Gavin Baker: SpaceX Might Be the Greatest Company of All Time

Gavin Baker, welcome to the show. How are you doing?

Doing great, man. How are you guys?

Fantastically, right? Uh, SpaceX IPO, it seems like everything went just flawlessly to a tee, like to the point where it wasn't even dramatic.

A round of applause for the bank, the bankers. Like 20%, 20% pop almost to its—

yeah, what I mean by that is like, is like it would have been more dramatic if it had like popped up 70% and then went down 30 and then went up 50 and it was drama, but it was just like Perfect execution from start to finish. Was that how you interpreted it?

I thought Goldman Sachs and Morgan Stanley did a very good job. Yeah.

What do you think the market is looking for SpaceX next? Is it all eyes on the first earnings report? Like, where do we go from here? Because there's so much of the SpaceX story pre-IPO that was a decade out, 5 years out, 2 years out. But is the market going to be processing quarter-by-quarter plays? Like, like many other companies?

Well, I think the market is always, you know, quarters matter. Yeah. You know, the runners on X, you know, it's like they're these reply people on X for any topic who are experts. Yeah. But somebody once told me a marathon is 26 one-mile runs. Yeah. And so, you know, and then all the runners were like, no, that's not true at all. Right. You know, obviously running a mile is different than running a marathon. But, you know, every quarter matters. But at the same time, I do think if you look at how the market has looked at Tesla over the last 5, 6 years, you know, Amazon during kind of the days of, you know, when they were building out AWS and then, you know, kind of their, their retail distribution infrastructure when they'd go through these investment cycles. I do think the public market has a much greater tolerance for investment and a much longer time horizon than a lot of people in the venture ecosystem give it credit for. By the way, this is Foxy in the back. He's our— he's, he's one of the analysts here at Tradese.

I was just listening to him on the Brad Gerstner podcast. I think he chimed in on that, right? You brought him in. There we go.

Yes, he did. But he did the work on SpaceX. So I thought you guys might want to— fantastic about that. But I do think that— I'm not sure the story is as far out as you made it seem to be. I think there are two variables that are going to matter a lot over the next year. The first is just how quickly can they bring on terrestrial compute. Yeah, it does seem like they monetize gigawatts at a higher rate than anyone else. Yeah. And we know from Jensen that they bring on data centers faster than anyone else, per Jensen's words. Yeah. Um, and everyone in the ecosystem is really incented to get, um, land and power in the hands of people who can energize it, because everybody starts making more money when the GPUs are energized. Um, so, you know, if they can— what, what are— what, what was the altimeter figure for how— what they were monetizing gigawatts at, Foxy? Do you remember? For which deal?

Well, I think it was like 2 to 3, wasn't it? Like at least 2 times higher than like average NeoCloud pricing. And that's partly due to scale and customer quality and things like that. But it was meaningful.

Yeah. So they're doing 50 billion a gigawatt on the Google deal. Wow. So how quickly they can add gigawatts really matters. Yeah. Right. If you can energize 2, 3, 4 gigawatts. Yep. In the next year. That's a lot of revenue. Now, you know, that prices may go up, they may go down, but that's really gonna matter.

So all eyes on Colossus 3, 4, 5, 6, 7, 8, 9, 10, etc., at least in the short—

yeah, our macro hard, macro harder, macro hardest to that name. Yeah, macro hardest. Yeah. Um, and then I think Cursor is another big variable.

Yeah.

Um, you know, we talked about it with Brad about how Composer 2.5, after 3 weeks of, you know, RL and supervised fine-tuning Colossus-2, it's kind of Pareto dominant. So what's going to happen when it's applied to a bigger, better base model? I do think Cursor being in, you know, half the Fortune 500 is interesting. So I think those two things, you know, while I mean, I'm super excited for going to Mars and asteroid mining and yeah, And, you know, a city and mass drivers on the moon, like all that stuff is awesome. And I think there's a decent chance it happens in my lifetime. I just think there is— there's much more tangible near-term drivers here.

Yeah.

How do you think about the tension of the cloud business versus their own application and model business? I think a lot of people were surprised when the initial Anthropic deal happened purely because Knowing Michael Truel, he would've been very excited.

That's my compute.

Yeah, yeah.

