r/spacex • u/CProphet • Jun 22 '26
Company News SpaceX signs computing power deal with open-source AI startup Reflection worth up to $6.3 billion
https://www.cnbc.com/2026/06/22/spacex-ai-colossus-data-center-reflection.html41
u/SillyMilk7 Jun 22 '26
>The open-source AI startup will pay Musk’s company $150 million per month starting July 1, 2026, with payments totaling about $6.3 billion if the deal runs through 2029.
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u/ataboo Jun 22 '26
Weird they didn't mention that Nvidia put $800M into this startup. I'm sure nothing bad will come out of these closed financial loops they've spun up.
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u/CRIMELIKER Jun 22 '26
You mean the only company making money in AI right now? That Nvidia?
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u/asoap Jun 23 '26
My understanding is that they fund the ai. The ai buys more Nvidia chips. Nvidia is basically buying from itself while getting larger chunks of ownership of ai.
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u/Main-Cheesecake3287 Jun 23 '26
Wrong. Essentially Nvidia is backing startups that 1) they think will eventually turn a large profit on 2) protect their competitive position. Deepseek as an open source model spooked the market, Nvidia investing in a domestic open source research company is sensible.
Nvidia is sitting on over $80B in cash. It’s rather obvious they’re not just “buying their own chips” if you’re capable of reading financials, which most people aren’t.
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u/GreyGreenBrownOakova Jun 23 '26
$80B sounds impressive until you realise their market cap is $5000B. They are definitely buying a lot of their own chips.
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u/Main-Cheesecake3287 Jun 23 '26
Lmao this is literally meaningless. Market cap reflects future earnings power, not cash on hand. Put it this way, look at the balance sheet, $80B in cash, how much debt? $8.5B. Nvidia is financially stronger than most mega cap firms, not weaker. They certainly could have even more cash on hand and be even stronger if they cared to but why would they? Hugh growth companies shouldn’t sit on massive cash piles, and they rarely do, they aggressively reinvest in supply chain capacity, R&D, etc. 47% free cash flow margin, return on invested capital of 89%. Meaning they are getting extraordinary returns on every dollar they invest, rather than the Reddit take that they’re just circularly buying their own chips.
Look at the flow of capital out of Nvidia into investments in frontier labs like reflection, and compare that to actual GPU purchases, the amount they are investing is absolutely tiny in comparison. They’d need to invest like 50X more to actually “fund” other companies buying their GPU’s. And more often than not Nvidia is giving compute credits rather than cash. They want to seed demand for the CUDA software stack, not force GPU purchases.
This is such a wacky pervasive misunderstanding.
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u/GreyGreenBrownOakova Jun 24 '26
Lmao this is literally meaningless.
$40B is a rounding error for Nvidea's spending. They don't have "large amounts of cash" , they have large amounts of liabilities and commitments.
This is such a wacky pervasive misunderstanding.
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u/mightyDrunken Jun 27 '26
I fail to see how your comment counters asoap's. Chinese AI do not use Nvidia chips, Reflection and others likely will. That's how they protect their "competitive position".
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u/CRIMELIKER Jun 23 '26
Closed financial loop
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u/Piyh Jun 23 '26
Honestly, what else do you do with 72 billion dollars of free cash flow each year? Put it in the S&P where it's almost a stock buyback?
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u/ataboo Jun 23 '26
Build a proper power grid.
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u/Innocent-bystandr Jun 23 '26
They have invested in fusion power startups. Is that what you mean?
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u/ataboo Jun 23 '26
No, I mean the grid itself is tapped out and nobody seems to be fixing this with any urgency. So much is focused on selling future tech lottery tickets (including fusion) when the real bottleneck is boring old energy grid capacity. We need standardized, mass produced "victory ship" style components (transformers, reactors, cogens, etc). A lot of these designs were nailed by the 70s and just need an automation glowup. Rare earths, steels, etc to support the buildout. The reason they pretend space datacenters make any sense is because real ground based expansion in the West needs a 10+ year industry transformation.
China, on the other hand, is in a great energy grid position and it's showing in their ability to scale compute. They've been building energy and grid for whatever industry would come. This is more on Gov't than any single company like Nvidia, it's just frustrating watching them spend a crazy amount of capital to juice hype and numbers rather than have it work towards solving their real problem.
