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Comment by ggm | Hacker News Reader

An interesting variant of "privatise the profits, socialise the losses" played wholly in the private sector capital investment space. "When you're rich they let you" is big in this because a functional board of a company about to be vested with a massive debt overhang from a serial offender (X and xAI) would surely have said "could we NOT" about this and the whole model including A and B class voting shares suggests this is a control issue: given proper control models none of this could happen.

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Is spaceX absolutely vital for the US national security through Starlink as well as the launch of military satellites? Yes, and as a matter of fact this is also true for NATO allies, Japan, Taiwan, SK, etc in any future conflict for at least the next 5 to 10 years, just as it has been for the past 4 years in Ukraine. In addition to land based infrastructure that can be targeted in any future war -undersea cables are now under constant threat around the world (Baltic Sea, Straight of Hormuz, Red Sea, South China Sea, and the Taiwan Straight, etc). Which leaves Starlink as the last resort option should shit hit the fan.

Note the tide has changed considerably in the Ukraine war in Ukraine's favor once Starlink locked down access - this proves how vital internet access it was to both sides, as once Russia could no longer use stolen terminals their manpower advantage became moot.

So I simply don't get this manufactured outrage - the vast majority of US retirement savings are already tied to the military sector (RTX, Lockheed Martin, Boeing, and Northrop Grumman) via index funds. I personally would have more concern with those laggards in the new age of drone warfare vs the likes of SpaceX and Anduril (when they ipo).

It’s the absurd governance and obvious manipulation of inclusion rules and limited float.

Is it *vital*

No.

It's really helpful, but it's not vital.

WRT Ukraine - the drones are now (AIUI) flown with a tethered fibre connection (inside the Ukraine) - because jammers have made radio traffic with drones near impossible for operators

Nope. The fiber optic drones are relatively short range, maybe up to 20km. And they can only work over land, not significant bodies of water. Ukraine is still using Starlink heavily for controlling longer range and naval drones. Starlink uses an ingenious phased array antenna system which makes it highly resistant to jamming. Recently Russia has been trying to overload Starlink satellite transceivers with powerful directional jamming but the huge size of the constellation limits how many birds they can effectively target.

> the vast majority of US retirement savings are already tied to the military sector (RTX, Lockheed Martin, Boeing, and Northrop Grumman) via index funds

I don't hear any concern about SpaceX due to military ties, it's that it seems like financial tricks are being used and forcing it into the markets and it might be seriously unstable.

The US national security depends far more on the separate but related Starshield constellation than on Starlink. Your general point is correct though in that widespread use of high-bandwidth, low-latency satellite communications has caused another revolution in military affairs on the same level as GPS and precision guided munitions. SpaceX might be overvalued but politically it's too big to fail.

> the Ukraine war in Ukraine's favor once starlink locked down access

I think this is coincidental correlation. In the same period drone warfare was evolving until it reached some stalemate with an optic-fiber strewn killzone where none of the belligerents have an upper hand, and Ukraine's ballistic missile industry picked up pace, allowing Ukraine to hit far into Russia without relying on American long-range munitions, or needing American permission to use those munitions.

Many of the long range drones use starlink terminals.

The deep attacks inside Russia would be significantly more difficult without starlink.

> The deep attacks inside Russia would be significantly more difficult without starlink

This is inaccurate: Starlink was geofenced to Ukrainian territory after Musk's World War III tweet. Deep strikes inside Russia are mostly missiles, but not even the deep-strike drones can use Starlink due to geofencing.

Starlink can't, but Starshield can.

If SpaceX is vital then we need to nationalize the company and have it under democratic control, not under a dictatorship of one.

If it is vital then that is a national security concern that it is under the control of a single person.

SpaceX is not "vital" for national security. It's a powerful tool, but it's not vital. And in any true peer conflict involving the US, Starlink satellites would also prove vulnerable just like undersea cables.

So let's assume you are right.

Does that justify the price?

Spacex price/sales: 100x-130x

RTX Corporation's (formerly Raytheon Technologies) Price-to-Sales (P/S) ratio currently hovers around 2.74 to 2.76. Boeing price-to-sales (P/S) ratio sits at 1.86, Lockheed Martin's (LMT) trailing twelve-month (TTM) price-to-sales (P/S) ratio sits at 1.64. Northrop Grumman's current Trailing Twelve Month (TTM) price-to-sales (P/S) ratio sits at approximately 1.76 to 1.89

So based on the peer comps you provided, SpaceX is overvalued by 50-100x. Your $185 shares are worth about $2.

Fine if you want to take that bet. Not fine if you force (via indexing) the majority of US pension savings to take that bet.

So what you’re trying to imply is they have leverage to hold the US public hostage both via military contracts and retirement savings, and nobody should be concerned?

Their current valuation makes absolutely no sense given the size of their business and the next century of business unless they’re going to pull the rug on the US and its allies and increase costs 100x.

Doesn't it feel like Falcon 9 is destined to be spun off so that adults can take care of it, and then X Corp is to be allowed to consolidate freely for a quick and easy disposal?

Vast majority?

