{"id":1197,"date":"2026-08-05T22:05:10","date_gmt":"2026-08-05T22:05:10","guid":{"rendered":"https:\/\/replyguru.online\/?p=1197"},"modified":"2026-08-05T22:05:10","modified_gmt":"2026-08-05T22:05:10","slug":"spacex-is-barely-space-and-mostly-x","status":"publish","type":"post","link":"https:\/\/replyguru.online\/?p=1197","title":{"rendered":"SpaceX is barely Space and mostly X"},"content":{"rendered":"


\n<\/p>\n

\n
\n

Once, I had some questions about why SpaceX, Elon Musk\u2019s healthiest company, acquired xAI, his sickliest one. Now I have some questions about why we\u2019re calling the whole thing SpaceX.<\/p>\n<\/div>\n

\n

Look, what we have here, by revenue, is primarily a telecom company and a company that rents compute, according to SpaceX\u2019s first quarterly earnings statement as a public company. The space sector of the business didn\u2019t break a billion dollars this quarter and contributed only a touch over 10 percent of the company\u2019s revenue. SpaceX remains its own biggest customer. There just aren\u2019t enough other people who want its rockets. And, I dunno, maybe if the rockets were a primary focus of the company, SpaceX wouldn\u2019t be in danger of blasting a new crater into the Moon with its space trash.<\/p>\n<\/div>\n

\n
\n

The lion\u2019s share of the spending (and the hype) is nonetheless around what is graciously being referred to as \u201cAI\u201d<\/p>\n<\/div>\n<\/div>\n

\n

The telecom part \u2014 SpaceX calls it \u201cconnectivity\u201d \u2014 is Starlink, the satellite internet service, which had $4.2 billion in revenue, and was the only part of SpaceX that did not have a loss from operations. And while Gwynne Shotwell, on the call, outlined plans for a phone service meant to compete with AT&T, Verizon, and T-Mobile, the lion\u2019s share of the spending (and the hype) is nonetheless around what is graciously being referred to as \u201cAI\u201d to capture whatever contributions Grok may be making. Analyst Alexander Potter expects spending on the neocloud business, which leases data center capacity to AI companies, to climb to $65 billion next year, $17 billion more than he\u2019d previously estimated, Bloomberg<\/em> notes.<\/p>\n<\/div>\n

\n

It was hard to miss how important leasing data center space was to SpaceX. Not only did it make more money than SpaceX\u2019s rockets, it also drove more spending \u2014 $15.8 billion on AI alone in the second quarter. (By comparison, spending on the space and connectivity sectors was a touch over a billion each.) That business makes it a competitor with neocloud companies such as CoreWeave and Nebius.<\/p>\n<\/div>\n

\n

Except that wasn\u2019t originally the plan.<\/p>\n<\/div>\n

\n

Musk built SpaceX\u2019s Colossus 1 data center in Memphis for Grok, his also-ran AI that also occasionally refers to itself as MechaHitler and has a penchant for undressing women and children without their consent. But xAI had trouble running the complex, and decided to rent it out instead. In addition to encountering latency that made it hard to train in-house models, the center employed a mix of newer and older chips that created bottlenecks. On the earnings call, Musk said that only 10 percent of the compute SpaceX builds will go to Grok.<\/p>\n<\/div>\n

\n
\n

Revenue isn\u2019t profit, and building data centers is expensive<\/p>\n<\/div>\n<\/div>\n

\n

SpaceX now has deals with Google, Anthropic, Reflection AI, and Cursor, an AI company Musk eventually chose to acquire. On the second quarter earnings call, SpaceX chief financial officer Bret Johnsen said those deals put the company \u201con a trajectory, including contribution from Cursor, to reach $100 billion of ARR, or annualized revenue run rate,\u201d a financial measurement used to estimate how much money a company will receive in a year, based on an estimate from a shorter period of time. Musk was even more bullish, saying that \u201cthe $100 billion ARR in December is not a question mark,\u201d and that the actual ARR might be higher.<\/p>\n<\/div>\n

\n

That\u2019s very nice. But revenue isn\u2019t profit, and building data centers is expensive.<\/p>\n<\/div>\n

