is their very much an unfair advantage. (06:22):
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Josh: On the earnings call, I was listening to their CFO, Brett Johnson, I think his name is. (06:25):
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Josh: He said that all CapEx isn't the same. Sun CapEx is much more lucrative than (06:28):
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Josh: others. In the case of SpaceX, it's about as lucrative as we've heard. (06:33):
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Josh: A lot of companies, let's say you invest in an apartment building and you build (06:36):
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Josh: this huge piece of real estate. It takes about 15 to 20 years to pay itself back. (06:39):
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Josh: SpaceX's data centers paid themselves back in a single calendar year. (06:43):
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Josh: So in terms of return not invested capital it's like this unbelievable opportunity (06:47):
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Josh: where it feels like they they have this unfair advantage being that they're (06:51):
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Josh: the only ones that could build these data centers quickly and efficiently and (06:55):
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Josh: then go off and sell these huge unbelievably large contracts to companies (06:58):
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Josh: that can't do the same and my favorite quote from the earnings call my favorite (07:02):
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Josh: one by far is what elon was asked about terrestrial data centers this is after (07:06):
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Josh: he concluded about the space data centers which we'll get up to in a minute (07:10):
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Josh: But the terrestrial data centers he's like this is like the New York Yankees (07:14):
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Josh: playing in a Little League. (07:17):
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Josh: It feels like they're just night and day difference in terms of their ability (07:18):
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Josh: to execute on these things. And their return on the invested capital (07:21):
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Josh: Huge you can't buy a blackwell gpu (07:25):
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Josh: period so that's why people are paying premiums in fact if you are currently (07:28):
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Josh: signed to a blackwell contract you are trying to extend the length that as much (07:32):
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Josh: as you can because if it renews it's going to renew at double the cost because (07:36):
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Josh: the cost of this compute is so expensive (07:39):
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Josh: the only people that are able to build it at scale as quick as they do is spacex (07:41):
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Josh: and i mean return on invested capital on an investment this large being 12 months (07:45):
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Josh: you can very quickly see why their revenue models are guiding towards something closer to a trillion (07:49):
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Josh: than where we currently are over the next four years or so. It's unbelievable. (07:54):
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Ejaaz: Just to focus on the GPU point for a second, right? (07:58):
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Ejaaz: I think a lot of people are worried. The doomers for the AI bubble say that (08:01):
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Ejaaz: the bubble is primarily formed in GPU CapEx specifically. So all these trillions (08:06):
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Ejaaz: of dollars that is being committed and spent on NVIDIA GPUs, AMD GPUs, whatever that, (08:11):
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Ejaaz: is where the bubble is inflating because these machines will eventually depreciate. (08:16):
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Ejaaz: They won't actually be in demand once the cost of tokens go down, (08:21):
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Ejaaz: et cetera, et cetera, et cetera. (08:24):
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Ejaaz: What we've seen from every single quarterly earnings report from all of the (08:26):
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Ejaaz: major hyperscalers, which are the ones that are investing the most, (08:30):
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Ejaaz: including or aside to SpaceX. (08:33):
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Ejaaz: So if you look at Amazon, Google, they're all reporting record revenue numbers. (08:35):
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Ejaaz: In fact, all their cloud service provider platforms like Azure, (08:40):
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Ejaaz: like Google Cloud, like AWS, (08:44):
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Ejaaz: that not only is their revenue increasing by like, I think it's like 40 to 45% (08:47):
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Ejaaz: compounded every single quarter, by the way. That's every three months. (08:52):
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Ejaaz: I don't think people understand how absolutely insane that is. (08:57):
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Ejaaz: Not only is it compounding their revenue specifically, but their margins are expanding even more. (09:00):
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Ejaaz: So they're making more money on the money that they're earning, (09:06):
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Ejaaz: which is just like an insanely good business. So Elon saw this and was like, (09:09):
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Ejaaz: well, I have more GPUs than any of you, and I'm building these data centers faster than any of you. (09:14):
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Ejaaz: It would make sense for us to become like a NeoCloud service. (09:19):
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Ejaaz: And that's why he's selling upwards of $50 billion of AI compute to the likes (09:22):
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Ejaaz: of Anthropi, Google, and whoever that might be going forward. (09:27):
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Ejaaz: So he's seen that it's a hugely profitable business. (09:30):
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Ejaaz: And what I love about one of the major announcements that he made yesterday (09:33):
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Ejaaz: is he came out and said, wow. (09:37):
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Ejaaz: We are going to be exclusive to Jensen. We're going to be exclusive to NVIDIA. (09:39):
