(Preview) SpaceX Hype and the Elon Bargain, Nvidia and the Neoclouds, Q&A on Dropbox, Google, Ferrari Luce Backlash

Summary

Sharp Tech with Ben Thompson

Episode: (Preview) SpaceX Hype and the Elon Bargain, Nvidia & the Neoclouds, Q&A on Dropbox, Google, Ferrari Luce Backlash

Date: May 29, 2026
Hosts: Andrew Sharp (A) & Ben Thompson (B)

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Overview

In this episode, Andrew and Ben dive deep into the tech world’s hottest topics: SpaceX’s hype cycle, the logic (and irrationality) of Elon Musk’s financial wizardry, the economics of space vs. terrestrial data centers, and the intricacies of Nvidia’s new reporting structure and the booming “Neoclouds.” Throughout, they respond to sharp listener questions and reflect on the nature of online discourse, hype, and contrarianism in tech.

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Key Discussion Points & Insights

1. The Ferrari Luce Backlash and Andrew’s Twitter Regret

(00:18-02:40)

• Ben opens with regret over a misunderstood tweet defending the controversial Ferrari Luce, designed by Jony Ive.
• He notes that on Twitter, “…none of that defense is going to make its way to Twitter. This is actually going to be a theme of this podcast of Twitter being annoying.” [01:29]
• They discuss the “accidentally viral critical consensus” (AVCC) – the dynamic where everyone online holds the same opinion, often without nuanced understanding.

Notable Quote:

“The consensus backlash is totally right, but mostly for reasons they don't understand why they're right.” – Ben [02:01]

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2. The Elon Bargain: SpaceX, Hype, and Retail Investing

(02:40-16:40)

The IPO Math and Musk’s Economics

• Ben summarizes SpaceX’s eye-popping numbers: a $2T sought valuation, $18.6B revenue, and $4.9B in losses, partly thanks to $5.1B in AI R&D (“for a model that is in fifth place and whose founding team recently left”). [02:40–03:53]
• Ben reflects on why Musk’s companies are so hard to analyze conventionally—Musk reverses the classic mass-movement model: instead of laboriously building infrastructure and then excitement, he rouses excitement online and uses that to raise capital for infrastructure.
• The symbol of meme stocks: Tesla’s share price rises even when issuing new stock, defying financial gravity because people buy the dream, not the underlying numbers.
• Ben: “He creates movements to fund infrastructure instead of infrastructure building to a movement. It's a complete inversion of the way things used to work.” [09:57]
• Andrew’s anecdote: even as fundamentals don’t make sense, people investing with Musk have made a lot of money in the end.

Is SpaceX IPO Worth Supporting?

• Ben is unconvinced by both fanboys and haters on Twitter.
• Even if economic fundamentals don’t support the hype, Musk’s bets sometimes win (the Model 3, landing reusable rockets): “Anyone who—even once—needs to have experienced it at least once… just to appreciate how good it is.” [14:46]
• On the risk: Ben sees IPOs as good for society: “You want to be a VC, here's your chance … being a VC means you might lose all your money. But that's great. … Buyer beware. This is not stock advice.” [15:00-16:29]

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3. Space Data Centers vs. Terrestrial Hacks

(16:40-27:50)

Listener Justin’s Question: Why Not “Ugly” Earth Solutions—like Oil Rig Data Centers?

(16:40–24:00)

• Ben acknowledges it’s “totally valid pushback” that industrial terrestrial solutions might be more plausible short-term than orbital computing.
• Building data centers at oil wells, where natural gas is abundant and often burned off, is a net-positive for the environment versus flaring.
• But expanding power infrastructure on Earth (new turbines, supply constraints, tech not easily accessible to China yet) also has major frictions—Ben: “It’s not dispositive that this means, like, it's not like we're fundamentally constrained in how many turbines we have. Yeah, we can make more.… Let me just write Justin's next email for him. Yes, that might be the case.” [21:26-22:20]

The Case for Space Computing

• The “elegance and simplicity” of satellite-based compute: you get free power from the Sun, in principle (minus significant cooling and radiation problems), and it scales. [22:39-23:48]
• Musk’s style: take on an “hilariously difficult” upfront challenge (Starlink, reusable rockets) in exchange for high long-term scalability and simplicity.
• Key insight: Even if space data centers are expensive or less efficient, the ability to add “marginal compute”—i.e., the last sliver needed when Earth’s constraints have maxed out—could become a defining advantage if global AI demand becomes “effectively infinite.” [25:08]

Notable Back-and-Forth:

Andrew: “If there's… an alternate path where they're offering marginal compute in perpetuity … it's easier to offer it even if it's more expensive.” [27:46]
Ben: “Exactly. Yes.”

