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SpaceX gears up to finalize its IPO pricing today. This is it offers attracts more than seventy billion dollars in orders from retail investors alone.
Plus Oracle is under pressure after the company reported higher quarterly capex than expected, raising concerns about the returns on.
AI and seven seven six founder Reddit co founder Alexis o'hanian joins us live from super Return in Berlin later this hour first ed with.
Us both here in New York.
We check in on these markets that we see the bounce back continue to an extent now as that one hundred and three ten percent, we're coming down from earlier highs, but still there seems to be a lot of muscle memory back in the memory perspective. We've got semi conductors up two point four percent if you're looking at that Sock's index. We are buying back into the hardware. But it's not all pretty out there. If you're looking at certain names amid the geopolitical.
Acts as well.
Okay, so the big earning story is Oracle, right, It's down twelve percent, basically falls the most in six months, and everyone is still worried about how much it costs to get data centers built. And it's so funny because like out there in the market, in the AI trade, the same anxiety exists on the other side of the table, like you can't get it built fast enough, you know, give us the compute. We're so compute constrained. But we're going to dig into that a lot more later in
the hour. There's still only one story in town.
That is, and it's why you're in town.
It's why we all.
Gather together in town, because we've got the big story of the day, of the week of months.
Spacexits IPO is upon us almost.
It feels like we've been building to this crescendo moment for a very long time. Bilumo's IPO reporter Bailey Lipschutz joins us around the desks space which is in town. Lauren Grush and look, we've been along this ride with us for many a month, Lauren, what does this mean when we're just galvanizing the amount of demand when we're starting to see that retail investments are so extreme.
And order books are filling up. But this is a space story. What does it mean for your industry?
Well, it has become something more than a space story.
You know.
I had my bets on how SpaceX would IPO. I do not think I would have had it IPO in this kind of current form.
Right.
We were told they would never IPO until they had achieved the Elon's dream of going to Mars. Now it's this hybrid rocket telecom AI company. But I just think it speaks to the value that SpaceX has provided up until now as a launch provider, as this telecom satellite operator.
You know, it's hard to really.
Understate the value that this company has brought to our space program and now also to you know, the telecom business as well. So it's hard to quantify, but I think you're seeing it with these you know, astronomical numbers. If you are sorry, I'm you.
Know all you know, this is out of this world, right.
This is also unusual, Like Bailey, you and I have been sort of banging our heads on our desks because there's a process to it. It's an atypical process that's playing out. But catch the audience up on the mechanics. I guess what happens likely aftermarket closed today, what happens tomorrow, and where we think the numbers stand, and then we can get to the kind of more intergalactic theme that we want to.
We just got to look back a week ago. They came out with a fixed price. Abnormal thing here in the U. It doesn't normally happen. No normally come out with a range. You want to walk Wall Street up to it. You want to start low, then come upsize, raise the number of shares, raise the.
Price, baking a big pop.
Elon and Company over at SpaceX said, we're going to treat this like a private equ private deal. This is the price, this is the size. Are you in or are you out? So that's been playing out for the last week. The bankers closed the formal order books yesterday at around four o'clock.
They're all meeting today deciding who's going to get what.
They're eventually going to take that to Brett Johnson and Elon Musk and say this is what we're thinking. Allocations are expected to go out this evening early tomorrow morning. People are going to find out either they got zero or maybe they got billions of dollars worth of shares, and then tomorrow the fun will start to take place when we start seeing where shares are indicated, probably in
the ten o'clock hour. Expectations are we'll get first trades sometime later in the afternoon, and we'll see if the plumbing holds up, because we again have never seen a deal of this size. We've never seen a deal of this size with retail being what it is, with Robinhood.
And others and Betty, you've been front and center along with ed breaking like the detail on how much demand there is and what allocations thus far we're anticipating.
So it's going to be slightly less to an international.
Perspective, Japan still getting a couple of billion or more. But talk to us about how much retail demand there is, how much they might be allocated, how much demand there is coming from the Middle East and from US investors.
So we've put out, just starting with retail, we put out and broke this morning more than seventy billion dollars in demand, probably well more than seventy billion dollars in demand. So you think about that, you're talking at least three times over subscribe from retail, which means they have that cash in the banking or.
You could have done this IFEO just on retail, which is crazy.
If you told people a year ago that SpaceX was going to Lauren Police disagree with me.
Laura's research less than a year, less than a year that this all kind of came.
Together come together quickly.
We've seen in Bloomberg Is reported about the demand from the Middle East. We've seen and reported on potential anchor demand, and when you kind of stitch all that together, the four times over subscribe number kind of seems like a no brainer, especially because people on the buy side inflate their numbers because maybe you put in for half a billion dollars, but you really want to get ten million. At least you're getting shares. But it's something that we haven't seen before.
We're going to get to this in a moment with our guests, but you and are also reported with the team that pre float. They also got basically investment grade ratings for the credit agencies, which I think is a big indication that this company will raise money post thing. I want to go to Lauren because can we just remember there is a story here that's not about money. It's about a launch system in spacecraft called Starship and
data centers in space. Would you kindly, Laurene, just summarize the plan here for SpaceX.
Right, it's it's almost it almost represents an entirely new direction for the company, This idea that they're going to put up to one million data center satellites into space to do complex computing for AI. I mean, as we mentioned, this wasn't even on our radar in terms of what SpaceX is going to be doing, you know, more than a year ago, and now it seems to be the new direction the future of the company. And yes, all of this relies on Starship. Starship is that organtuan rocket
that they're building in South Texas. It was meant to or it is meant to fulfill Elon Musk's AI or a Mars dream, but now it's also critical for the AI dream too, because it's going to be needed to launch these AI data center satellites at scale.