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Ejaaz: And verbatim, he quotes, going forward, we've decided to build exclusively on (09:43):
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Ejaaz: NVIDIA because we think that the Vera Rubin architecture is the best architecture. (09:48):
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Ejaaz: We think it's the best AI computer. And so we're going to be exclusive to NVIDIA. (09:53):
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Ejaaz: Now, the craziest part about this is what he committed to buying. (09:57):
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Ejaaz: He is basically going to double his existing or SpaceX's existing GPU fleet by the end of next year. (10:01):
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Ejaaz: I cannot emphasize enough how crazy of an attempt that's going to be. (10:09):
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Ejaaz: That is going to be in NVIDIA's pocket. Let's say he pulls this off, (10:13):
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Ejaaz: right? Let's say he gets to the 10 gigawatts cumulative worth of GPUs by the end of next year. (10:16):
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Ejaaz: That is $200 billion from SpaceX alone in NVIDIA's pocket by the end of next (10:22):
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Ejaaz: year. Now, let's be realistic. Let's say he's at two, two and a half gigawatts, (10:28):
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Ejaaz: he'll get to three by the end of this year. (10:32):
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Ejaaz: Let's say he gets to like six gigawatts by the end of next year. (10:34):
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Ejaaz: That is an extra $100 billion in NVIDIA's pocket. (10:38):
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Ejaaz: He is going to be his number one customer, and he's taking a massive commitment. (10:41):
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Ejaaz: With Jensen. And this is interesting because a few days earlier, (10:46):
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Ejaaz: Anthropic signed this major deal with AMD. They're signing major deals with (10:49):
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Ejaaz: other cloud service providers. (10:52):
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Ejaaz: Elon has basically said, Jensen, if you can guarantee me the allocation, (10:53):
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Ejaaz: we will take the compute. And that is my commitment to you going forwards, (10:57):
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Ejaaz: even when we launch them into space, right? So I'm just massively bullish on (11:01):
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Ejaaz: the cloud business, on the compute business that he's built. (11:05):
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Ejaaz: I think even if everything falls to the wayside, (11:07):
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Ejaaz: Elon still has a very profitable business, and people are discounting that massively right now. (11:10):
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Josh: This deal is pretty interesting to me, too. It's because we're seeing a lot (11:15):
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Josh: of these accelerator chips. We're seeing, like, the training chips and the TPU chips from Google. (11:17):
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Josh: And everyone's kind of focused, even OpenAI is building their own vertically integrated chipset. (11:23):
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Josh: And it's interesting to see SpaceX going the other direction. (11:26):
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Josh: They're saying, well, we are going to build our own chips to some extent, (11:29):
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Josh: but we're also going to work with NVIDIA to use their new architecture. (11:31):
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Josh: And we've talked a lot about how this new Blackwell era of models is unbelievable (11:34):
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Josh: the vera rubin era of models is going to probably be like remarkable and spacex (11:40):
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Josh: will be using that exclusively which is (11:45):
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Josh: very bullish because then i assume (11:48):
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Josh: it works both ways right it's like nvidia gets this amazing showcase to share (11:50):
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Josh: with the world like hey look what our gpus can do look how fast they can be deployed (11:54):
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Josh: And the SpaceX team gets a much more tighter feedback loop with the team when (11:58):
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Josh: it comes to development of the software architecture, the hardware architecture. (12:01):
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Josh: And I assume that's going to turn into like a pretty nice partnership from both (12:05):
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Josh: of these companies. I mean, both founders love each other. (12:08):
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Josh: Both are at the top of their game. It's very exciting to see this happen. (12:10):
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Josh: And the tangent of planning, as you were talking about how many gigawatts they (12:14):
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Josh: were planning to deploy. (12:16):
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Josh: On the conference call, Elon initially said 10 by the end of 2027. (12:17):
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Josh: And then when people pressed him by the end of the decade, around 2030, (12:21):
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Josh: he is guiding towards roughly 20 gigawatts of power with (12:25):
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Josh: a floor of 15 gigawatts so he's like all right well even if everything goes wrong we can at least (12:29):
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Josh: get to 15 gigawatts for reference we've talked about this a lot but like a singular (12:33):
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Josh: gigawatt of power is equivalent to roughly 800,000 homes it's like cities worth (12:38):
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Josh: of power and they're planning to do 15 of these in the next (12:44):
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Josh: four years like that's that's really fast the other thing is i mean jensen has (12:47):
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Josh: his own kind of rule of thumb when it comes to deploying gigawatts of energy. (12:52):
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Josh: He says you can guide for around $40 to $50 billion of annual revenue per gigawatt. (12:55):
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Josh: So if SpaceX does get 15 gigawatts of sold out capacity by the end of the decade, (13:01):