Get access to a couple of— He's like, hey, you gotta share.

I'm the only child around here. And it feels like you can imagine SpaceX bringing on a lot more compute very quickly. But at the same time, every lab has had to go through this tension of like, how much compute do we allocate to training versus inference?

A way to interpret that is that maybe the team at SpaceX is pretty confident in their ability to bring gigawatts online. Yeah, that makes sense. And the altimeter figure that they've ordered 20% of the Rubins, and the Rubin is an epic chip. Like, Blackwell was really hard to get it online. Rubin is kind of a more drop-in replacement. It's a really, really good chip. You'll have the, um, you know, the Groq LPUs integrated at some point in the next 6-9 months. So one way to interpret that is they're pretty confident that they can bring data centers online pretty quickly. But I also— I don't remember all of the details, but I do think there was an out in the Anthropic agreement that if they—

Yeah, and the Google deal.

Yeah, it could be short-term.

Well, that's what I just meant. It's like there is a tension there where if you there's a moment where maybe you want the compute, but you don't necessarily have all of the revenue yet. And so you could see, anyways, I'm very confident they can figure it out.

Yeah. On the topic of like Elon Web Services, is there a world where SpaceX winds up building out more of what looks like AWS? Like we've seen between OpenAI and Anthropic, there's this tension of like, you gotta be on AWS 'cause ITAR or the ecosystem or enterprises just wanna be on AWS. They won't even go over to Azure or Google Cloud for whatever. And, you could imagine, like, is it enough to just be a token factory or do you need to have, you know, a database and in-memory storage and, you know, cloud storage and cold storage and all the things that AWS provides?

My thought is that being a token factory is more than enough for the next 5 to 10 years, man. We are, yeah, we need more token factories, but we'll see. And if they need that stuff, like, they will build it.

Yeah. How are you thinking about the other hyperscalers, the other big tech companies? We were sort of puzzling over Meta's strategy at this point. Tons of resources, cash flow, data centers. They have experience there. Maybe they're not as fast as, as SpaceX, but there's a lot there. But it's a completely different motion to go into token factory. And yet there's still a lot of demand. So how do you think all of that plays out?

Well, I think there's many ways to go to the token factory business. You could, if you're, if you're Meta, you could just say to someone like Fireworks, hey, here are 100,000 GPUs. We'll, we'll take a revenue split and we'll see what happens. I am increasingly looking at EV to net PP&E as a valuation metric, just with the idea of being installed atoms on Earth. I think are going to appreciate in value. This is a little bit that halo trade that I think maybe Goldman Sachs came up with, you know, high asset value, low obsolescence. Yeah, but Meta, you know, Meta's EV to net P/E multiple is in an interesting place. It just suggests that the market has an immense amount of skepticism about their ability to monetize their own asset base.

And I think that's— I think that's Warranted, given that all we've really got out of management is this concept of personal superintelligence. And it would be different if Meta AI was like at the top of the App Store and everyone you were talking to was like, yeah, you know, I'm using Meta AI.

Or even there was like a killer feature within Instagram.

Yeah.

Like, oh, people are shopping in Instagram now.

And I think no one doubts that like once Zuck has an AI product with $1 billion of revenue, he can take it to tens of billions. But it's unclear. I feel like, you know, going into enterprise, like, you know, what is this API business going to look like? We know they can use the GPUs just on making the ads product better at the end of the day. And but there's a lot of questions.

Look, I think a few things. I do think if I look at the way different players are behaving, it feels like everyone thinks we're entering the endgame. Everybody, you know, loves to use these chess analogies, and it looks like the endgame may be here sooner than we think. I think that's why OpenAI is cutting Codex pricing simply because coding, you know, coding tokens are so valuable. And if you don't have enough of them, you may not be able to get into this RSI loop that, that everyone is, you know, pushing for. And I think if you're Zuckerberg, you feel that acutely. I thought Muse— what is it?

Muse Spark.

It was to me, it was an upside surprise. And it made me feel like, you know, what's the— what's, what's, what's from Talladega Nights? Or what is it? So you're saying there's a chance?

Oh, yeah.

Like, yeah. So you're telling me there's a chance?

I mean, the other quote from Talladega Nights is if you're not your first, if you're not first, you're last.

