00:00Pierre Fargo of New Street Research, becoming the first analyst to initiate coverage of the stock with a buy rating
00:04and 165 price target, writing the space opportunity is large and diversified.
00:09Our $2.3 trillion valuation assumes they win 75% of this market. Pierre joins us for more. Pierre, good
00:16morning, sir. It's good to see you.
00:17Morning, John.
00:18We've got comms, launch, AI infrastructure. What's driving the valuation of this company?
00:23It's an excellent question. When we looked at that, we figured out about half the valuation of SpaceX today comes
00:32actually from combining artificial intelligence and space, because space today is a lot of cash flow.
00:40It's very cash generative. So telecom business is generating a lot of cash. And if you have access to your
00:46own cash flow in AI, you can buy your own infrastructure.
00:50That makes it much cheaper for you. You don't have to pay a margin to a cloud provider providing you
00:56your infrastructure.
00:56You have to imagine Enthropic and OpenAI are raising money in the market to pay the bill, but they can't
01:02buy their own data centers.
01:04And XAI is building their own data center. Massive competitive advantage.
01:09And then you look at that further down the line. In five years from now, SpaceX will be in a
01:14position to really put to orbit gigawatts of data centers.
01:19Well, let's sit on that story, because that forms the valuation in a major way.
01:23Yes.
01:23Does the technology exist that forms the basis of that story? Or is this another full staff driving over a
01:29Tesla?
01:29That's what the critics will ask this morning. How do you address that question?
01:33So you look at the technology roadmap of the industry today, which is about stuffing more and more compute power
01:42into bigger and bigger integrated packages.
01:48This is really what space needs in terms of compute. And this is in the roadmaps today.
01:53And it's like it was in the roadmap before we looked really seriously at space.
01:58So I think there is no significant technology roadmap.
02:01At this point, how much more money do they need to raise for CapEx?
02:03Because I'm looking at some of the CapEx expectations for the different units, whether it's AI, space or connectivity.
02:08You're talking more than $20 billion. I mean, how much more are they going to tap the market for?
02:12That's a good question. So we have our own forecast. We are not in this syndicate.
02:16We are not in the game of pushing up the forecast as much as we have.
02:21To give you an idea, we think the company tops like $200 billion of revenues in 2030.
02:26At that level of growth, which is less than what the syndicate is pitching,
02:31we think the company can sustain itself without raising more money.
02:36If they want to grow faster, if they can grow faster, they could go back to the market to raise
02:42more capital.
02:42And it's mostly going to be about building out the data centers.
02:47How much is SpaceX paving the way for open AI and Anthropic versus a completely different story
02:52that has hinged the hopes and dreams of Elon Musk and the cult factor among retail investors?
02:58It's a good question.
02:59I guess it's a very, very unique story, equity story.
03:06You see, like, four times over subscribe, it's a quarter of a trillion dollar interested in investing in SpaceX.
03:14Investors we speak to are more interested in understanding, like, the broader space opportunity
03:20than the specifics of the AI story.
03:24But they come to realize and understand that actually it's combining space and AI
03:28that really creates the opportunity.
03:30What is the Musk premium here?
03:31If you took him out of this story, what's the company worth?
03:34Well, I guess you wouldn't have rockets flying without him, right?
03:37So the Musk premium is extremely significant.
03:42It's critical simply because the timeline, only Musk can put up the timeline and say,
03:48oh, I'll have all these data centers in orbit in three years.
03:52And people believe it too.
03:53I don't know.
03:53So I think people buy, accept the idea that if Musk says, I'm going to do it in three years,
04:00people are like, there is a very high probability it's going to happen in seven or eight years.
04:04And then, you know, it's a whole discounting game where the Musk faster is you accept a discounting
04:09on a much longer period of time, but that's because it's Musk.
04:12Like, that's the way Tesla is trading today.
04:14What happens if he leaves?
04:16Is he going to leave?
04:17No.
04:19I know.
04:20I know.
04:20No.
04:21Well, it's like, it's a good question.
04:27He never left.
04:27So we don't have a precedent for that.
04:30So the answer is just no.
04:33Musk's talent is to attract talent.
04:35So like the density of talent at X, at SpaceX, at Tesla is incredible.
04:41So the days he leaves, he's not driving anymore.
04:45I mean, like we were wondering the same about Apple a decade ago with Steve Jobs.
04:50And so we will have to see.
04:52I've only got 45 seconds left.
04:54So this is a few words if you can.
04:56How quickly before we combine Tesla and SpaceX?
04:59We're talking months?
05:01Years?
05:02That's a good question.
05:03I think right now is not ideal because Tesla is spending anyway a lot of money on their
05:09own and on the TerraFab.
05:11Some of that will help Tesla.
05:14And then once they do that, it's very interesting to have access to the free cash flow of Tesla.
05:18And then there is an element which is politics, which is like it's probably easier to do it
05:23before the end of 2028 than later.
Comments