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Josh: that alone is worth $600 to $750 billion of revenue. (13:05):
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Josh: And that doesn't include the other pillars of this company, which are space and connectivity. (13:09):
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Josh: So there's this like unbelievable bull case, even if you disregard all of the (13:15):
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Josh: other pillars of the business. (13:19):
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Josh: But in addition to this, there are these pillars like ai data centers in space which again (13:20):
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Josh: They are being built with jensen huang and nvidia and the idea i found this (13:25):
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Josh: really interesting for their ai1 satellites is (13:29):
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Josh: they're basically going to build the same thing on earth as they are going to (13:31):
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Josh: be in space the only difference is they're going to put some solar panels on (13:33):
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Josh: this bad boy and send it off into space so this vertical integration of the (13:36):
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Josh: hardware stack as it relates to terrestrial as it relates to space it's just (13:40):
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Josh: remarkable and then if they actually figure out (13:44):
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Josh: how to get payload into space at scale oh my god like you start to put the numbers (13:45):
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Josh: together, you're like, wait a second. (13:49):
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Josh: They actually could do this thing. And like, what is the stock gonna be trading at if they get (13:51):
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Josh: terrestrial data centers 15 gigawatts online in four years and also they start (13:55):
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Josh: putting mass into space at scale like this is gonna be a pretty huge opportunity (13:59):
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Ejaaz: The biggest critique uh that i hear from a lot of you listeners and that watch this show is (14:04):
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Ejaaz: that this vision this plan is just too insane to pull off and honestly like (14:09):
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Ejaaz: i agree with you but you also have to look at the evidence of things that can (14:14):
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Ejaaz: actually make the company money that will help fuel (14:18):
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Ejaaz: elon and spacex getting to some of the more crazier visions, right? (14:21):
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Ejaaz: And one of the main ones is this compute revenue business that he's kind of (14:25):
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Ejaaz: showcasing and saying, hey, this thing makes money and we're going to be the (14:29):
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Ejaaz: biggest bettors on this, right? (14:32):
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Ejaaz: We're going to be able to pull this off. And if he's able to secure that capacity (14:33):
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Ejaaz: with the likes of Jensen and NVIDIA, and Jensen loves Elon Musk so much. (14:36):
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Ejaaz: He will be able to pull this off. (14:41):
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Ejaaz: Now, just to kind of translate kind of like what this compute means for Elon, (14:42):
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Ejaaz: it's not just a way to kind of like earn money by selling compute to competitors. (14:47):
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Ejaaz: He's also very much using this to train some of the best AI models in the world. (14:51):
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Ejaaz: And of course, like you might listen to that and like laugh. (14:56):
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Ejaaz: But if you kind of like span out the timeline over the next kind of six to 12 months, (14:58):
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Ejaaz: the only thing that is consistent across every single model, (15:02):
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Ejaaz: different model architecture, whatever, like, you know, different weights that (15:06):
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Ejaaz: you use, it is compute, you need more compute to pre train, you need so much (15:09):
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Ejaaz: more compute to post train. (15:14):
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Ejaaz: And then you need compute to serve this to people at like perfect speeds and (15:15):
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Ejaaz: quality of service, you just need more compute. And in order to do that, (15:19):
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Ejaaz: there's two things you need to look at. (15:23):
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Ejaaz: You need enough capital to buy the GPUs, but you also need enough capital to (15:25):
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Ejaaz: buy the best GPUs. Tuakash had an amazing blog post. I don't know if you read (15:30):
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Ejaaz: it, Josh. He basically said the better the GPUs get, (15:34):
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Ejaaz: the better AI models these GPUs can unlock, which means that NVIDIA will basically (15:38):
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Ejaaz: sell these GPUs to the highest bidder. Who are the highest bidders going to be? (15:45):
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Ejaaz: I like this example. There's two companies, okay? Company A wants to use 100,000 (15:48):
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Ejaaz: GPUs to cut down a bunch of, let's say, administrative workload at their company by 30%. (15:54):
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Ejaaz: That is a really meaningful impact, right? And they'll save a ton of money and (16:02):
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Ejaaz: they'll be able to generate millions of dollars. Great. (16:05):
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Ejaaz: There's a problem. Company B wants those same GPUs to train and cure cancer, right? (16:07):
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Ejaaz: Over a month. And they know that if they can do a one training run with their (16:15):
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Ejaaz: data, they'll be able to cure cancer. (16:18):
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Ejaaz: Who's going to bid more? It's going to be company B. (16:20):