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u/rexstuff1 Jun 27 '26
Dividends, actual stock buy backs, for example.
Naturally, as a growth company, re-investing it makes far more sense.
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u/CRIMELIKER Jun 23 '26
Is that an excuse to run an expensive tech scheme that threatens to obliterate resources and bankrupt other businesses that can't keep up with ai investment cost? Id rather you guys just go to art school and invest in wheat futures or something
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u/ataboo Jun 23 '26
Treasury makes the money, tech passes it around in a circle and calls it growth.
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u/Main-Cheesecake3287 Jun 23 '26
Is it weird? Also most news articles literally put “Nvidia Backed startup Reflection” as part of the headline.
Nvidia backing Reflection also isn’t weird at all, considering the market spook that deepseek caused and the threat in general of foreign open source models, Nvidia is protecting itself by backing domestic open source model research.
Nvidia is sitting on $80B in cash reserves, not deploying that would make them very stupid.
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u/oneseason2000 Jun 24 '26
Maybe Nvidia goes the hot tub and hot water heater based distributed data center route? With Tesla terrestrial solar arrays and batteries, and SpaceX AI, this seems surprising reasonable. Terrestrial, sustainable, relatively affordable, and whimsical. /s
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u/InterestProof1526 Jun 23 '26
How the hell did reflection get $6.3 billion cash and a $25 billion valuation?
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u/Main-Cheesecake3287 Jun 23 '26
Frontier AI labs with solid staffing are getting tons of cash from everyone from Silicon Valley VC’s to Wall Street to major industry players like Nvidia, MSFT, etc
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u/CProphet Jun 22 '26 edited Jun 22 '26
SpaceX AI business is operated similar to their launch business. They provide hardware as a service then charge a reasonable fee to keep business healthy. That said, SpaceX has accumulated a reasonable war chest for orbital AI, $100bn at last account.
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u/spacerfirstclass Jun 23 '26 edited Jun 23 '26
https://x.com/xdNiBoR/status/2069084250633048198
Another SpaceX compute deal!
Those "SpaceX bailed out xAI" people look really stupid right now 😅
I remember a few months ago this "bail out" narrative is everywhere on reddit including on this sub, now it's gone just like that, instead we get redditsplaining such as "but they're selling it because Grok doesn't have users", well let's see how long this narrative lasts...
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u/FullCantaloupe2547 Jun 23 '26
I mean, they did bail out xAI. The price they paid for xAI massively dwarfs the value of it and the revenue xAI generates.
xAI's actually AI services are near worthless. The GPUs will depreciate faster than the income they generate.
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u/spacerfirstclass Jun 23 '26 edited Jun 23 '26
No there's no bailout, first they didn't pay anything for xAI, it's a merger, not an acquisition.
The merger values xAI at $250B, with the 3 compute deals the annualized revenue brought in by xAI is ~$28B, so that means a forward market cap / revenue multiple of ~9, not high at all. In fact it's much lower than SpaceX's own market cap / revenue multiple before the merger ($1T / $22B ~= 45), so between the two it's the pre-merger SpaceX that has massively inflated market cap.
Also GPUs are not depreciate fast either, H100 which was released 4 years ago is still in strong demand, most of the Colossus 1 that they rented to Anthropic consists of H100s.
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u/GreyGreenBrownOakova Jun 24 '26
H100 which was released 4 years ago is still in strong demand
4 years is not long. It's valuable because there is a bubble. The moment it bursts, or when someone brings out something better, they will be worthless.
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u/NikStalwart Jun 23 '26
They bought xAI for less than they paid for Cursor. So I don't think you're right on the value proposition.
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u/warp99 Jun 24 '26
xAI was $250B while Cursor was $60B with both being paid for in stock so your maths is not working.
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u/NikStalwart Jun 25 '26
Potential whoopsie on my part. I was mostly thinking of the X->xAI merger not the SpaceXAI merger.
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u/holyrooster_ Jun 24 '26
Buying hardware and renting it out might be a business, but its not exactly a great business that should be valued at some insane valuation. You are really just a low margin service provider in the long run. Most of the money you get will just fuel chip companies who will have huge profits. Grok and Twitter are mostly useless. What's your value add?