Risks and Regulatory Barriers

• Ben reiterates this remains “an unbelievably risky investment”—the logic of letting average investors into risky private companies is a societal debate.
• Dry sarcasm: “What if we create a company so audacious and large that we could give the public the opportunity to lose all their money without any regulations whatsoever? Here we are.” [28:38]

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4. SpaceX’s Rocket Monopoly: Durable or Not?

(28:49-32:18)

• Listener Adam asks: Will SpaceX keep its monopoly on space delivery, or will competitors like Blue Origin or even nation-states catch up if the economic incentives grow?
• Ben: Once pioneers show what’s possible, catching up gets easier. He invokes industrial espionage in turbine tech: “If the economic incentives get large enough, problems get solved. Particularly if it's been demonstrated that they are solvable.” [30:08]
• Durable advantage may accrue not just from infrastructure, but from being first and accruing software/network effects (i.e., data, integration, tooling).
• Ben declares he’s happy even if rivals emerge: “If we get to the state where multiple companies are reusable rockets and there's multiple companies putting compute in space, the thesis was correct for SpaceX.” [31:39]

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5. Nvidia, Neo-clouds, and Where the AI Margin Flows

(32:18-end preview)

• Transition to quick Q&A on Nvidia, focusing on its new revenue segmentation and the distinction between short-term bottleneck benefits and longer-term moats.
• Clarifies Nvidia’s “AC” segment: stands for “AI Clouds, Industrial, and Enterprise”—essentially everyone except mega-clouds (Google, Microsoft, Amazon, Facebook).
• Andrew and Ben joke about sports references (“AC Law” vs. “AC Earl”) to highlight their age difference.
• Listener asks: Since Neo-clouds (e.g. CoreWeave) only thrive due to GPU supply shortages, won’t they fade when hyperscalers catch up with proprietary chips, making “the Nvidia tax” less of a burden?

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Notable Quotes

• On Elon’s approach:

  “He creates movements to fund infrastructure instead of infrastructure building to a movement. It's a complete inversion of the way things used to work. He's the master of retail in that way, the master of the Internet of memes.” – Ben [09:57]

• On IPOs and societal good:

  “IPOs are by and large good for society … their ambitions are so large and the commensurate risk factors are so high … you want to be a vc, here's your chance … But that's great. I think it's great that that opportunity exists. So buyer beware. This is not stock advice.” – Ben [15:00-15:36]

• On space as the next compute frontier:

  “If this is a bet on actually the demand for compute being effectively infinite … if you're the only one that can add marginal compute, you can make it up in volume … At some point the demand for compute becomes so large and the constraints on doing it on Earth become so difficult … we basically move our compute to space.” – Ben [25:08-26:53]

• On competition and technological catch-up:

  “If the economic incentives get large enough, problems get solved. Particularly if it's been demonstrated that they are solvable.” – Ben [30:08]

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Timestamps for Important Segments

• 00:18: Ben’s Ferrari Luce Twitter regret, “consensus backlash,” and accidental viral opinions
• 02:40: Introduction to SpaceX hype, Musk's $2T valuation ask, and IPO rationale
• 04:20–09:57: The “Elon Bargain”—inverting mass movement and infrastructure logic
• 10:19: Musk’s “dream-selling” and meme stocks
• 12:45–15:36: Musk’s track record, the physical world, and why he’s hard to bet against
• 16:40: Terrestrial vs. orbital data centers / Justin’s Q&A
• 23:48–25:06: The elegance (and risk) of Starlink-like solutions for data centers
• 28:49: Adam’s question on SpaceX’s evolving moats/monopolies
• 32:18: Nvidia’s Neo-cloud segmentation and ramifications for the AI stack margins

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Tone & Language

• Conversational, analytic, occasionally irreverent (“What if we create a company so audacious and large that we could give the public the opportunity to lose all their money without any regulations whatsoever? Here we are.”)
• Self-aware about online culture and Twitter discourse (both speakers poke fun at the “consensus,” how tweets are misunderstood, and their own sometimes-contrarian instincts).
• Open to nuance: neither uncritical Musk fanboys nor automatic cynics—willing to admit both the irrationality and success of “the Elon method.”

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Summary for New Listeners

This Sharp Tech episode is an excellent case study in how Ben and Andrew blend detailed industry analysis with accessible, often wry conversation. They explore the forces behind Musk’s business magic (and mess), the rational and risky case for space-based data centers, and why Nvidia’s “neocloud” customers might only have a temporary advantage. Whether you’re eager for deep dives or just want sharp takes on tech’s wildest frontiers, this episode has you covered.