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Ejaaz: So these GPUs are like very, very scarce. And at the end of the day, (16:23):
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Ejaaz: the people that have the most capital will buy those GPUs and train the best (16:27):
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Ejaaz: models. They'll train the best features, product services, whatever that might be. (16:32):
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Ejaaz: And Elon is at the front of all of this. It's not even Anthropic or OpenAI. (16:35):
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Ejaaz: He has secured the most allocation. He has the largest arsenal of GPUs right now. (16:39):
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Ejaaz: So it goes to say that he could potentially create the best AI model, (16:43):
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Ejaaz: Grok 4.6, Grok 4.7, and Grok 5 is going to be coming out by the end of this year. (16:46):
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Ejaaz: And he said it's going to be trained on all of SpaceX's data, (16:51):
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Ejaaz: which would technically make it like the best engineering AI model. (16:54):
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Ejaaz: So there's a lot of these things that are kind of like in the oven, (16:58):
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Ejaaz: they're cooking, and we don't quite see them right yet, but it's good to be (17:01):
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Ejaaz: just generally aware of i don't know i'm just very optimistic about like where (17:04):
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Ejaaz: this could be in six to twelve months. (17:07):
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Josh: Yeah there's a lot of really high quality shots on gold that they're taking (17:10):
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Josh: where even if one completely and catastrophically fails there's still many others that are doing well (17:12):
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Josh: and it's funny hearing a space company talk about terrestrial data centers they're (17:16):
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Josh: talking about like they're actively trying to send these things into space that (17:21):
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Josh: are actually trying to blow themselves apart and it's just like (17:24):
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Josh: how easy is it that you could just drop these things on earth and it's easy (17:26):
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Josh: and the atmosphere is easy to handle and and it just seems like going back to (17:29):
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Josh: the baseball analogy it's like when you (17:33):
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Josh: go up to bat with like a weighted bat and then you use like a normal bat and (17:35):
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Josh: a normal bat is the data centers that are terrestrial and those will probably (17:39):
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Josh: be used for training when we think about training (17:42):
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Josh: where latency matters those are probably for training the satellite layer where (17:44):
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Josh: there is like downlink latency happening that's probably more for inference (17:47):
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Josh: where latency matters a little bit less but we're going to start to see this (17:51):
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Josh: star mind constellation launch as soon as (17:54):
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Josh: Next year with starlink version 3 being launched as soon as the next starship (17:58):
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Josh: so the plan for the next starship launch is to follow up what they did with (18:04):
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Josh: the previous launch which was get these starlink v3 satellites into orbit (18:07):
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Josh: um now they're actually going to deploy them put them in orbit turn them on (18:11):
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Josh: make them work and that takes us to the starlink part of the engine which is (18:14):
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Josh: pretty unbelievable as well the growth curve of this service is the about as (18:17):
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Josh: pure of an exponential curve as you can get (18:22):
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Josh: they doubled their subscribers year over year they are now at 12 million they (18:24):
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Josh: just added 1.7 of those 12 million this quarter alone so it is just a vertical (18:27):
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Josh: hockey stick and i think this is one of the more underrated parts of the earnings report (18:32):
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Josh: Gwen shotwell she had a lot or a little bit to say on this as it relates to the (18:37):
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Josh: ability to deploy a network similar to a verizon or at&t i mean currently there's (18:43):
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Josh: on earth there's about 5.5 billion users of the internet um so (18:48):
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Josh: they are talking about being the pipeline for a large majority of that (18:52):
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Josh: and totally removing dead zones and making it direct to sell and the starlink (18:56):
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Josh: mobile fly i think is really interesting i remember last year we recorded an (19:00):
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Josh: episode where they bought a fixed amount of spectrum to start deploying once they have (19:03):
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Josh: their plan seems to be that they are going to continue to buy these dedicated (19:08):
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Josh: pieces of spectrum until they own enough bandwidth to truly compete (19:12):
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Josh: and then they have these ground base stations which are able to kind of handle (19:16):
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Josh: a lot of the bandwidth and work in higher density areas (19:20):
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Josh: and one shot well all she said on the call is that they have a foundational (19:23):
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Josh: competitive advantage and won't really go into the like (19:27):
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Josh: secrets and strategies that they're going to go with but what i expect is that this time next year (19:32):
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Josh: on our iphones we will have like pretty high (19:36):