And, and, you know, that's how a lot of people— there's so many good books.

He sold the windshield.

Yeah, 100%. But I think if, um, I'm pretty confident Mark Zuckerberg has proven to be a good entrepreneur over time and has been willing to pivot, you know. And it's just, it's so funny, you know, right now Facebook is, you know, Meta is telling investors there's like No chance that we're going to, you know, you know, monetize GPUs externally. Well, like 10 days before they announced all those layoffs, which I think was at the end of '22, if not— I don't remember when they started to announce the layoffs. So shortly after Brad, maybe 2 months after Brad wrote that letter to Mark where he said, you're the king, you can do whatever you want, but this is what I might respectfully encourage you to do. They went from saying, we're not going to do that, we're going to keep investing, to super focused on OpEx in a couple of days, man. So, it's like people, they meet with Meta and they hear, oh, we're not going to monetize our GPUs externally. Well, I don't know, check back in a few hours.

Yeah, yeah. No, it's like everyone— it comes down to everyone has a price. You look at Elon and Anthropic's relationship 4 months ago and then you look at kind of, kind of as the opportunity unfolded, it made sense for them to partner. I wanted to ask how—

on the Meta thing, I think there is one point that's important. What ultimately drives behavior for all these big cap companies like getting to AI? I think that does feel existential for all of them. But the stock price also really matters. Sure. Because if you don't— if the stock goes down, you gave people a grant at this price, stock goes down, your engineers are unhappy, and it's tougher to get to where you want to go if you don't have these— now, forget the 10x engineer, people are talking about the 10,000x engineer. You're not going to get there if you don't keep those 10,000x engineers. So, just I think, we'll see with Meta.

Yeah.

Yeah.

How did this IPO update your, your general kind of framework for the role that retail is playing in capital markets? A lot of it was very funny last week to see people like say like, oh, the IPO is only 2x oversubscribed by retail. Yeah, they're dumping all these other $3 billion IPOs where we're 10x oversubscribed. And it's like, no, we're, we're talking about, you know, a very, you know, order of magnitude difference here, man. But it still feels like retail is going to play a very, very important role over the next 12 months, maybe more so than ever, given that the hyperscalers are now running, you know, cash flow negative. You have the conflict in the Middle East, right? There's rebuilding efforts that needs to happen. And so I feel like retail, this is kind of retail's moment now, maybe more than ever.

Yeah, well, so a few things. One, people say retail in a pejorative way, and I would just say stupid is as stupid does. We track— there's all these indices of retail favorites. Man, they're up a lot. They're up a lot in '25, and they're up a lot in '24. Stupid is as stupid does. I think retail is probably outperforming the overwhelming majority of professional money managers, whether they're private equity managers, venture, public equity managers, whatever. So retail, I don't think it's pejorative. I do actually think in the case of SpaceX, I'm not sure, you process so much information, I'm not sure where this comes from. But I actually think after the IPO, for whatever reason, some of that retail stock may have gotten allocated to people who were flipping it, because my understanding is there was more institutional buying. I don't know where this— after the IPO, of course, retail buying. Now, I'm sure, you know, retail is very sensitive to momentum. So maybe what's happening today changes that. But I think another really underappreciated thing about the SpaceX IPO is that over 10,000 SpaceX employees bought on the IPO. And that's just, you know, everybody does all these lockup analyses and oh, how much stock is going to come come to market. And, you know, for sure there's all these triple-layer SPVs or whatever, you know, or maybe there are— there are people speculate there are, um, and I'm sure some of that will get unwound. But the reality is, is that SpaceX employees own a lot of this. And if you're an employee, or even if you're an investor who has an SPV, or you're directly on the cap table, you've had a chance to sell every 6 months for the last 10 years. If you wanted to sell, you could have sold in, you know, whatever, when they did that offering in the second half of last year. So I think the supply-demand dynamics here are going to be very interesting. But with retail in general, yeah, man, they're— they've been a more powerful force in the market over the last 3 and a half years than it any other time in my career, including the year 2000 bubble, which I think this is nothing like, by the way. But yeah, they matter. And stupid is as stupid does.