Transcript

[A]

Hello, and welcome to a free preview of Sharp Tech. Hello, and welcome back to another episode of Sharp Tech. I'm Andrew Sharp, and on the other line, Ben Thompson. Ben, how you doing?

[B]

Filled with regret, Andrew.

[A]

Over what?

[B]

Filled with regret. Well, so I was going through the rundown last night, late at night, and there was a question about the Ferrari Luche on here, and I decided I'm going to troll on Twitter and, you know, do the guy in the courtroom saying, I like the Luce. But I was in the context of Sharp Tech, where last week I explained I don't like electric cars.

[A]

Right. Not.

[B]

Which is, like, super. Yeah, right. Which, which I actually have a much broader take on the Luce that ties into that, but no one on Twitter has that context. So I'm just, like, hanging out on Twitter and defending the car everyone hates. And I'm not really defending it. I was actually trying to have this very subtle, like, diss of it.

[A]

Okay.

[B]

Total, total failure.

[A]

I did not pick up on your diss at all. I saw the tweet and I was

[B]

like, so poorly, too. It's so. It's so poorly. I was so thinking about Sharp Tech. Just. You can't delete a. Like, you can't delete that tweet. Yeah, right. You just. You got to own it because you're, like, getting beaten down by the cop. You got to own it. So. So I'm going to explain myself on this podcast we actually talked about on the other ring. So I'm going to double dip.

[A]

Okay, great.

[B]

I do feel that you defend myself, but none of that defense is going to make its way to Twitter. This is actually going to be a theme of this podcast of Twitter being annoying. But this one was on.

[A]

I cannot wait. That's going to be the party in the back. It's going to be mostly male on this episode. We'll try to hit as many questions as possible. And the Luce discussion will be the party in the back, because you've had takes all week long, and I felt like you were pushing back against some of the consensus backlash to the Johnny I've designed.

[B]

So it's one of those things where the consensus backlash is totally right, but mostly for reasons they don't understand why they're right. And there's a bit of the. Our friend Spike Eskin has the accidentally viral critical consensus where it just becomes the thing to have an opinion about something. And the annoying thing about AVCC is, number one, I share spikes sort of desire to inherently push back against it. So that definitely fuels the tweet but the other part where avcc gets super frustrating is when AVCC is right. But. But people are just so on the bandwagon that it gets really annoying. And they're all annoying about it.

[A]

Okay, well, we'll dive into all of that in about an hour. For now, we will begin with SpaceX. You wrote a big SpaceX article on Wednesday. It was really sort of an Elon Inc. Article because there was a lot of good Tesla discussion in there as well. But as to SpaceX and the impending IPO, I'll read from your article. SpaceX is seeking a $2 trillion valuation on a mere $18.6 billion in revenue. With 4.9 billion in losses. Last year, growth actually slowed from 35% to 33%. That slowdown happened despite the addition of XAI and. And thus also X, which tipped the company from a small profit to that massive loss thanks to $5.1 billion in AI R&D expense. That R and D, keep in mind, went toward building a model that is in fifth place and whose entire founding team recently left the company. But sure, $26.5 trillion AI opportunity. So alongside that note, you also wrote that the SpaceX IPO is an IPO worth supporting. So tell me why. Tell me how you're making sense of all of it.

[B]

Well, this is part two of Twitter being annoying. Take him who. Who I quite enjoy. He's sort of great. Follow his own newsletter. Yep. Yeah, he's a big Nvidia guy. Wrote the book the Nvidia Way, which was a great read. He clipped this paragraph and says, oh, I love that Thompson. He'll give it straight. So what I ended up with was the reason that paragraph is in there was to upfront say the. This whole thing from a financial analyst perspective doesn't make sense.

[A]

Doesn't fully.

[B]

And the reason to talk. Right. And so just in general, when it comes to anything Elon Musk related, I write about him like once every five years. And the reason is because it's really annoying and impossible. Like, why do I never cover Tesla earnings? Because Tesla all along is fueled by like promises and belief, especially of like

[A]

retail investors coming soon. Imagine it's gonna be.