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Josh: bandwidth internet connectivity and for that to happen that quickly seems like (19:39):
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Josh: a very bullish thing to me and it's just like who wouldn't sign up for a service (19:44):
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Josh: that has good internet anywhere in the world with no dead zones i just went (19:48):
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Josh: to national parks the last two weeks. I had no service at all. (19:51):
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Josh: The only thing connected me was Starlink terminals here in (19:54):
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Josh: there. But direct to sell would be such an awesome thing. And the business is growing so quickly. (19:57):
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Ejaaz: For context here, I couldn't reach Josh for like six to 12 hours at a time. (20:01):
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Ejaaz: It was absolutely insane. (20:06):
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Josh: Like he was in the dark surrounded by sequoias and redwoods. (20:07):
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Ejaaz: I thought he'd, you know, suffered some kind of fatal injury or something like (20:11):
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Ejaaz: that. I was, what was that movie? The 100 hours or whatever. (20:14):
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Josh: Where you get lost out there. (20:17):
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Ejaaz: I was like, damn, is Josh okay? Listen, on the, Starling side of things, (20:19):
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Ejaaz: I think the thesis, put very simply, is, (20:24):
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Ejaaz: in a world where you have these AI models, these AI agents running 24-7 on GPUs, (20:27):
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Ejaaz: getting work done, you need reliability. (20:34):
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Ejaaz: And reliability sits in the modern day world on the internet. (20:37):
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Ejaaz: Now, you can't have lines going down, you can't have connectivity issues, (20:41):
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Ejaaz: you can't have T-Mobile messing up some of their lines. (20:44):
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Ejaaz: What are some of the most consistent ways of beaming internet down? (20:47):
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Ejaaz: Well, you can do it via satellites, right? And I would love to have consistency (20:50):
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Ejaaz: with my provider as well. (20:54):
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Ejaaz: Like, to be honest, like if I could have an affordable Starlink connection right (20:55):
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Ejaaz: now on my phone, mobile package, I would move to that because then I could just (20:58):
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Ejaaz: use it on the plane or whatever that might be. (21:02):
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Ejaaz: So I don't think that this is just a temporary trend. I think this is something (21:03):
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Ejaaz: similar to AI where everyone's just going to want consistent, (21:08):
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Ejaaz: strong, fast access to the internet. And Starlink is a very obvious win. (21:11):
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Ejaaz: And it goes back to my earlier point, which is, (21:16):
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Ejaaz: Elon has his hands in a lot of different things and they're actually working. (21:18):
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Ejaaz: They're working well individually, but they're working well together as well. (21:24):
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Ejaaz: And we're going to see that in future quarterly earnings reports. (21:27):
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Josh: Right, EJ, as you mentioned agents and speaking of agents, we have to talk about (21:30):
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Josh: a sponsor of the show Ledger because if you are building with AI agents and (21:34):
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Josh: you're worried about security, which a lot of people should be, (21:38):
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Josh: I mean, we've had a lot of AI models recently that have broken out of their (21:40):
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Josh: sandboxes. It's a little scary. (21:43):
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Josh: An agent with untracked access is very scary. So Ledger has this three-step (21:45):
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Josh: process to solve this in which an agent proposes, a human approves, (21:49):
undefined

Josh: and then a Ledger signer enforces. (21:53):
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Josh: This technology works with cloud code, codex, cursor, all of the things that we are used to using. (21:55):
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Josh: And it's also open source to be fully audited. Basically, they use this thing (22:00):
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Josh: called a Ledger agent stack, which has a series of four open source tools. (22:03):
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Josh: There's a wallet, there's an enterprise solution, there's a multi-sig so that (22:07):
undefined

Josh: you don't get compromised for any of your transactions. (22:10):
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Josh: And you could basically just talk to it normally. You could say, (22:13):
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Josh: rebalance my wallet and it'll do all the math and do the transactions on your (22:15):
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Josh: side while letting you approve and be in the loop the entire time. (22:19):
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Josh: So I just want to shout out Ledger for a responsible way of building with AI (22:22):
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Josh: agents. Thank you so much. You can find the link to the description down below. (22:26):
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Ejaaz: So before we wrap up this episode, Josh, I... (22:30):
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Ejaaz: We need to talk about the bear case of all of this going on. (22:34):
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Ejaaz: Now, we've mentioned this on a previous episode. (22:37):
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Ejaaz: There is a very constricted supply of SpaceX stock that is available for people to currently trade. (22:39):
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Ejaaz: And the number one bit of critique is it's going to flood the gates tomorrow. (22:46):