I'm interested to go a click deeper on the idea of like value will accrue to companies that are in the token path. I think that phrase is extremely powerful right now, but I want to sort of expand it and understand the fringes of the token path because we talked to Matthew Prince at Cloudflare, stock's at all-time highs. It's delivering tokens at the edge. And obviously there's an immense amount of AI agents that are interfacing with different websites. They need to be distributed. So there's a lot of value there. But is Cloudflare in the token path if they're the one finally sending you the packet of tokens at the edge? Or does that not count? How does that— how do you think about that?

Every CDN has this business. Akamai, they signed— what was it? A $1.8 billion with Anthropic. And if you have all these points of presence and you can deliver really low latency tokens to high value users, I think what's interesting for all these CDNs is they're getting a massive premium for that latency. It turns out one of the lessons from Cerebris is people are willing to pay for speed. And you see that in the prices these guys are commanding. But I do think— I mean, my gut is, in terms of tokens consumed, um, on planet Earth, these CDNs are delivering less than 1% of them. And I mean, maybe less than 10 basis points.

Most of the things are happening internally, and then you just get the result. Yeah.

Um, would I say that these guys are in the token path? I mean, I would say they have a path towards being in the token path. Then they have part of their business that's in it today. And like everyone, they're trying to move it more and more there.

Yeah, I mean, Matthew was talking about co-locating NVIDIA servers on the edge, specifically for the delivery of voice models because you want those to be very low latency. Maybe you want your coding model to go off and cook in Virginia for 20 minutes or an hour and then come back to you with the final result. But if you're trying to actually talk to a model, you probably want it as fast as possible. What about on the opposite end?

Wasn't there that startup that Nvidia just invested in that like will—

Oh yeah, on your house.

Money to put a GPU, you know, for a 4-GPU server on the outside of your house.

I mean, yeah, GPUs are going everywhere, going in your bed eventually.

I mean, it's full circle too, because it wasn't Jensen talking about stuff like that back during like the original crypto cycle being like everyone's going to be, you know, mining Yeah, and I mean, the Tesla Powerwall is like a version of that for storing energy.

It doesn't store compute, but it stores energy locally on the edge, off the grid. And there's a lot of powerful things that get unlocked by that. What about land? Is land in the token path at some point on the extreme other end? Because people are obviously searching for— going further and further upstream. They found a toilet company that makes a particular material that goes into semiconductor supply chain. People are hunting for like the final— The final ingredient, maybe it's just sand that turns into silicon.

Yeah, I do think the bottleneck bros, as they are called, are— bottleneck bros. —this bottleneck trade is nearing its end. OK. And I did— the Wall Street Journal had the story about this Japanese company that makes— I forget what they make. Isn't it Toto? Ajinomoto.

Ajinomoto, yeah.

Hajimoto. And, you know, everybody's in this because they thought they were going to raise prices and then they just said, we're actually not going to raise prices. This is the wrong thing for us. And I almost posted yesterday on X, welcome to Japan to all of the bottleneck people. But, you know, everybody's, you know, having claw and run. What's the next bottleneck? Yeah, that was, that was the game for the last year. The next game is what has enduring franchise value. Yeah, kind of on the other side of these bottlenecks whenever, whenever that is. As far as land, is land a bottleneck? Man, I do think the math for orbital compute, to me, it— once they can reuse Starship, yeah, I think the math for orbital compute becomes pretty compelling. You know, it's just $60 billion to bring on a gig terrestrial, $25 is power and cooling. You don't need that in space. And so the right comp for that $35 billion of kind of, you know, IT equipment, GPUs, CPUs, switches, um, you know, memory storage, um, is, is that $25 billion versus the cost of launch. And once Starship is reusable, I think the cost of launch is $5 billion. So $20— that means you can put a gig into space for $30 billion, and the gig on Earth is $60 billion. And that $25, the power and cooling, feels reasonably inflationary to me. Sure. Um, so I don't know that I would say land is in the token path.

Maybe beachfront property, but that's about it. Yeah, beachfront property is beachfront property.

Airplanes. Yeah, really nice cars.

Yep, firmly in the token path.

All that stuff is in the token path.

I gotcha. Uh, how do you think the events of, of last week with Anthropic in DC update different countries on their own sovereign AI play? 'Cause there's been attempts. It doesn't feel like many of the attempts have, you know, you can have a powered shell and you can have the best GPUs, but if you don't have the talent, it's gonna be really hard to get to the frontier. And now if you don't have massive usage, it'll also be really hard to get to the frontier. Do you think the ship has sailed? No.