[B]

Yeah, well, so, so what I wrote and I, I wrote it's a Tesla in 2016 or something like that. When the Model 3 was put on, made available for pre order and like 300,000 people put down a thousand dollars in like 12 hours. Like, like, which was. Remains pretty incredible for a car that, you know, and it was, it spoke to the power of Elon Musk and the brand and why. And I wrote another. It's funny, I do like the articles. I don't tend to write about Elon Musk, but it's just hard. Like I wrote another one a few years later. Mistakes and memes about this flip where it used to be. You go back to like the March on Washington, you know, very famous civil rights march, which entailed years of preparation, both in terms of seeing the political ground, but also organizationally. And like that specific march, I think was like two years in the planning. And it culminated in this sort of incredible moment. One of the most famous speeches in history, Martin Luther King's I have a Dream speech. And that was how mass movements, they had to be built. You built them up and they culminated in this massive spectacle on the National Mall. On the Internet. It doesn't work that way. Internet, you can spin up masses overnight. And so I think I wrote mistakes and memes in the context of the whole GameStop sort of thing. But there's been other things like the color protests and there was a sense that why is it we get these huge movements and nothing happens? And it's because this whole process has been inverted. You can spin up a mass movement on social media, but if you didn't put in the years of building the infrastructure around that movement, then it just sort of sputters out and everyone forgets about it. However, and this is where I tied Musk into that article. What makes him unique? There's a lot of things that Ian Musk unique. And by unique, unique can be good and it can be bad. But no question he's unique is the extent to which. And there's a bit of Jobsian sort of reality distortion field, but Musk has like nuclearized that sort of capability where you leverage the masses to achieve the means by which you build the structure that spun up the masses in the first place. And the Tesla stock has always been the best story of this. I have not written about Tesla earnings because any sort of breakdown, even once they achieve success, honestly, the stock went to the moon. It was still. If you, if you actually sketch out their, their, their profits and losses, super rational value. Yeah, it doesn't really make sense, but at some point, and people on Wall street have been writing TSLA stock does not make sense. Yeah, and they look dumb though, because the stock that like they lost their shirts when the Model 3 worked and the model I worked and. And the stock went to the Moon. But like the stock was just because it went to the moon. It's like, okay, if it had stayed where it was, then it actually made sense. But they did. It got escalated. But the crazy thing about the Tesla stock that always amazed me, and I'm sure this is the thinking for SpaceX going public, is they would do a stock issuance to get more money. Now, if you issue more stock, you're diluting the stock that's in the market. Like the fundamental value of the company. If the company's worth $1,000 and you have 10 shares worth a hundred dollars, if you issue 10 more shares, nothing has changed about the quality of the company. So the shares should go down to $50.

[A]

Yeah, you mentioned this last week.

[B]

Tesla would issue shares and the stock price would go up.

[A]

And so it's like, man, you know, go for a ride with Elon, see where you end up right there was

[B]

like, oh, yes, he's investing more money in the company. We're going to achieve our dreams, achieve our goals. And it's easy to sit around and mock this and like, look at these rubes being led astray by Elon. And you're seeing a lot of it with the SpaceX thing, right? Look at, I can't believe these idiots are going to invest in this company with these numbers. And that's why this paragraph was there in a mocking tone, to reflect sort of that reality. But what Musk is doing and has done again and again, is sell people on a dream such that they will put money into the dream. And that's the means by which he goes and pursues the dream. Yeah, like he's flipped over the process. He creates movements to fund infrastructure instead of infrastructure building to a movement. It's a complete inversion of the way things used to work. He's the master of retail in that way, the master of the Internet of memes. Like Tesla, like SpaceX is the new meme. Meme stock. Like, that's just going to be. That's gonna be the case. And so the question then, if you accept that as this is what happens, it seems irrational, but this is what happens. Is there a path to building in

[A]

terms of what he's promising that's actually gonna make a ton of money and justify any sort of valuation, like backwards justified.

[B]

So you look at all the idiots who are like, buying unbelievably expensive Tesla stock and doubling down when they were issu. Like, they all made a lot of money at the end of the day, like, all the people who are pointing out that was dumb.

[A]

And by the way, how the Stock. I will just note that my best friend is a money manager. He manages my wife's money. I've mentioned in the past my wife has Tesla stock for literally eight years. My friend Ed has been coming to me and being like, the fundamentals just don't make sense with Tesla. You need to get out. And Alice will always say no. And the fundamentals still don't really make sense with Tesla. When you look at the multiple and the valuation and like the cybercap stuff, you know, it is definitely a real possibility. And on the SpaceX front, I, I mean there are real things that they have working in their favor. They got a $45 billion contract for compute with anthropic. Over the next three years, either side can walk away from that deal with 90 days notice, which is pretty interesting. But Anthropic definitely needs the compute right now. So like, the AI infrastructure business alone is real and should grow for them.