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Ejaaz: Actually, as you're listening to this episode, it should be today on the 6th, (22:50):
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Ejaaz: $100 billion worth of SpaceX shares goes live. (22:54):
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Ejaaz: And the big question in everyone's mind is, where's the buying power coming (22:58):
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Ejaaz: for this? Because to keep the price at its current level, you need someone that (23:01):
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Ejaaz: is buying all of those shares, right? (23:05):
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Ejaaz: And what we've seen, and maybe this is reflected in the stock action today, (23:08):
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Ejaaz: is people don't believe that that will be the case. (23:11):
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Ejaaz: Now, whether they're thinking over a short-term period of time, (23:14):
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Ejaaz: whether they're thinking of a long-term period of time is another question. (23:17):
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Ejaaz: If you're common listeners of this show, you will know that Josh and I think (23:20):
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Ejaaz: on pretty mid to long-term time horizons. So we're kind of bullish in SpaceX (23:23):
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Ejaaz: over the long-term, of the short term we kind of like don't care too much we (23:28):
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Ejaaz: want to kind of like see it as an opportunity to. (23:31):
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Josh: Access it but (23:33):
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Ejaaz: Nevertheless it is a concern or. (23:34):
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Josh: Worry yeah no i understand why people are concerned and worried and in fact (23:36):
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Josh: i remember viscerally feeling this with uh the tesla story (23:40):
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Josh: because tesla i'm a lot of people don't know was the most shorted company in (23:44):
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Josh: the stock exchange for two or three years like everyone was just pounding on (23:47):
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Josh: it was just the the most diabolical company ever like no one was going to it (23:52):
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Josh: was never going to work and (23:57):
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Josh: now i haven't driven a car in (23:58):
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Josh: like a couple years and these like seemingly sci-fi impossible things that (24:00):
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Josh: are sold a lot of people are uncertain of their ability to happen and that's (24:04):
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Josh: like totally fair there's the key man risk in the sense that like there is a (24:08):
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Josh: singular person at the helm who is in charge of driving all this value that (24:11):
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Josh: is a serious risk there is the (24:15):
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Josh: risk on timelines oftentimes these timelines are very optimistic is there actually (24:17):
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Josh: going to be 15 gigawatts of compute deployed by 2030 and (24:21):
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Josh: If there's not, what does the revenue look like? But even if these things are (24:25):
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Josh: fractionally wrong, the trajectory of this company is one way. (24:28):
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Josh: And when I think about other companies, it's like, as a person who has like (24:32):
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Josh: cash, if you have any cash sitting in a bank account, you have a problem because (24:36):
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Josh: that cash needs to earn money. (24:39):
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Josh: Otherwise you're going to get outpaced by inflation. And when you think of the (24:41):
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Josh: places to deploy that cash, where the upside is the greatest and most exciting (24:43):
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Josh: and most aligned with like an optimistic vision of the future, (24:48):
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Josh: it's hard to find something more interesting and exciting and mispriced (24:51):
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Josh: um than something like spacex is and it's not like things aren't working like (24:56):
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Josh: we are seeing progress the starship launches you can go and watch you could (25:00):
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Josh: literally go to texas and sit on the highway and watch them in person and they get better every time (25:03):
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Josh: and the the um the heat shield which is the biggest part of rapid reusability (25:08):
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Josh: finally works for the first time ever with the last starship launch (25:12):
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Josh: and soon they're going to land both parts of the rocket (25:15):
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Josh: and then at the very least that (25:18):
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Josh: means they'll be able to deploy starlink version 3 satellites at scale. (25:19):
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Josh: These things are already built. It's just a matter of a few more iterations to getting there. (25:23):
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Josh: The data centers thing, we saw that they have a tremendous amount of data center (25:27):
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Josh: capability to build these things quickly. So they can do it. (25:31):
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Josh: Can they build 15 gigawatts worth? We don't know. (25:34):
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Josh: But currently, I mean, I'm looking at the stock right now. It looks like it (25:36):
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Josh: is trading down at the time of recording right now, about 9% down to $115 as (25:39):
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Josh: the unlocks are happening today. (25:44):
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Josh: And that seems to me just fine. It's like, okay, one and a half trillion dollars. That is about (25:46):
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Josh: I don't know, a little more than one-tenth of their expected revenue in four (25:51):
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Josh: years, it is very highly risky. (25:55):
