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

Gavin Baker welcome to the show how are you doing? (bell ringing) - Doing great man, how are you guys? - Yeah, fantastically right? SpaceX IPO, it seems like everything went just flawlessly to the point where it wasn't even dramatic. - Let's get a round of applause for the bankers. - The bankers, like 20%. - 20% pop almost through its day. - Yeah what I mean by that is like, it would have been more dramatic if it had like popped up 70% and then went down 30 and then went up 50 and it was drama but it was just like perfect execution for start to finish. Was that how you interpreted it? - I thought Golden Saxon were going to be a very good job. - Yeah. What do you think the market is looking for SpaceX next? Is it all eyes on the first earnings report? Like where do we go from here? Because there's so much of the SpaceX story, pre IPO that was a decade out, five years out, two years out. But is the market going to be processing quarter by quarter plays like many other companies? - Well I think the market is always, quarters matter. - Yeah. - The runners on X, it's like these reply people at X for any topic or experts. But somebody once told me a marathon is 26 one mile runs. - Yeah. - And so then all the runners were like, "No that's not true at all." - Right. - Obviously writing a mile is different than running a marathon. But every quarter matters. But at the same time, I do think if you look at how the market has looked at Tesla over the last five, six years, Amazon during the days when they were building AWS and then their retail distribution infrastructure when they go through these investment cycles, I do think the public market has a much greater tolerance for investment and a much longer time horizon than a lot of people in the venture ecosystem give a credit for. By the way, this is Foxy in the back. He's one of the analysts here at the trade ease. - I was just listening to him on the Brad Gerstner podcast. I think he chimed it on that, right? You brought him away? - There we go. - Yes, he did, but he did the work on SpaceX. So I thought you guys might want to talk about that. But I do think that I'm not sure the story is as far out as you made it seem to be. There are two variables that are going to matter a lot over the next year. The first is just how quickly can they bring on terrestrial compute? It does seem like they monetize gigawatts at a higher rate than anyone else. And we know from Jensen that they bring on data centers faster than anyone else per Jensen's words. And everyone in the ecosystem is really incentive to get land power in the hands of people who can energize it because everybody starts making more money when the GPUs are energized. So if they can, what was the altimeter figure for what they were monetizing? Can you go out to that Foxy? Do you remember for which gig? - Well, I think it was like two to three. Wasn't it like at least two times higher than average NeoCloud pricing and that's partly in due to scale and customer quality and things like that. But it was meaningful. - Yeah, so they're doing 50 billion of gigawatts on Google deal. So how quickly they can add gigawatts really matters. If you can energize two, three, four gigawatts in the next year, that's a lot of revenue now that prices make up. They may go down, but that's really going to matter. - So all eyes on Colossus 3, 4, 5, 6, 7, 8, 9, 10, etc. At least in the short. - Yeah, our macro hard macro harder macro. - Hardest. - To that name, macro hardest. And then I think cursor is another big variable. We talked about it with Brad about how composer 2.5 after three weeks of RL and supervised fine tuning Colossus 2 is kind of Pareto dominant. So what's gonna happen when it's applied to a bigger, better base model? Do you think cursor being in half the Fortune 500 is interesting? So I think those two things, well, I'm super excited for going to Mars and asteroid mining. And a city and mass drivers on the moon, like all that stuff is awesome. And I think there's a decent chance it happens in my lifetime. I just think there's much more tangible near-term drivers here. - Yeah. - How do you think about the tension of the cloud business versus their own application and model business? I think a lot of people were surprised when the initial and theropic deal happened purely because knowing Michael Truel, he would have been very excited. - That's my compute. - Yeah, yeah, get access to a couple of them. - It's like, hey, you gotta share. - It's not the only child around here. - And it feels like you could imagine SpaceX bringing on a lot more compute very quickly. But at the same time, every lab has had to go through this tension of how much compute do we allocate to training versus inference? - A way to interpret that is that maybe the team at SpaceX is pretty confident in their ability to bring gigawatts online. - Yeah, that makes sense. - And the altimeter figure that they've ordered 20% of the Rubens and the Rubens is an epic chip. Like Blackwell, it was