[B]

But what I love, and I do, I, I, I should have acknowledged I do like, and I've said this before, Xai, like, basically I, I, I think the way I'm interpreting it is xai's new team is basically Cursor, which I think is, is quite interesting. Like they, because Cursor, like cursor needs, needs compute. They need to build their own models. They have like, they, it's not a viable business that they have to be. Their ultimate model is throwing out to Anthropic or, or to OpenAI or whatever it might be. But they also have lots of interesting data. They have a very good enterprise business that's still growing. And if it's important to be really good at coding, it's hard to imagine sort of a better place to start. So I don't, I don't even hate where XAI is in that regard. You know, almost certainly that deal was structured because you can't do a, like a $50 billion acquisition like as your S1's already filed. Yeah, so, but, so I don't hate where that's going either. And I probably should have given more sort of credence to it, but I wanted to write about space data centers and I wanted to sort of like acknowledge, like, But I think this framework is actually important. It's important to understand the Elon framework, which is not conducive to your friend Ed for other reasons.

[A]

Well, but it has been, I mean, look, the odds of starting a new car company 15 years ago or 20 years ago, whenever Tesla started and actually succeeding literally has not been done in

[B]

100 years 100 years. Yeah.

[A]

So clearly something he's doing is working and I just appreciate any company that is ipoing. I feel like I came to Sharp Tech in the post IPO era and you know, half the companies we talk about are private companies. So I'm excited to open up the balance sheets and have some fun. First of all, yeah.

[B]

This part of why the IPOs were supporting number one just in general, look, I'm not going to defend this is not a defensive Elon musk like up and down, left and right.

[A]

Yeah.

[B]

But there is a bit where both sides go too far. So on one hand again this is why I come back to that tweet. I just had tons of Elon Bros in my mentions like going off on me who clearly didn't read the article. Right, right. They were just attacking that one screenshot and they're like listing all these things like whatever.

[A]

Your article was like pretty positive all things considered on what's possible.

[B]

I know but it widely got interpreted on Twitter as very negative which is like, like it's funny, I was worried about like I'm coming across as like way too much of a believer and so I need to like shield myself and like be like look, this is all kind of ridiculous. It doesn't make sense. And of course that's the part that Toyota anchored on like there is. This is why I don't ride. What Elon. There's no winning. Like both sides got mad so whatever. But yeah, but to the Elon point, look, Tesla exists. The self driving is amazing. Fair questions? Is it ever going to get to fully autonomous with doing vision only? We've litigated that. It's still an open question as it is. It goes door to door and you don't have to touch the steering wheel and it does it reliably. It's amazing. Like anyone who everyone needs to have experienced it at least once. You owe it to yourself just to appreciate how good it is. So that exists. Rocket boosters do land on ships routinely. It happens every week, multiple times a week. It's not even a news story.

[A]

Starlink exists.

[B]

Starship. We'll see. I mean starship is kind of. It's taking a long time. They're spending a lot of money on this. It's definitely, I think been much more difficult than they think. And I've given the case for iteration, getting on the limit, finding exactly where it is. Stuff should blow up. There's a reason the risk Factors of the S1. It starts immediately with starship and it's like multiple pages long. Because all this stuff depends on getting that sort of capacity into space. And 2024 they catch that thing with chopsticks like, oh, they're almost there, they're going to get it. It's been two and a half years, right? Or two years I should say. So it's a real risk factor. But number one, like Musk has earned like Musk. IPOs are by and large good for society. I think is like number like that's been sort of shown, number one. Number two, their ambitions are so large and the commensurate risk factors are so high. People talk about like, oh, you know, it's not fair that retail investors don't get a chance to get into startups and all they do is sort of like catch stuff at the end. It's like, well, you want to be a vc, here's your chance. Yeah. And by the way, being a VC means you might lose all your money. But that's great. I think it's great that that opportunity exists. So buyer beware. This is not stock advice. I don't invest my stock directly. If I did, probably not for me because there's a bit where I oh,

[A]

it looks pretty overvalued right now as in IPOs, but who knows, I don't

[B]

know, maybe I'd be, I'd probably get a few shares just because like hey, we might pull it off but. But I'm glad it exists.

[A]

Yeah. And I agree. Well, what I love about Space X is it's not a software company. Like they're building real infrastructure that actually matters and could change the way we live in a variety of ways. Like they've already changed national security in some very positive ways. Delivering Internet in new ways, building out data centers faster than anyone on earth, at least in this country. Maybe going to Mars, I don't know. I don't know if we'll get to Mars. But I support the ambitions in the physical world. I think that's pretty cool. So we'll see what it turns into. Speaking of the physical world though, Justin says before we go to space for data centers, aren't there uglier but more plausible terrestrial or near terrestrial escape hatches? For example, modular data centers attached to offshore oil platforms or other stranded energy sites powered by gas that might otherwise be flared with existing industrial maintenance infrastructure? Fiber slash backhaul and the ocean as a heat sink Lot going on there. Obviously marine environments are brutal and maintenance would still be a nightmare. But that seems dramatically more tractable than launching disposable rack satellites and accepting orbital hardware depreciation. My question is if the core stick is terrestrial power and zoning opposition, why shouldn't we expect the industry to exhaust every conceivable alternative before orbital data centers pencil out? I'm very pro space industry and I'd love billionaires to subsidize orbital industrial capability. I'm just struggling to see why Earthside ugly solutions don't dominate space computer economically for a long time. What do you think Ben?