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Josh: In the case that they can figure out how to actually convert that into revenue (25:57):
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Josh: and actually deliver on these timelines, there's no way this doesn't go absolutely (26:01):
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Josh: nuclear. So it's mostly a matter of if, not when, or perhaps if and when. (26:04):
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Josh: It's just like, I understand, I could understand the case for both people, (26:10):
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Josh: for the bulls and for the bears. I think just as someone who has a very low (26:13):
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Josh: time preference, seeing the progress that's being made and just very clearly mapping that out. (26:17):
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Josh: It seems very obvious to me that barring any catastrophic problems, (26:22):
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Josh: this is just going to be a one-way trajectory up. And sure, there will be bumps along the way. (26:27):
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Josh: Sure, maybe they're unlocks and it sells off another 10% for a couple more times. (26:32):
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Josh: But the reality is that a company five years from now who is just continuing (26:36):
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Josh: on this trajectory without any of these optimistic outlooks is worth more than (26:40):
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Josh: the company that they are today. (26:44):
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Josh: And that's just kind of what I'm basing all this off of. (26:45):
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Ejaaz: There's a key man risk with all of this, which is... (26:48):
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Ejaaz: Can Elon focus all of his attention to actually be able to pull this off? (26:52):
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Ejaaz: Does he have the chops to basically execute on the vision that he's kind of (26:55):
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Ejaaz: like laid out on his earnings call? (26:59):
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Ejaaz: That's pretty much the main thing that you have to kind of like believe in. (27:01):
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Ejaaz: The other thing is on the point of like below time horizon, I think that you (27:04):
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Ejaaz: can equally be very bullish SpaceX over the long term and be bearish over the short term. (27:10):
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Ejaaz: And that could be an opportunity for you. It just depends on like how you want to frame it, right? (27:16):
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Ejaaz: Like, for example, you might want to wait and see how the share unlocks happen (27:20):
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Ejaaz: over the next couple of months. I think something like 25 to 36% of the entire (27:24):
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Ejaaz: share supply gets unlocked in that period of time. (27:30):
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Ejaaz: Maybe you expect to see a lot of volatility during that time. (27:32):
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Ejaaz: And maybe that's like the time for you to kind of like load up to your point (27:35):
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Ejaaz: earlier, Josh, like Tesla was one of the most shorted stocks ever. (27:38):
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Ejaaz: And it was that case for two to three years. And maybe we'll see a similar profile (27:42):
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Ejaaz: for SpaceX. You know, these valuations are huge. (27:46):
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Ejaaz: Society is very unaware or uncomfortable with these large numbers. (27:48):
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Ejaaz: And, you know, we saw the same transition when we saw the first $100 billion (27:53):
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Ejaaz: company, right? So Meta went through this, Uber privately went through this as well. (27:56):
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Ejaaz: And so we're probably going to see the same on SpaceX in particular. (28:01):
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Ejaaz: But I agree with the trajectory in general. I think these companies are going to do very well. (28:06):
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Ejaaz: SpaceX has a very bright future ahead of it. And to be honest. (28:10):
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Ejaaz: In terms of like where the risk curve is, it is on the furthest end out there. (28:13):
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Ejaaz: Like Elon could be doing this with just one company, but he's doing this with (28:17):
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Ejaaz: like four or five combined into one. (28:20):
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Ejaaz: And now there's like rumors that like they might merge with Tesla. (28:22):
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Ejaaz: It might become a whole kind of like megacorp type situation. (28:25):
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Ejaaz: So if that plays out, there's going to be even more scrutiny that's going to be placed on him. (28:27):
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Ejaaz: But overall, I think I am very bullish long term, but maybe over the short term, (28:31):
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Ejaaz: I'm going to say that I'm tentative. I'm sitting there with my cache and seeing (28:36):
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Ejaaz: whether there is a better time to deploy and we'll see over the next couple of weeks. (28:41):
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Josh: Yeah, you just maybe don't want to miss the repricing. I'm looking at that Tesla (28:45):
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Josh: chart between 2020 and 2021 and how the stock 13X'd over the course of a year (28:48):
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Josh: as it ripped in like the largest short squeeze ever. (28:54):
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Josh: If you go to the all-time chart, that 2020 to 2021 is a pretty violent repricing. (28:57):
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Josh: And that's just the world coming to grips with the fact that the technology (29:02):
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Josh: and the thesis actually played out. (29:04):
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Josh: In the case that that does happen again, that's the expectation, (29:06):
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Josh: but there's lots of reasons to be bearish. I mean, just today for reference, (29:08):