Well, look, look, I think every country is going to want to have their own sovereign AI strategy at a minimum for national defense. I think where that ends up is— I saw today that the EU had restricted exports of Mistral.

I think that's a joke.

I think that's a meme. So people have gone so far on the Mistral, le chat thing, le chaton. That they're saying it's like Mythos is distilled on it and it's breaking all the benchmarks. I think it's a good model, but I don't know that it's quite there yet. Yeah, but you can imagine that we get there for sure.

Yeah. So I think what sovereign AI will look like for essentially all countries really other than the United States and China, although I think China is going to fall further and further behind, is just some sort of— you do, you use you know, you use one of these providers to do some reinforcement learning on your language, your culture, your values. You have a system prompt, you do some supervised fine-tuning, and you run that on whatever the best open-source model is. I think that's where sovereign AI ends up. And then you run it in your own data centers so you feel like, you know, it's safe. And whatever defense questions you're asking it or whatever— forget questions, whatever. Defense and intelligence and maybe, you know, policing activities your sovereign AI agents are doing, you know, 24 hours a day, you feel like they're safe. Yeah. So I think that's where sovereign AI ends up. And I think, you know, there'll still be a big buildout for that. But man, sovereign AI at the frontier, I don't see it.

Yeah. What do you think the drivers are of the widening gap between Chinese open-source models and American closed-source models?

Is. China has made a terrible mistake not, you know, taking— it feels like the administration has been willing to let them buy H200s or P30s. Oh yeah. And I think they're on this, like, you know, they have this crazy belief that, oh, you know, our own internal chips are good enough. They're not. Yeah. And then, you know, I think what's making them think that is that Chinese labs are very, very good at distillation. Somebody told me it only took 160,000 reasoning traces from '01 and '03 to get the original DeepSeq. You know, they're very clever at industrial-scale distillation, running it through multiple APIs, pinging each API from, you know, we've all seen those iPhone farms in China. You know, they've got, they've got the same thing for distillation, and they've got, you know, 100,000 endpoints distilling these models across every API available. They've gotten really, really good at that. But man, all that goes away if people stop releasing these models at the frontier. And I think Mythos is a sign of things to come there.

Yeah, yeah. It seems like they're getting much better at locking down the reasoning traces, locking down the espionage. It feels like back during the L1 days, the labs weren't even aware that distillation was so possible, that that was, uh, that that was something that was such a such a potential threat for sure.

Uh, please. Is any part of you worried that you'll never see another, another company like SpaceX?

Um, worried is the wrong word.

Not, not worried, but, but like, you have to appreciate, you have to appreciate that a moment like that, it's possible that you have an opportunity to invest in a company like that one time in your career, and thank God you did it. Because there's plenty of people that, that had the opportunity and didn't.

And, uh, well, I did own 15% of NVIDIA when it was a sub-$2 billion market cap, but I owned 10% of Tesla when it was a sub-$2 billion market cap. But, um, but SpaceX, certainly it's been a special experience for me, and I think there is a chance that it is, you know, one of the most important iconic companies of all time. I mean, it already is. There's a chance it's the most. And I think in general, it's just like I kind of want to take a step back and like all this trillionaire hate from the left. It's like the, you know, there was a great post from my friend Kevin Mahaffey saying like, oh, this is a Bond villain. Who's decarbonizing the world. Last time I checked, people on the left were like the environment. Connecting, uh, you know, poor people in low-income countries, schools and hospitals to the internet, very low cost. And he's helping blind people see today and, you know, interact with the world. That's a villain. Um, and then just like, there's so many parts of the SpaceX story, like all of the blue-collar workers who've gotten super wealthy. If you're opposed to data centers on Earth because the environment— well, SpaceX is your solution. There was another great post that just said the left won and they don't even appreciate it. The world's first trillionaire has done more to solve the environment than everyone else on Earth combined.

Yeah, I saw there was another good one. It's like, yeah, Elon could solve world hunger by, you know, market selling every, you know, uh, piece of stock that he has and send the world into a global economic downturn, losing, you know, millions of millions of jobs in the process.