The combined market cap of those four companies is maybe $500-600 billion combined. The total S&P 500 market cap is roughly $45-50 trillion.

So defense contractors represent maybe 1-1.5% of a typical index fund portfolio.

> The vast majority of US retirement savings are already tied to the military sector

The defense sector is 2% of the stock market. So if by majority you mean 2%, then that's a reasonable statement.

If SpaceX succeeds, the gains will go to the same people who will bear the losses if it doesn’t. Both the gains and losses are privatized.

The consumer/ad tech bias of HN is really showing. The app I use to share photos of my kids with my elderly relatives is worth $1.45 trillion, but somehow companies that make freaking EVs, robots, and rocket ships, and AI can’t possibly be worth that much? I’ve been in HN for 16 years and heard so much breathless cheerleading for web apps “changing the world” but now we have companies that really might change the world and it’s a scam?

But if SpaceX does anything _other than become the most valuable company in history by delivering at least two technologies predicated on the largest stock rise in history based on a single technology (LLMs)_, the gains from zero to now will have been privatized and the losses will be born by the public. Which is what everyone is thinking about.

The difference being, of course, that the photo app actually earns a profit, whereas the "EVs, robots and rocket ships" and ESPECIALLY the AI so far do not, and most likely will not any time soon.

Valuation is based on future prospects. Investing 101.

> but somehow companies that make freaking EVs, robots, and rocket ships, and AI can’t possibly be worth that much?

The sky-high valuation of SpaceX is almost entirely related to it's estimated TAM from AI entreprise solutions, not robots and rocketships. HN news comments have a similar bias against the sky-high valuations of OpenAI and Anthropic.

> The sky-high valuation of SpaceX is almost entirely related to it's estimated TAM from AI entreprise solutions, not robots and rocketships

That’s not how TAM works. The valuation of each business unit isn’t just a simple proportion of its TAM like that. In the SpaceX/xAI merger, which was just a few months ago, the rocket company was valued at $1 trillion and the AI company at $250 billion: https://www.reuters.com/legal/government/how-math-works-175-...

EDIT: To elaborate: TAM is not a valuation for a specific business. It’s a ceiling in the size of the market the business targets. AI has an astronomical TAM because you can sell AI into almost every market. E.g. shipping and logistics is a $10 trillion business. You could sell AI into that market and capture some of that revenue. But if one business has a $10 trillion TAM and another is $5 trillion, that doesn’t mean the valuation of the first business is double the second one.

SpaceX's S-1 listed its expected TAM and did break it out by segment. $26.5 trillion to AI, $1.6 trillion to connectivity (Starlink), $0.370 trillion to space launch. https://www.sec.gov/Archives/edgar/data/1181412/000162828026...

$26.5 trillion dollars. That's more than $3,000/yr from every single man woman and child on the planet. Another way to put it - more than 10x as much as all of the US spends on food every year. For Grok/xAI. That's bonkers.

It's not for Grok/xAI. It's an estimate for the total market for AI at some future time. As one datapoint:

>Morgan Stanley projects a $25 trillion market for AI-powered robots alone by 2050,

It's about 10x current AI spend.

There is no moat around what they are doing really and they have competitors in all these sectors. All it takes is another administration to come in with a brain and a spine to not just hand contract blindly to Elon.

Who do you think the viable alternatives are? Be realistic.

Which competitors? Blue Origin and Amazon are trying but they're way behind on space launch capability, and still using SpaceX to launch a lot of their TeraWave and Kuiper satellites. Arianespace and ULA seem to have given up and aren't even trying to compete.

Blindly? SpaceX launches cost only 10% of what NASA was previously spending.

Not to mention it had to pay Russia $4 billion for seats on Soyez flights to ferry astronauts to the ISS.

"No moat" are you serious? It took SpaceX 20 years to develop reusable rocket launch tech they have and everyone else who is working on it is decade behind. Falcon Heavy per kg cost to LEO is 25 times lower than what SLS can provide. Freaking 25 times!

No moat lol, hardware has much more of a moat than all these SaaS companies

There are a lot more consumers in the world willing to use the photo app than entities that do rocket launches. This isn't to say that it is changing the world more, it's just that it makes more money. That's how capitalism is set up right now.

I'm not sure I understand. The cynical analysis is that SpaceX insiders are dumping on retail at a high valuation. They know the valuation is ridiculous, but are relying on "dumb" retail (think wallstreetbeets level of gambling) and "forced" retail (your 401k) to create artificial demand so the valuation doesn't collapse until the insiders have sold.

The cynical part (that they know the valuation is ridiculous) is supported by the structure of the IPO. A 4% float with a, what, 30% retail component is unheard of. NASDAQ QQQ admission rule-change is also unheard of. If SpaceX insiders actually thought their company was worth $2T or whatever, why make this highly suspicious changes?

This is irrespective of whether or not SpaceX will eventually be worth more. It definitely could be. But when you look at this IPO, you can't help but catch a smell that something fishy is going on.

The SP500 (the index the article is using for their example) literally requires profitability. Tesla wasn't includes for years and years because of it.

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