\n

There are some problems with being in the bare-metal business of renting out compute \u2014 specifically, inevitable obsolescence, the vagaries of construction, and the fact that compute is basically a commodity, which means that companies compete on cost. The more data centers that get built, the more compute is available. With more compute available, companies can\u2019t charge as much for their chips.<\/p>\n<\/div>\n

\n

Musk has claimed that he took SpaceX public because he wanted to build data centers in space. Now, I might think that if I had trouble running a data center on the ground, I\u2019d get better at it before I tried to do something an order of magnitude harder \u2014 something that had never been done before, even. But that is not how Musk thinks, I suppose.<\/p>\n<\/div>\n

\n
\n

This all sounds expensive, doesn\u2019t it?<\/p>\n<\/div>\n<\/div>\n

\n

SpaceX has even proposed an orbital data center consisting of as many as 1 million satellites to the Federal Communications Commission. The application is light on technical details \u2014 we have no idea about satellite size or deployment schedule, for instance \u2014 which makes me think that it\u2019s more for PR than anything else. Musk has also released a few details about the satellites \u2014 or, at least, some drawings of them. In this vision, a Musk-owned chip producer called Terafab will produce one terawatt of chips every year. A billion Optimus robots will do the work, at least once Musk figures out hands.<\/p>\n<\/div>\n

\n

This all sounds expensive, doesn\u2019t it? The end goal, Musk claims, is to build a mass accelerator on the Moon.<\/p>\n<\/div>\n

\n

I don\u2019t put much stock in this kind of thing, any more than I put much stock in Musk\u2019s claims that Starlink will deliver \u201ca majority of the world\u2019s internet,\u201d as he said on the earnings call. It\u2019s all part and parcel of Musk\u2019s general habit of talking about a sci-fi future as imagined by a bunch of mid-20th-century writers. Sure, there are a bunch of scientists suggesting Musk\u2019s proposed space data centers are a bad idea. You can even argue about the feasibility of space data centers if you want. Remind me, did the Hyperloop ever get built? Say it with me now: It\u2019s all vaporware till it ships, babe.<\/em><\/p>\n<\/div>\n

\n

If we take away the pseudoscientific big talk, we are left with a company that launches rockets mostly for itself, has a fairly successful satellite internet business, and is basically running the risky and capital-intensive bare-metal business we\u2019ve seen from a bunch of the neoclouds, as a result of its failures of its in-house AI. That\u2019s not quite as dreamy as getting to Mars in six years, is it?<\/p>\n<\/div>\n

\n
\n

SpaceX\u2019s insider lockups start expiring on August 6th, which is tomorrow<\/p>\n<\/div>\n<\/div>\n

\n

What it does do, however, is provide Tesla with an important customer, one that buys $295 million in Tesla Megapack battery storage. SpaceX has also been buying a bunch of Cybertrucks, Musk\u2019s historic flop of an automobile. As of this writing, Tesla stock is down 25 percent since January of this year.<\/p>\n<\/div>\n

\n

Musk can maybe charge a premium on his compute because of his political connections \u2014 I don\u2019t think he\u2019s planning on splashing out $100 million on the midterms for nothing<\/em>. Maybe those political connections will make it easier for Musk to build terrestrial data centers \u2014 though those seem to be wildly unpopular across the entire political spectrum. Who knows, maybe the game plan is just, That\u2019s a nice AI business you have there. Would be a real shame if something happened to it. Perhaps you should buy my compute, so nothing happens.<\/em><\/p>\n<\/div>\n

\n

But maybe I\u2019m just thinking too long-term. After all, SpaceX\u2019s insider lockups start expiring on August 6th, which is tomorrow. If those insiders sell \u2014 as short-sellers expect them to \u2014 the already slumping stock will be even worse off. So reminding everyone of the mass accelerator on the Moon is maybe meant to rally the troops. Good thing Nasdaq changed its rules for SpaceX, so those losses will hit everyone with an index fund!<\/p>\n<\/div>\n

\n

Actually, I have a science fiction thought about that. Hey Elon! Why don\u2019t you take a flying fuck at a rolling donut? Why don\u2019t you take a flying fuck at the Mooooooon<\/em>?<\/p>\n<\/div>\n

Follow topics and authors<\/strong> from this story to see more like this in your personalized homepage feed and to receive email updates.<\/span><\/p>\n