Yeah, that, uh, somebody said that Elon, that the World Bank could solve hunger with $5 billion. He said, if you prove it to me, I'll do it. Yeah. Of course. And turns out you can't solve world hunger for $5 billion. Yeah. Um, but yeah, SpaceX is certainly— I would say, you know, SpaceX, NVIDIA, Tesla, they've all been very special to me in kind of a different way. But man, there is nothing like a rocket launch. And so I just don't think— as a visceral experience, I highly recommend everyone listening, you guys, if you have kids, take your kids to a launch. You don't want to go with SpaceX. Everybody's always like, oh, get me the special tickets. You just literally— you can go to a beach at Boca Chica and be where the special SpaceX viewing area is. You could literally be closer to the launch. Yeah, you could. There's hotels near Vandenberg. Take your kids, see a launch. It's super inspirational that humans are capable of this, and it's much more visceral than you realize. You know, the sound, the blast of hot air, A lot of people cry. So go see a launch. But there will be a— never— I don't think— I'm pretty skeptical that there will be another company that delivers a visceral experience like that. And then listen, if SpaceX puts a city on the moon and then Mars and enables, you know, becomes the British East India Company of the solar system, I think this will— those— there's a lot of hard engineering that needs to happen to go into all that. This will probably be the most important company of certainly my lifetime, but maybe, maybe of all time. And so from that sense, I don't think there will ever be anything else like it. And yeah, I guess that is a little bit sad. But you know what? There's so much awesome stuff happening in the world that it's, it's, it's tough for me to get too down.

I love it. Yeah. Hard to, hard to, hard to be, hard to be too.

I have, I have one last question. We have You mentioned owning NVIDIA sub $2 billion. What is the health of the sub-$2 billion market right now? Is there, is there anything that you're excited about or anything that the bottleneck bros haven't ran? You haven't run up to a trillion yet?

The bottleneck bros have taken everything under $2 billion.

Maybe not even, maybe not even like, like public companies, but private areas. I mean, we're starting to see the knock-on effects of AI in bio and material science and like Neuralink was sub-$2 billion for a long time, right? And so, there are more like not in theme but accelerated by. So, I don't know. There's also just like SaaS company.

There's loads of incredible venture companies, startups under $2 billion. Yeah. Like loads of them. Yeah. I talk to them several times a week minimum. Yeah. In public, until the Bottleneck Bros came along, until AI came along, there was not a lot happening in public small-cap land. And by the way, on this, all these small caps, these bottlenecks, this AI, it does feel a little weird to me that you could have a large following on social media post about, you know, buy, buy stock in something. Yeah. And then post about, you know, outline your thesis in a $35 billion market cap company and send it up like 1,000%. And there's a lot of that going on. And by the way, this is not, this is not like a Serenity comment. I think that guy's, that person is smart. But I mean, there's, there's, there's There's a lot of shady stuff happening, it feels like to me.

Sure. Well, yeah. And you look back at, you know, you were a young analyst at Fidelity, right, during the end of the dot-com cycle. And there was a lot of just like euphoria stuff happening. And in the years that followed, there was consequences, right? There were people ultimately had to face Sometimes civil penalties, all sorts of different things.

Companies went bankrupt. There were all sorts of different perturbations in the market. And of course, we got a bunch of really enduring generational companies through that period too.

Although a lot of these accounts are anonymous, and I'm sure they're logged into social media with a made-up email, you know, caught through a VPN. And so I don't know. We'll see.

It is different than a sell-side research report that maybe goes a little bit too far, but there's still a whole compliance compliance department around it. Uh, we are in, yeah, uncharted territory, so, uh, everyone needs to stay safe out there and do your own research, I suppose.

Yeah. Anyway, well, guys, man, this was super fun.

This was great. Let's do it again soon.

Thank you so much. Anytime. Let's get the whole team on too. Yeah, yeah, that's actually fun.

Yeah, let's do that with the whole team.

It'd be amazing. That's awesome. I would love it. Yeah, yeah, you got a conference room with a, with a nice wide-angle camera. You can just have the whole crew there. That's great.

Partnering into a partner meeting. Yeah, exactly. Awesome. Great to hang with you guys.

Thank you so much for coming on. We'll talk to you soon.