really hard to get it online. Ruben is kind of a more drop-in replacement. It's a really, really good chip. You'll have the GROC LP use integrated at some point in the next six to nine months. So one way to interpret that is they're pretty confident that they can bring data centers online pretty quickly. But I also, I don't remember all of the details, but I do think there was an alt in the anthropic agreement that if they can use Google, and the Google deal. - Yeah, could be short-term thing. - That's what I just meant. It's like, there is a tension there where if you, you know, there's a moment where maybe you want the compute, but you don't necessarily have all of the revenue yet. And so you could see, anyways, I'm very confident that you figured out. - Yeah, on the topic of like Elon web services, is there a world where SpaceX winds up building out more of what looks like AWS? Like we've seen between OpenAI and Thropic, there's this tension of like, you got to be on AWS 'cause I tar or the ecosystem or enterprises just want to be on AWS. They won't even go over to Azure or Google Cloud for whatever. And you could imagine like, is it enough to just be a token factory or do you need to have a database and an in-memory storage and cloud storage and cold storage and all the things that AWS provides? - My thought is that being a token factory is more than enough for the next five to 10 years, man. We are, yeah, we need more token factories. But we'll see. And if they need that stuff, like they will build it. - Yeah, how are you thinking about the other hyperscalers, the other big tech companies? We were sort of puzzling over meta strategy at this point. Tons of resources, cash flow, data centers, they have experience there. Maybe they're not as fast as SpaceX, but there's a lot there, but it's a completely different motion to go into token factory. And yet there's still a lot of demand. So how do you think all of that plays out? - Well, I think there's many ways to go into the token factory business. You could, if you're meta, you could just say to someone like fireworks, hey, here are 100,000 GPUs, we'll take a revenue split and we'll see what happens. I am increasingly looking at EV to net PP&E as evaluation metric, just with the idea of being installed atoms on earth, I think are going to appreciate and value. And this is a little bit that halo trade that I think maybe Coleman Sacks came up with, high asset value low obsolescence. But meta, meta is EV to net PP&E multiple is in an interesting place. It just suggests that the market has an immense amount of skepticism about their ability to monetize their own asset base. - And I think that's warranted given that all we've really got out of management is this concept of personal super intelligence. And it would be different if meta AI was like at the top of the app store and everyone you were talking to was like, yeah, you know, I'm using meta AI. - Where there even there was like a killer feature within Instagram. - Yeah, like people are shopping in Instagram now. - And I think no one doubts that like once Zack has an AI product with a billion dollars of revenue, he can take it to tens of billions. But it's unclear. I feel like going into enterprise, like, what is this API business gonna look like? We know they can use the GPUs just on making the ads product better at the end of the day. But there's a lot of questions. - Look, I think a few things. I do think if I look at the way different players are behaving, it feels like everyone thinks we're entering the into game. Everybody loves to use these chess analogies. And it looks like the end game maybe here sooner than we think. I think that's why OpenAI is cutting codex pricing. Simply because coding tokens are so valuable. And if you don't have enough of them, you may not be able to get into this RSI loop that everyone is, you know. - Question four. [BLANK_AUDIO] And I think if you're Zuckerberg, you feel that acutely. I thought, Mews, what are the Mews? - Mews, Spark. - It was, to me, it was an upside surprise and it made me feel like, you know, what's the, what's from Talladeganites or what is it, so you're saying there's a chance? - Oh yeah. - Like, you have to say, you're telling me there's a chance. - I mean, the other quote from Talladeganites is if you're not first, you're last. (laughs) And, you know, that's how a lot of people-- - There's so many good books, Talladeganites. It's all the windshield. (laughs) - Yeah, 100%. But I think if I'm pretty confident Mark Zuckerberg is proven to be a good entrepreneur over time and has been willing to pivot, you know, and it's just, it's so funny, you know, right now they spoke as, you know, meta as Talladebusters, there's like no chance that we're gonna, you know, monetize GPUs externally. Well, like 10 days before they announced all those layoffs, which I think was at the end of 22. If not, I don't remember when they started to announce the layoffs shortly after Brad. Maybe at two months after Brad wrote that letter to Mark where he