In 2015, Google wrote a $900 million check to SpaceX for a roughly 7.5% stake in Elon Musk’s budding aerospace/rocket company. At the time, SpaceX was valued at $12 billion. Ten years later, Google’s early investment in SpaceX is now being framed as a great trade, not just because of the massive profit it will generate, but also because of the strategic benefits it will afford Google.
SpaceX recently announced plans to go public at a target valuation of $1.5 trillion. At that valuation, Google’s $900 million stake will be worth $112 billion. For context, Google’s latest annual income was $98 billion. A 125x return over ten years is incredible; the strategic foresight is equally powerful.
As AI models grow more complex, the need for energy to power data centers is increasingly the binding constraint. Data centers already strain power grids, water resources, and local communities. One answer to the shortcomings of the power grid is space-based data centers. SpaceX, with 7500 satellites in orbit, has demonstrated its ability to deploy data centers in space.
The benefit of space-based data centers is that solar power is much more efficient than on Earth. Consider the following excerpt from Travis Beals, Senior Director, Paradigms of Intelligence:
The Sun is the ultimate energy source in our solar system, emitting more power than 100 trillion times humanity’s total electricity production. In the right orbit, a solar panel can be up to 8 times more productive than on earth, and produce power nearly continuously, reducing the need for batteries. In the future, space may be the best place to scale AI compute.
SpaceX was never just a financial investment; it was a bet on solving AI’s future resource problem. Space offers effectively unlimited solar energy, passive cooling, and freedom from land and water constraints that are currently highly problematic for hyperscalers. Google’s strategic and financial investment success demonstrates that it is effectively aligning capital, infrastructure, and long-term compute needs. The graph below, courtesy of Jarsy, shows the composition of SpaceX investors.
Economy
The Week Ahead
Government economic data will resume in earnest this week. On Tuesday, the BLS will provide the employment report. The current estimate is for a mere 25k job growth, with the sticking at 4.4%. The graph below compares current data with lagging BLS employment data to help us appreciate the weakness that may likely show up in the unemployment report.
Also, on Tuesday, retail sales will be released. Assessing consumer health through is challenging this time of year due to fluctuations in holiday spending. Retail sales for the October-December period typically provide a clearer picture of consumer spending than single-month data. On Thursday, the BLS will release . Current estimates are for a 0.3% increase, bringing the annual rate to 3.0%.
Given the divergent views of Fed members, we will get a good mix of hawks and doves, each articulating their economic views and how they impact their prescriptions for monetary policy.
Tweet of the Day