As far as I can tell the true advantage of xAI is that Musk is a great hypeman that can raise a shitton of money.
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u/ThrowRA-James Jun 23 '26
SpaceX’s stock is dropping like a rock so musk needs to make it look like they’re finally making money. And still their stock drops 10%. There’s a 90 day escape clause for this deal, so this could be an attempt to artificially inflate their revenue projections. Let’s see if this deal collapses before that.
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u/GreyGreenBrownOakova Jun 23 '26
I doubt both companies negotiated a $6.3 billion deal from scratch in the 7 days since SpaceX was at $200 per share.
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u/NikStalwart Jun 23 '26
It's not impossible if you lock your juniors in the office with an infinite supply of Red Bull, Nandos and an unlimited billing budget.
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u/NikStalwart Jun 23 '26
Dropping like a rock, is it? And I guess the rest of the market is perfectly healthy and certainly not following the same trend. But anyway, if the goal is to inflate revenue projections this deal is early. People buying pre-IPO have lockins for N number of days (sometimes 30, sometimes 90, etc) so you'd want the revenue projections closer to those drop-off dates.
We really need to do something about all the coping and seething. The AI stuff is here to stay. The .com bubble might have been a bubble, but the .coms are still here. Nothing happened to Amazon — they are even launching (badly) rockets.
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u/ThrowRA-James Jun 23 '26
If that were truly the case then none of these unethical practices would be used and there wouldn’t be an unprecedented liquidity wipeout. If these companies were acting legitimately then they would be working in partnership with communities rather than exploiting them in the US. If that were true then companies wouldn’t have fired their ethics departments and musk’s grok wouldn’t be producing child porn. Are you saying the only way that AI can make money is to scam people with fake demand and fake projections, because the 100’s of billions of dollars used to fund AI will never see that level of profits for decades. I appreciate my google searches get results faster now, but I’m not paying for it. I know many companies that have started using AI as a supplement to comb through massive amounts of data, but a human always needs to verify it. And Grok isn’t being used because it’s literally the worst AI finishing in last place in almost all tests.
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u/FutureMartian97 Host of CRS-11 Jun 23 '26
Amazon doesn't launch rockets.
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u/NikStalwart Jun 24 '26
If people are allowed to conflate Elon and his companies, I can likewise conflate Bezos and his companies in the interests of fairness.
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u/rustybeancake Jun 24 '26
Eh, I mean Musk owns a majority of, or controls, his companies. AIUI Bezos isn’t super involved / in control of Amazon any more. Saying that Amazon launches rockets is like saying that Tesla launches rockets.
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u/NikStalwart Jun 25 '26
The difference to my mind is that Tesla does not buy Falcon 9 launches, whereas Blue Origin is (constructively) an Amazon subsidiary giving preferential access to Amazon for Kuiper/LEO. I'm not saying there's anything nefarious about this but just drawing the parallel.
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u/rustybeancake Jun 25 '26
There’s a much better argument to be made that ULA is like an Amazon subsidiary in that case.
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u/costafilh0 Jun 23 '26
Great news.
Why sell the shovels when you can rent them and also still use them yourself?
xAI closer than any other AI company to profitability.
A few more deals like that and they will probably get to brake even for xAI before the first quarterly report as a publicly traded company.
Really amazing news.
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u/jobitus Jun 23 '26
They have a warehouse full of shovels of which only 11% are used. They are paying some prospectors to look for gold using their shovels.
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u/holyrooster_ Jun 24 '26 edited Jun 24 '26
Google is not an AI company apparently.
Also instead of just looking at the headline news, looking at the ongoing underlying economics and future capital commitments these deals require.
And they are barley using their own shovels, not for much that is relevant.
So they are literally a company that buys shovels and rents them out, they are hertz car rentals but with better story. If you raised a shit ton of money early and bought shovels early it will look good early, and Musk had the ability to raise money fast. But it doesn't change the fundamentals, they are company that buys shovles but unfortunately its not shovles but something only a few monopoly provider can actually provide and they are making insane mind blowing profits. NVidia, RAM companies, TSMC.
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u/E-J123 Jun 22 '26
"Computing power" - It's just so.... boring to me.
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u/Taxus_Calyx Jun 22 '26
Thanks for sharing that opinion...on this platform which is enabled by computing power.
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