said, "You're the king, you can do whatever you want, "but this is what I might respectfully encourage you to do." You know, they went from saying, "We're not gonna do that, we're gonna keep investing." To, you know, super focused on Opex. And a couple of days, man. So it's like people they meet with meta and they hear, "Oh, you know, we're not, we're not gonna monetize "or GPUs externally." Well, I don't know, check back in a few hours. - Yeah, yeah, no, it's like everyone, it comes down to like everyone has a price. You look at Elon and Anthropics relationship four months ago and then you look at kind of as the opportunity unfolded, it made sense for them to partner. I wanted to ask how-- - Now, on the meta thing, I think there is one point that's important, what ultimately drives behavior for all these big-hub companies? Like getting to AI, I think that does feel existential for all of them, but the stock price also really matters. Because if you know, if the stock goes down, you know, you get people at grant at this price, that goes down, you know, your engineers are unhappy and it's tougher to get to where you wanna go if you don't have, you know, these, you know, now forget the 10X engineer, people are talking about the 10,000X engineer. You know, you're not gonna get there if you don't keep those 10,000X engineers. So just, I think, like we'll see with meta. - Yeah, yeah. How did this IPO update your general kind of framework for the role that retail is playing in capital markets? A lot of, it was very funny last week to see people like say like, oh, the IPO is only 2X over subscribed by retail. - Yeah, there's all these other-- - These are all $3 billion. - Every $3 billion IPO's, we're a 10X over subscribing. It's like, no, we're talking about, you know, a very, you know, order of magnitude difference here. But it still feels like retail is going to play a very, very important role over the next 12 months. Maybe more so than ever, given that the, the hyperscalers are now running, you know, cash flow negative. You have their conflict in the Middle East, right? There's rebuilding efforts that needs to happen. And so I feel like retail, this is, this is kind of retail's moment now, maybe more than ever. - Yeah, well, so a few things. One, people say retail in a pejorative way. And I would just say stupid is a stupid does. And like, you know, we track, you know, there's all these indices of retail favorites. And man, they're up a lot. And they're up a lot, 25, and they're up a lot, 24. You know, so kind of stupid is a stupid does. So I'm not, you know, like I think retail is probably outperforming the overwhelming majority of professional money managers, whether they're, you know, private equity managers, venture, you know, public equity managers, whatever. So like retail, I don't think it's pejorative. I do actually think in the case of SpaceX, I'm not sure, you know, you process so much information, I'm not sure where this comes from. But I actually think after the IPO, you know, for whatever reason, some of that retail stock may have, may have gotten allocated to people who are flipping it, because my understanding is there was more institutional buying. I don't know where this after the IPO, but it was retail buying. Not sure, you know, retail is very sensitive to momentum. So maybe what's happening today changes that. But I think another really underperishing thing about the SpaceX IPO is that 10 over 10, noblescent SpaceX employees bought on the IPO. And that's just, you know, everybody does all these lock up analyses and oh, how much stock is gonna come come to market and you know, for sure there's all these triple layer SPPs or whatever, you know, or maybe there are, there are people speculate there are. And I'm sure some of that will get unwound. But reality is, is that SpaceX employees own a lot of this. And if you're an employee or even if you're an investor who has an SPV or you're directly on the cap table, you've had a chance to sell every six months for last 10 years. If you wanted to sell, you could have sold in, you know, whatever when they did that offering in the second half of last year. So I think the supplied demand dynamics here are going to be very interesting. But with retail in general, yeah, man, there they've been a more powerful force in the market over the last three and a half years than any other time in my career, including the year 2000 bubble. Which I think this is nothing like by the way. But yeah, they matter. And stupid is, the stupid does. - I'm interested to go a click deeper on the idea of like, value will accrue to companies that are in the token path. I think that phrase is extremely powerful right now. But I want to sort of expand it and understand the fringes of the token path because we talked to Matthew Prince at Cloudflare, stocks at all time highs. It's delivering tokens at the edge. And obviously there's an immense amount of AI agents that are interfacing with different websites that need to be distributed. So there's a lot of value there. But