Hacker News Reader

Comment by sandeepkd | Hacker News Reader

> SpaceX said in the filing that if it fails to “deliver access to the committed amount of GPUs by September 30, 2026,” Google can immediately end the agreement, or accept the number of GPUs provided at a reduced fee after a one-month grace period.

> After this year, the agreement can be terminated by either party provided they give 90 days’ notice.

Circular financing at its peak for the IPO. There has to be some regulatory body to not allow such shady things

View on HN

> Circular financing

Circular financing would require SpaceX to buy a similar quantity of stuff from Google. (Or invest in Google.) We have no evidence of that. Instead this looks like Google taking advantage of SpaceX’s desire to print revenue today versus a month from now.

(If the agreement is terminated with no exchange of goods, it might be market manipulation. But still not circular financing.)

It's circular since Google owns part of SpaceX. According to [1] they own 7% of SpaceX, so a $1.75T IPO would value their stake at $120B. The target IPO price is >90x revenue, so if Google increases SpaceX's revenue by $11B, SpaceX's valuation could increase by $990B to maintain the same multiple, which would increase the value of Google's stake by $69B.

1: https://finance.yahoo.com/markets/stocks/articles/alphabet-s...

Their exposure is more than just their ownership of SpaceX.

If the SpaceX IPO bombs (or even merely underperforms), the expectations for the Anthropic/OpenAI IPOs collapse, and with that, everything else AI.

AI companies can't afford to let any AI company go down.

I'm not sure this is true for Google. Ignoring their equity in Anthropic, AI is generally a threat to Google, since it's the closest thing to upsetting their search monopoly. The best case for Google is if OpenAI and Anthropic are way out over their skis, and Google is the only major player left with their sturdier financial position. The worst case is if ChatGPT/Claude completely displace search and nobody wants to pay for gemini. I find it unlikely that all three go down for the same reason.

> It's circular since Google owns part of SpaceX

Not what circular financing means. Buying from a company you own stock in can be a conflict of interest, but it's only circular if you invest in the company and then they use those proceeds to buy your stuff. A past investor buying services from a company they are affiliated with is pretty par for the course in business.

> Alphabet has made a windfall from backing SpaceX. Musk’s company was worth $12 billion at the time of Google’s 2015 investment

How come its not a circular deal where google is investing little bit more money to make a whole lot more money

that's not circular though

It’s only circular if it violates my narrative, of course.

It's circular when money flows from A to B and then back from B to A again.

This is a series of transactions in which money flows from Google to SpaceX. There is no flow of money from SpaceX to Google. So it's not a circle.

More to the point, allegations of circular financing are about following cash. When NVIDIA invests in a company so they can buy NVIDIA chips, that raises a unique set of questions distinct from other types of conflict of interest. Affiliated parties doing business, as is the case between Google and SpaceX, has its own host of conflict-of-interest concerns. But they're distinct from those that arise in circular transactions.

Google is paying $12.00 per gpu-hour which costs SpaceX $1.50-$3.50.

Who's taking advantage of who?

> Circular financing

Keep in mind, Google has a 6% stake in SpaceX, so this is more like exchanging millions to gain billions.

Yeah, I just looked this up because my first thought was another circular financing deal (or not circular by definition but certainly backscratching). Looks like Google's SpaceX stake, diluted, based on a cursory search, at a $1.5T valuation is somewhere in the $80-$100B neighborhood (bought back in 2015 I think is what it said when SpaceX was valued in the low tens of billions if I'm remembering correctly). So you have Google sending $12B back to SpaceX annually in this deal, so maybe 12% or so of their equity stake at that valuation. I'm not sure how to feel about it other than a means of swaying people to buy into the IPO with the added benefit of actual compute value.

And seems silly to ignore that the Google founders and Elon are buddies, or were, based on which gossip rag you believe in, and there's zero chance these types of deals are being made independent of those guys talking (when are they ever, of course, but it's even more obvious in this case given the players and their histories).

There is nothing shady or circular in the text you quoted

I avoided adding too many details, made a base assumption that folks on this topic would already be aware of google's investment in spaceX, probably should have added that too

> made a base assumption that folks on this topic would already be aware of google's investment in spaceX, probably should have added that too

Still doesn't make it circular financing. If SpaceX issued Google a dividend right after Google paid SpaceX, that would be circular.

Closer to just vanilla juicing numbers than circular

Reply on news.ycombinator.com