[B]

So this is totally valid pushback. So in fact a lot of the pushback we're going to go through is valid and there is a bit where for Space X specifically there is a. You have a hammer. What's the biggest nail I can find? Yeah right. So there was on Tech Mean or today or there's an article from the information about Apple is going to tout how their own chips gives them an advantage in AI. Like did Apple develop their chips to give them an advantage in AI or are they casting about and retrofitting their advantages to tell a story about how they have an advantage in AI? Now that also definitely true. And it also might be true that they do have an advantage in AI because of their chips. Like all these things can be true at the same time. This definitely applies to SpaceX. SpaceX was not created to put data centers in space. Yeah, right. So there is a certain retrofitting of mission and there's a bit where AI is like is arguably rescuing the SpaceX economic case by virtue of delivering this theoretical market that is so large that they didn't plan for, but it happened to come along at the right time and there. And so all these arguments about space opportunity right there. SpaceX is making the argument for data centers in space because they're a space company. Right. So totally valid response. Now the pushback to Justin and the reason why I am fairly optimistic about data centers in space is a few. Like you already said, there's a lot going on here. Yeah, like, like now number one, I absolutely think there will be things like this maximizing everywhere we can find energy. And by the way, in the meantime there's still a lot of places to build data centers, particularly in places like West Texas. To his point, this bit about they actually have more natural gas than they know what to do because it's a byproduct of extracting oil and yet they literally just set it on fire. Yeah, right. Because they can't get rid of it. So it's actually a net positive. It is carbon positive to the earth to Build a data center instead of flaring it up. A lot of existing data centers have been retrofitted for AI. Were Bitcoin for the same idea. Because, look, we can just monetize actually what is excess energy. And then everyone's like, oh, wait, I know it's better than Bitcoin. AI, like tokens, like, tear it all out, put stuff in there. There's this whole ecosystem of like, rando old school. Like, what was the name for, like, people Wildcats or.

[A]

Yeah, wildcatters that would just like, find

[B]

oil wells and stuff like that's going on with AI and finding places to put GPUs. Okay, so absolutely. Absolutely a thing. And so all. Yeah. Data centers on oil platforms. Sure, why not? You do need. There's lots of stuff that goes into that. You have to convert that natural gas into power. You need turbines. Guess how long it takes to buy a turbine right now?

[A]

Probably quite some time, I'm sure, like

[B]

seven, eight years or something like that.

[A]

Especially in China.

[B]

No, it's actually a lot of. It's not actually. Believe it or not, in part because turbine blade technology is. Is one of the West's great secrets. And so there's Siemens, there's ge, there's. What I don't want to say

[A]

one of those companies had a big espionage scandal like three or four years ago because that has been something that China. That's a nut that China has yet to crack.

[B]

Yep. Turbine blade technology. And so, but so there's been a big push on, like, much less efficient turbines or like, like temporary ones or generators or like, like the Bloom Energy that's doing like fuel cel, which is not nearly as efficient as a proper generator, but you can't get a proper generator. And there's like, demand right now. So now all these things can and I think will be solved over time. So it's not dispositive that this means, like, it's not like we're fundamentally constrained in how many turbines we have. Yeah, we can make more. And which is like, wouldn't it be easier make more turbines and to have data centers in space? Let me just write Justin's next email for him. Yes, that might be the case. So the thing about data centers in space is there are some fundamental advantages.

[A]

Okay.

[B]

And the fundamental advantage is pretty straightforward, which is free power. Right. And so you do get power. And it's actually relatively simple, all things considered. It's not capturing gas, then, you know, setting it on fire and spinning and boiling water and spinning blade. If you think about it, the actual power generation is kind of nuts. How it works. And this gets back to the bit we talked about last time. We're not talking about putting a warehouse in space. It's putting a bit of compute that's about the size of what Starlink satellites are today. Now you need more cooling. Just to put it in context, I think the International space station's like 70 kilowatts. And that was very difficult to figure out how to deploy the radiation to cool that. You're gonna have to figure that out with the. If you're going for, let's say, 100 kilowatts.