is Cloudflare in the token path if they're the one finally sending you the packet of tokens at the edge? Or does that not count? How does that, how do you think about that? - Every CDN has this bit. So you know, I'll come by, they signed. - Yeah. - What was it, a $1.48 billion within Dropback? And if you have all these points of presence, and you can deliver really lowly C tokens to high value users, I think what's interesting for all these CDNs is they're getting a massive premium for that latency. You know, it turns out, you know, one of the lessons from Srivara says, people are willing to pay for speed. And you see that in the prices these guys are commanding. But I do think, I mean, my gut is in terms of tokens consumed on planet earth, these CDNs are delivering less than 1% of them. And I mean, maybe less than 10 basis points of them. - Most of the tokens are happening internally. And then you just get there exactly. Would I say that these guys are in the token path? I mean, I would say they have a path towards being in the token path. And they have part of their business that's in it today. And like everyone, they're trying to move it more there. - Yeah, I mean, Matthew's talking about co-locating and video servers on the edge, specifically for the delivery of voice models because you want those to be very low latency. Maybe you want your coding model to go off and cook in Virginia for 20 minutes or an hour and then come back to you with the final result. But if you're trying to actually talk to a model, you probably wanted as fast as possible. What about on the opposite end? - Wouldn't it start up that a video just invested in that like will-- - Oh yeah, on your house. - Money to put a GPU, you know, for a 4 GPU server on the outside of your house. - Yeah, the GPUs are going everywhere. Going in your bed eventually. - I mean, it's full circle too, because it wasn't Jensen talking about stuff like that back during like the original crypto cycle being like everyone's gonna be, you know, mining. - Yeah, and I mean, the Tesla Powerwall is like a version of that for storing energy. It doesn't store compute, but it stores energy locally on the edge off the grid. And there's a lot of powerful things to get unlocked by that. What about land? Is land in the token path at some point on the extreme other end? Because people are obviously searching for going further and further upstream. They found a toilet company that makes a particular material that goes into semiconductor supply chain. People are hunting for like the final ingredient. Maybe it's just sand that turns into silicon. - Yeah, I do think the bottleneck bros as they are called are. This like bottleneck trade is kind of nearing its end. - Okay. - And, you know, I did, you know, the Wall Street Journal have the story about this Japanese company that makes, I'm sure what they make of this. - I didn't know, too. - I didn't know, I didn't know. - I didn't know. - I didn't know. - I didn't know. And you, everybody's in this, 'cause they thought they were gonna raise prices. And they just said, we're actually not gonna raise prices. This is the wrong thing for us. that I almost posted yesterday on X-Walk. Welcome to Japan to all of the bottleneck people. (laughing) But you know, everybody's, you know, having clawed, run. What's the next bottleneck? - Yeah. - That was the game for the last year. The next game is what has enduring franchise value, kind of on the other side of these bottlenecks, whenever that is. As far as land is land of bottleneck, man, I do think the math is for orbital compute to me. Once they can reuse Starship, I think the math for orbital compute becomes pretty compelling. You know, it's just 60 billion to bring on a gig to restrially. 25 is power and cooling. You don't need that, it's based. And so the right comp for that 35 billion of kind of, you know, IT equipment, GPU, CPU switches, you know, memory storage is that 25 billion versus the cost of launch. And once Starship is reusable, I think the cost of launch is five billion. So 20, that means you can put a gig into space for 30 billion and the gig on Earth is 60 billion. And that 25, the power and cooling feels reasonably inflationary to me. So I don't know that I would say land is in the token path. - Maybe beachfront property, but that's about it. Beachfront property is beachfront property, airplanes, really nice cars. - Yep, firmly in the token path. - All that stuff is in the token path. - I got you. - How do you think the events of last week with Anthropic and DC update different countries on their own sovereign AI play? Because there's been attempts, it doesn't feel like, you know, many of the attempts of, you know, you can have a powered shell and you can have the best GPUs, but if you don't have the talent, it's really, it's gonna be really hard to get to the frontier. Now if you don't have massive usage, it'll also be really hard to get to the frontier. And so, do you think the ship has sailed? - No, look, I think every country's gonna wanna have their own