SpaceX IPO Nears & Retail Makes a Comeback
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What is the main topic discussed in this episode?
The SpaceX IPO is almost here. Motley Fool Hidden Gems investing starts now. Welcome to Motley Fool, Hidden Gems Investing. I'm Travis Hoyum, joined today by Lou Whiteman and John Quast. Guys, the big news of the week is that SpaceX's S1 is out. If you're not familiar with an S1, this is the document that gives all the financial information, the total addressable market, maybe something we'll talk about with SpaceX. Basically, all the financials, all the things that we've been speculating on for years are now public. And this is kind of the last big thing before the company actually goes public. So John, I want to start with you, and I'm just going to start this wide open. This is a multi-hundred page document.
What stuck out to you?
Well, the big thing that stuck out to me, ignoring everything else, is that I think that we thought that this was going to be a rocket company that had a little bit of AI on the side, but really the S1 is pointing to this is an AI-first company that dabbles in rockets. I don't want to... be too bombastic in stating it that way, but look, it has a total addressable market that it's putting out there of 28.5 trillion. We can talk about that all day long, but 80% of that TAM is for enterprise AI.
What financial insights does SpaceX's S-1 reveal?
That is extraordinary, but it's putting its money where its mouth is here. 76% of first quarter capital expenditures going to AI. In other words, what it is spending in AI is more expensive than putting rockets into space. This is a very big surprise to me.
Yeah, Lou, I want to put these numbers out there because they are fascinating. Space is... And this is their total addressable market that they have published in the S1. Space, $370 billion. Connectivity, so that's Starlink and Starlink Mobile, broadband and mobile, $1.6 trillion. And AI, $26.5 trillion. This is from the company that... is now renting its GPUs because its utilization for its own Grok products was so poor that that's what they needed to do. And yeah, John's right. They're spending, in the past three months alone, CapEx was $7.7 billion for AI CapEx. Just fascinating how different this company is even than the name SpaceX. Yeah.
Yeah, I'm reminded of what Willie Sutton said about why he robbed banks in a way, because when you're doing an IPO, you have to sell your company. Now, it really shouldn't be. Well, actually, it really should be a reflection of what you want to do, what you want to accomplish. But in practicality, it tends to be. this is why you should buy it right now. And AI is where the money is, as Willie Sutton said. We'll see where they go. You're right, though. The thing that strikes me is that Grok is, shall we say, a very incomplete product. I mean, the thing that really stuck out to me of staying on the AI is that even without the R&D expense, and of course, R&D expense is a huge expense for these hyperscalers, but even without R&D,
Grok didn't make enough revenue in the first quarter to cover it's just general expenses and the cost of doing business. So backing it out, I mean, it is a less than a billion dollar quarter of revenue in a time when Anthropic and Google and others are catching on. Look, here's the thing, and we can talk about lots of different parts of this. I think Starlink is fascinating, but just like back in 2010 with the Tesla IPO, I don't think that anyone is going to be interested in this for what it is today. And I don't think that this S-1 should be taken, I mean, take it seriously, not literally, I guess.
How does AI influence SpaceX's business model?
It's a tedious expression used about politics.
Let's stick on that Starlink piece because, John, I thought these numbers were fascinating. This is from the connectivity section. The number of Starlink subscribers more than doubled in the past year to 10.3 million. So that's a very significant number. ARPU or average revenue per user did drop to $66 per month. I have seen that they at least some people reporting they're raising prices over even just in the past month. But this is the segment that is also profitable segment income from operations, $1.2 billion in the last three months and $4.4 billion in the past year.
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