[A]

Yeah.

[B]

Positioning it so that one side's always in shade, one time's always in sunlight will solve some of these issues. But the long and short of it is that, like, there's a. There's a elegance and simplicity to this that I think is underappreciated. If all these issues can be solved

[A]

well, and that's my question is, in terms of where they're driving to, would it be a just a cheaper solution in addition to more availability in space? Like, is that the goal that the SpaceX value proposition that they're trying to offer?

[B]

No, I don't think so. Like. So the, the. There is a bit where Elon at his best ends up with very elegant solutions that took astronomical amounts of investment up front to get in place. They're like, Starlink is an example of this. Like, like Starlink on airplanes is so obvious. But to get to this state where of course, every airline is going to sign up for it, and they had to invent rockets, they had to get rockets to that lab, they had to do Starlink, they had to do all this.

[A]

It's like the.

[B]

So there is a complexity in Justin's solution that is an ongoing operational complexity. You have to continually figure out what you're gonna do with these GPUs and getting the natural gas and powering the turbines and maintaining the turbines and all the. That that is. It's complex on an ongoing basis. Even if the path to getting there is much easier. What Musk usually does is the path to getting there is hilariously difficult.

[A]

No one stupid would ever try. Yes.

[B]

But if you get there, it's super elegant and super reproducible and super scalable. And this, the idea that we talked about this last week, too. Space is so much bigger than people realize. And if this is a bet on actually the demand for compute being effectively infinite, and where these racks in space would be is they're providing marginal compute, which is mean you need one more bit of compute where you know, of course you're still going to have the data centers on Earth, which by the way, the data centers on Earth are probably extremely profitable because they're cheaper. But the marginal if compute becomes a commodity, the price of the commodity is set by who adds one more bit of the commodity, what's their cost structure. So on one hand it's the most expensive one that has the worst margins, that adds that marginal compute. But if demand is large enough, then that marginal piece of compute, if you're the only one that can add marginal compute, you can make it up in volume is literally the answer here. And so there's a make it up in volume aspect, which by the way, should always make you worried and suspicious and feels very bubbly. We're gonna make it up in volume has always been like the excuse to do things that make no sense. But that's the case is it's a make it up in volume. At some point the demand for compute becomes so large and the constraints on doing it on Earth become so difficult. And SpaceX gets so good at this and actually Starship works, they could deploy large at scale. The that this very elegant solution where we basically move our compute to space.

[A]

You look at how you do streamlined. Yeah, because you can envision a scenario where we get 10 years down the line or 15 years down the line. And sure, you can set up like an offshore data center on an old oil rig that you bring natural gas in for and you.

[B]

Natural gas is from the ocean. To be clear, they're operating in the natural gas. But yes, no, that's, that's Justin's point is the energy is there, but the, it's still, it's one of those things, you look at it and if the elegant solution works, it's like, I can't. Why are we going to do it that way? Like just watch more satellites.

[A]

And my point would be you do that and then you get six months down the line and say, oh, actually we need more compute. And then a year down the line

[B]

we need more on this treadmill forever.

[A]

Exactly. So if there's sort of an alternate path where they're offering marginal compute in perpetuity and SpaceX has cracked that nut.

[B]

Exactly. Yes.

[A]

It's easier to offer it even if it's more expensive. So.

[B]

Right, we'll see whether the cost of like the, the implementation cost of the alternatives gets very, very high. That's exactly right. Now again, everything I just described to you may sound stupid and impossible and you might totally be right. That's why this is an unbelievably risky investment. Like, this is why the laws exist. Now, should the laws be changed to make it easier for retail to get into private companies? That's certainly a debate that can be had, particularly as the world has shifted to larger, larger companies staying private longer and longer. This isn't Microsoft going public like $100 million or whatever it was like, and you could ride it all the way up. That's definitely a discussion to be had. But the reason we have protections against retail investors getting into private companies is because you're likely to lose your money. Yeah, like Space X is like, what if we create a company so audacious and large that, that we could give the public the opportunity to lose all their money without any regulations whatsoever? Here we are.

[A]

So like here we are and we'll see where we go again. Maybe we're going to Mars 10 or 15 years from now. Adam says last SpaceX question, how durable is the SpaceX rocket monopoly? At present, it seems that SpaceX has two incredibly valuable moats. A monopoly on space delivery, commercial rocket contracts, and a monopoly on lower earth orbit Internet Starlink. You can currently project out a few years as Ben's done, and see how it's possible that they'll have a third moat in the future. Racks in space. This of course assumes a lot, and Ben makes that point in his article for me. However, the most crucial or the most crucial assumption is that SpaceX will be the only game in town for space delivery going forward. Now, there's no doubt that SpaceX has a huge lead in reusable commercial rockets. But is it safe to think that that will stay the case for a decade, two decades longer? In other words, if racks in space become as important as Ben thinks they might be, there'd seem to be enormous incentives far greater than any exists for satellite delivery and Internet satellite constellations for investment into second mover R& D, whether from Blue Origin, other startups or even nation states. What do you think, Ben? I've wondered the same thing about the SpaceX rockets.