sovereign AI strategy to minimum for national defense. I think where that ends up is, I saw today that the EU had restricted exports of the straws way. - I think that's a joke. I think that's a meme. So people have gone so far on the Maestro Le Chat thing, that they're saying it's like, mythos is distilled on it and it's breaking all the benchmarks. I think it's a good model, but I don't know that it's quite there yet. - Yeah, but you can imagine that we get there for sure. - Yeah, so I think what's over the AI will look like for essentially all countries really other than the United States. And China, although I think China is gonna fall further and further behind, is just some sort of, you do, you use, you know, you use one of these providers to do some reinforcement learning on your language, your culture, your values. You have system prompt, you do some supervised fine tuning and you run that on whatever the best open source model is. I think that's where sovereign AI ends up. And then you run it in your own data centers so you feel like, you know, it's safe and whatever, defense questions you're asking it or whatever, forget questions, whatever, defense and intelligence and maybe, you know, policing activities, your sovereign AI agents are doing, 24 hours a day, you feel like they're safe. - Yeah. - So I think that's where sovereign AI ends up. And I think, you know, there'll still be a big build out for that, but man, sovereign AI at the frontier, I don't see it. - Yeah, what do you think the drivers are of the widening gap between Chinese open source models and American close source models is? - China has made a terrible mistake not, you know, taking, it feels like the administration has been willing to let them buy H200s or P30s. - Oh yeah. - And I think they're on this like, you know, they have to face me that, oh, you know, our own internal chips are good enough, they're not. And then, you know, I think what's making them think that is that Chinese labs are very, very good at distillation. And he told me it only took 160,000 recently traces from '01 and '03 to get the original deep seek. You know, they're very clever at industrial scale distillation, running it through multiple APIs, peaking each API from, you know, we've all seen those iPhone farms in China, you know, they've got, they've got the same thing for distillation and they've got, you know, 100,000 endpoints distilling these models across every API available. They've got really, really good at that. But man, all that goes away if people stop releasing these models at the frontier. And I think mythos is a side of things to come there. - Yeah, yeah, it seems like they're getting much better at locking down. The reason trace is locking down the espionage. It feels like back during the '01 days, the labs, weren't even aware that distillation was so possible that that was something that was such a, such a potential threat for sure. - Yeah, please. - Is any part of you worried that you'll never see another company like SpaceX? - Worried is the wrong word. - Not worried, but like, you have to appreciate, you have to appreciate that a moment like that. It's possible that you have an opportunity to invest in a company like that one time in your career and thank God you did it. 'Cause there's plenty of people that had the opportunity and didn't and. - What? - I did own 15% video when it was a sub-tupelied arbarchic cap, but I own 10% of Tesla was a sub-tupelied arbarchic cap. (audience laughing) But SpaceX certainly, it's been a special experience for me and I think there is a chance that it is, one of the most important iconic companies of all time. I mean, it already is. And there's a chance it's the most. And I think in general, it's just, like I kind of want to take a step back and like all this trillionaire hate from the left, it's like the, you know, there's a great post from my friend, Kevin Bahafi, say, like, oh, this is a Bondville and who's decarbonizing the world last time I checked people on the left were wiped the environment. Connect the, you know, poor people in low-income countries, schools and hospitals to the internet, very low cost. And he's helping wide people see today and, you know, interact with the world. That's a villain. And then just like, there's so many parts of the SpaceX story, like all of the, you know, blue collar workers who've gotten super well. If you're opposed to data centers on earth, because the environment, SpaceX is your solution. So, you know, there was another great post that just said, you know, the left one, they don't even appreciate it. The world's first trillionaire, you know, is definitely more than half-solved. But did like, everyone else on earth could buy. - Yep, yep. - So there was another good one that's like, yeah, Elon could solve world hunger by, you know, market selling every, you know, piece of stock that he has and send the world into a global, economic downturn losing, you know, millions of, millions of jobs in the process. - Yeah, then somebody said that the world bank