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Josh: there's 911 million shares unlocking. That's $100 billion of potential sell side pressure. (29:12):
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Josh: They guided for 39% higher CapEx this year with no guidance given for next year, (29:18):
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Josh: which is interesting. They didn't guide to where CapEx is. So that's a huge unknown. (29:24):
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Josh: There's the like average revenue per user compression on the Starlink side, (29:28):
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Josh: where Starlink revenue per user fell 22% as they doubled year over year because (29:31):
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Josh: they're trying to move into cheaper international markets. (29:36):
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Josh: So even though the subscribers are doubling, their revenue per user is decreasing. (29:39):
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Josh: So there's a lot of these definitely things to look out for. (29:42):
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Josh: But on the upside, I think of like moats and competition, (29:45):
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Josh: Peter Thiel's the big monopoly guy. They have a monopoly on so many different (29:49):
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Josh: industries, even if one of them works. (29:52):
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Josh: This is a remarkable outcome for a one and a half trillion dollar company. (29:54):
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Josh: So that's, I think it, that's the SpaceX update. That's the earnings report. (29:56):
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Josh: I don't know, trying to be a little sober about how we view this, (30:00):
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Josh: but like, God damn, there's no company in the world that's more exciting than this one. (30:03):
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Josh: It's so sick. Like, okay, sure. The mass drivers on the moon, (30:07):
undefined

Josh: like that's a long shot. That's going to be like, I'll be excited to live through (30:10):
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Josh: that and hopefully see that one day. (30:14):
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Josh: But today, today, Starlink, incredible. (30:15):
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Josh: Starship, incredible. their ability to deploy data centers at scale and break (30:18):
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Josh: even after just 12 months. (30:22):
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Josh: Incredible. There's no one else that can manufacture at the scale. (30:24):
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Josh: So just in terms of manufacturing monopolies, it seems to me like there's China (30:26):
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Josh: and then there is Tesla and SpaceX. (30:30):
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Josh: And that's kind of the people who are most able to move the amount of atoms (30:32):
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Josh: in a coherent way that generates value. (30:35):
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Josh: And that is worth a lot. So yeah, I think that's everything. (30:37):
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Josh: That's the SpaceX update. This went pretty long. If you listen to this, (30:40):
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Josh: I, if you made it this far, like, please let us know how crazy this sounds to (30:43):
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Josh: you? Like, is this a little too far over indexed on one side? (30:48):
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Ejaaz: So for us, please. Yeah. (30:51):
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Josh: Let's hear it either way. What's the strategy around SpaceX? (30:53):
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Josh: How are we thinking about this $1.5 trillion company? Because listen, (30:56):
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Josh: we're going to come back here. (30:59):
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Josh: Couple years on the show and we're going to reference this episode and be like (31:00):
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Josh: told you so or maybe not maybe we'll be poor maybe starship will blown up and (31:03):
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Josh: the show wouldn't exist but you know what we (31:07):
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Ejaaz: Just wouldn't have a camera in front of us yeah. (31:09):
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Josh: Yeah i'd have to point off my camera so that might be a worst case scenario (31:11):
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Josh: um but yeah that's that's the episode uh thank you so much for watching you (31:14):
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Josh: just any final parting thoughts before we let everyone go (31:17):
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Ejaaz: Yeah no if you are listening to us and you aren't subscribed to us please please (31:19):
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Ejaaz: do it helps us out massively whether you're on apple music or spotify. (31:23):
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Josh: Just on our way to 100k we're on our way to 70 i think subscribers on youtube (31:26):
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Josh: which is exciting we have a bunch of subscribers on all the other platforms (31:31):
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Josh: so like awesome thank you for the support so cool (31:34):
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Ejaaz: Welcome to all of you i think we added like 2 000 subscribers over the last (31:37):
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Ejaaz: 28 days hello it's lovely to meet you um, (31:40):
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Ejaaz: we are putting out shows and episodes about four times a week but we also have (31:44):
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Ejaaz: a newsletter that goes out to (31:48):
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Ejaaz: over a hundred thousand people we post twice one is a long form essay um, (31:49):
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Ejaaz: and the other is kind of like the weekly recap but as i was saying earlier wherever (31:53):
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Ejaaz: you listen to us leave us a comment give us feedback we're also on x dm us if (31:57):
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Ejaaz: you have thoughts if you disagree with us we'd love to (32:01):
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Ejaaz: hear from you even more give us a like thumbs up it helps us out massively and (32:03):
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Ejaaz: yeah i guess that's it we'll see you on the next one. (32:07):
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