[B]

It's a very, it's a very, it's a very relevant question. I. Blue Origin has landed boosters like Suborbital, I believe, but they, they, they've done it. China is obviously working on this and to Adam's point, if the economic incentives get large enough, problems get solved. Particularly if it's been demonstrated that they are solvable. Right? It's a lot. It's way easier to invent the second booster that lands precisely because you know it's doable. Just like it's going to be easier in some respects for China to invent turbines. Right, because they know it exists and a lot of the equipment they need they can take apart and look at it and try to figure it out. And so that's absolutely a fair point. This is maybe an argument for why continued investment in XAI is a good thing. If you get there first and your model and your tooling, you accrue like software type network effects in part because you were there and you had way more capacity than everybody else. That provides more durability than just having infrastructure. I think that's probably the point there. It's like, actually it is important to get something defensible in the long run. The way I look at it though, not coming here as an Elon Musk fanboy or like a SpaceX stock advocate, if we get to the state where multiple companies are reusable rockets and there's multiple companies putting COMPUTE and space, the

[A]

thesis was correct for SpaceX.

[B]

That's right. I'm feeling great. It's a wonderful world. It's a world I want to live in. So I'm actually not worried about it.

[A]

Fair enough.

[B]

That makes sense. This is why I had to give myself permissions article. I'm not being a stock analyst here. I'm just like, I think the this, you know, I wanted to tie it into, you know, the agentic inference idea. This idea that there's just going to be a lot of compute, that everything we think about how COMPUTE has to look today, I'm not sure is exactly what COMPUTE is going to look like in 10, 20 years. And part of that is certainly the thesis here. But yes, it's a fair point, Adam, and I don't care.

[A]

Fair enough. All right, well, shifting gears, let's run through some mailbag questions. Aaron says. Hi guys. In Ben's Tuesday post on Nvidia, he discusses the AI stack and makes an interesting distinction between where the benefits accrue in the short term because of bottlenecks and in the long run because of moats. The distinction tees up how Nvidia's new reporting segmentation, which was likely done to show just how much of their sales were going to the AC customer base, where they have a much stronger moat than they do.

[B]

Is there a definitive way how to pronounce this?

[A]

So I saw AC in this email and I immediately thought of AC law. And so in honor of AC Law, former Texas A and M. Great. Had some great battles with Kevin Durant about 15 years ago or 20 years ago. Now I'm going with AC. I'm probably getting that wrong.

[B]

Yeah. So just to be clear, AC is acie, which is AI Clouds, Industrial and enterprise. Basically it's all of Nvidia's sales to non hyperscalers. So exclude Google, exclude Microsoft, exclude Amazon, exclude Facebook. Is that all of them? It's hard to keep straight.

[A]

So if we're talking like there's not

[B]

very many of them. No. So Core Weave is in the AC category, right? All these, like wildcatters that are fighting like old bitcoin data centers and putting GPUs in there. Those are the AC category. Companies buying GPUs for themselves are in the AC category. And like governments buying anyone but the big guys is ac. We'll go with ac. Yeah. Any longer of which AC Law or AC Law. Yeah. IC Earl, Another good one.

[A]

Remember some guys, you know what I mean? Is it the AC customer segment itself, though?

[B]

I think that's our age difference. I thought of ac, Earl. You thought of AC Law. I think that captures it perfectly.

[A]

Isn't the AC customer segment itself currently benefiting significantly from bottlenecks? Aren't Neo Clouds largely only thriving because there's a huge supply shortage? And ultimately, when there's a balance between supply and demand, won't the very fact that these guys need to buy an entire Nvidia bundle, paying Nvidia's huge gross margins by definition mean that they will lose significant share to lower cost hyperscalers who have their own asics who can avoid the Nvidia tax. What do you think about that possibility? All right, and that is the end of the free preview. If you'd like to hear more from Ben and I, there are links to subscribe in the show Notes or you can also go to SharpTech FM. Either option will get you access to a personalized feed that has all the shows we do every week, plus lots more great content from Sir Techery and the certecary plus bundle. Check it out and if you've got feedback, please email us at. Email sharptech fm.