had solved hunger with five billion. And he said, if you prove it to me, I'll do it. - Yeah, of course. - And turns out he hits all world hunger for five billion dollars. - Yeah. - But yeah, SpaceX is certainly out, say, you know, SpaceX and Bidia Tesla, they've all been very special to be in kind of a different way. But man, there's nothing like a rocket launch. And so I just don't think has a visceral experience. I highly recommend everyone listening. You guys, if you have kids, take your kids to a lodge. You don't wanna go with SpaceX. Everybody's always like, oh, get me the special tickets. You just literally, you can go to a beach at Boca Chica and be where the special SpaceX viewing area is. You can literally be closer to the lodge. You get, there's hotels in your vandenberg, take your kids, see a lodge, it's super inspirational that humans are capable of this. And it's much more visceral than you realize. You know, the sound, the blast of hot air, a lot of people cry. So go see a lodge, but there will be a debt, never, I don't think I'm pretty skeptical that there will be another company that delivers a visceral experience like that. And then listen, if SpaceX puts a city on the mood and then bars and enables, you know, becomes the British East Indian company, the source system. I think this will, and there's a lot of hard engineering that needs to happen to go into all that. This will probably be the most important company of certainly by lifetime, but maybe of all time. And so from that sense, I don't think there will ever be anything else like it. Yeah, I guess that is a little bit sad, but you know what, there's so much awesome stuff happening in the world that it's tough for me to get too down. (laughing) - Yeah, hard to be too, yeah. - I have one last question. We have, you mentioned owning NVIDIA sub-2 billion. What is the health of the sub-2 billion market right now? Is there anything that you're excited about? - Is there anything that the bottleneck bros have at the ranch? - Yeah, haven't run up to you. >> They have a lot of pros to take it everything under $2 billion. >> Maybe not even public companies, but private areas. I mean, we're starting to see the knock on effects of AI and bio and material science and neural link with sub-2 billion for a long time, right? And so there are more, not in theme, but accelerated by. So I don't know. There's also just like, you know, SaaS company. There's loads of incredible venture companies start up under $2 billion. >> Yeah. >> Like load up. >> Yeah. >> I talked to them several times a week minimum. >> Yeah. >> In public, until the bottleneck grows, came along, until AI came along. There was not a lot happening in public small cap land. And by the way, on this like all these small caps, these bottlenecks, this AI, it does feel a little weird to me that you can have like a large following. On social media, post about, you know, by stocking something. >> Yeah. >> And then post about, you know, outline your thesis in a $35 million market cap company. It's sending up like a thousand percent. >> And there's a lot of that going out of my way. This is not like a serenity comment. I think that guys, that person is smart. But I mean, there's a lot of shady stuff happening. It feels like to me. >> Sure. >> Well, yeah, and it's always kind of exciting. >> And you look back at, you know, you were a young, young analyst at Fidelity, right during the, the doc, you know, the end of the doc cycle. And there was a lot of just like euphoria stuff happening. And in the years that followed, there was consequences, right? There were people ultimately had to face. >> Sometimes civil penalties, all sorts of different things. Companies went bankrupt. There were all sorts of different, you know, perturbations in the market. And of course, we got a, we got a bunch of really enduring generational companies through that period too. >> Although a lot of these accounts are anonymous, and I'm sure they're logged into social media with a made up email. >> Yeah. >> You know, called through a VPN. And so I don't, I don't know. >> It is different than a cell side research report that maybe goes a little bit too far, but there's still a whole compliance department around it. We are in, yeah, uncharted territory. So everyone needs to stay safe out there and do your own research, I suppose. >> Yeah. >> Anyway. >> Well guys, man, this was super fun. >> This was great. Let's do it again soon. >> Thank you so much. >> Anytime. >> Let's get the whole team on too. >> Yeah, that's actually fun. >> Yeah, it'd be great. >> That's true that with the whole team. >> That would be amazing. >> Awesome. >> I would love it, yeah. >> Yeah, you're going to come for a-- >> I will talk. >> You can do the conference room with a nice wide angle camera. You can just have the whole crew there. That's great. >> A partner means to do a partner means, yeah, exactly. >> Awesome. >> Great to hang with you guys. >> I'm very, very sure you guys. >> Thank you so much for coming on. We'll talk to you soon.