And you know, as.
We've noted, the development road has been attacked rocky for Starship. I'm not saying they can't get there, but it's still unclear when they will unlock for reusability.
Blue Mike's Baley lip Schultz and Lauren Grash. Just incredible reporting to date and obviously the next twenty four hours are going to be a lot, Thank you very much. Indeed, just SpaceX's growth forecast actually hinges on ideas that seems straight out of science fiction, but backers of Elon Musk says he's pulled off the unbelievable before. Brett Winton is the chief futurist at ARC invest probably one of the
most prominent institutional supporters of must firm. Brett's great to have you back on the show, and like, actually is a place to start. I wanted you just to kindly remind us of how ARC invested in SpaceX, the sort of venture mechanism that you have, and then we'll go into the thesis.
Yeah, so SpaceX space XAI is the largest position in our venture fund, which is an interval fund that you know, anybody,
not just the rich, can invest in. And we did that because, as you can see from the retail demand for the IPO, people understand kind of like the potential power of these innovation focused companies and we think that you know, everyday people should be able to get access to these AI exposures, including open Aianthropics SpaceX, which are the top positions in the fun And so we've invested in SpaceX, you know, as long as the vehicle has been available, and you know, from the inception of ARC
we had reusable rockets as a break through disruptive technology. And so I've done work all along the way demonstrating how being able to reduce cost of launch from ten thousand dollars to one thousand dollars to we think much less than one hundred dollars with Starship actually unlocks huge market potential, certainly on the starlink side and kind of as a second stage on the AI side.
Okay, and for AI one needs data centers. We need therefore maybe data centers in space. This is the entire pitch that we now go through rule workings. You're numbers your thesis on orbital data centers breadth.
Well, what's interesting about this based XIPO is you actually don't need the AI business to really work that well in order to actually get a great return on kind of just the starlink business.
So you know, the Elon and Co.
They are saying they're going to be able to launch tens of gigawaps per year by the late twenty twenties. So an easy way to think of a gigawat, you can rent it out at the current market rate over the long term, it's something like fifteen billion dollars per gigwat. So imagine launching tens of gigawaps times fifteen billion dollars, so three hundred billion in incremental revenue in any individual year that you're doing that. The reality of their AI
business today is on a blnded average basis. They have just rented capacity to Google and Anthropic for just a little under forty billion dollars per gigawatt. So actually serving it as as an infrastructure as a service provider could be a wildly lucrative business for them because they can they can build assets on the ground so efficiently, and once they launch into space they can build it efficiently.
You know, Brett, like you are as a firm regarded as some of the most bullish on Elon Musk like the individual and the plan that they outlined in the prospectus. But there of course are risks, right you know, must post it an X last night, This idea that one million tons to orbit will be possible in roughly five years. Starship on paper can do one hundred and fifty metric tons on paper. Right, do the math. That's one three hundred and thirty three launches a year every year for
five years to do that. You know you would concede, right, that this a long shot.
Well, he always lays out super ambitious targets for its companies because that's the way he's found to make his workforce most effective it acts delivering world changing technologies.
Think about it this way. Just look at the.
Starlink business and imagine instead of look at SpaceX, Imagine, instead of launching Falcon nine rockets, I'm launching Starship rockets at the same cadence filled with Starlink satellites. That alone would get me in two years of launching to roughly
a little under two hundred billion dollars in revenue. So we don't have you don't have to make an assumption that the company is going to be launching, you know, at even one thousand launches a year in order to get into the kind of mostly on Starlink three hundred to four hundred billion dollars in revenue by twenty thirty.
So there's there's this discourse out there that, hey, you know, this company on a price to sales basis on the immediate term looks very expensive, and poor retail is investing in this thing because they don't understand the whole point of capital markets is you raise capital and then you deploy it in high return on invested capital businesses. And Starlink alone is it's you know, a six month cash
on cash return for five year link satellites. They're going to spend a half billion dollars building or launching a rocket filled with satellites and acquiring the customers, and it should generate them a billion dollars plus per year over the five year life.
Of the satellite. So that's a great, great business.
I mean unarguable if you think about how much you've turned twenty five thousand percent it's been returned since Tesla went public. But what is also unarguable is as it stands, SpaceX net loss four point two eight billion dollars on revenue of four point six nine billion dollars in the first quarter, when.
Does it become positive? Does it need to become positive? You happy at being loss making.
For the foreseeable because the revenues are just going to go so astronomically high.
No, no, I think that profitability at least as we have a model, it happens very quickly. As they launched the Starlink satellites. It really depends upon how much capital they are throwing at terrestrial data centers to try to catch up with the frontier labs.
In terms of GRUX capability.
You can build an amazing business just basically renting compute to others and running Starlink, but there's clearly both an ambition and then a higher margin in actually kind of like competing within thropic and open. AI didn't argue that probably doesn't happen until SpaceX's is launching, so you know, multiple gigawatts into orbit.
I'm sorry to interrupt you.
There is a disconnect and that many people share this thesis.
Right what the TAM number in the prospectus twenty six point five trillion was for enterprise AI and I appreciate this sub buckets in the here and now they've basically played a blinder with a ready to go neocloud business, and lots of people keep telling me like, in the end, it doesn't matter if rock works or is competitive against Anthropic and open AI, just rent out the capacity and that will fund the you know, the out of this world ambition.
What would you respond to that.
I think that's possible, as in the way in which we model.
The business, that is the more likely outcome.
It's I think to compete to get to the frontier by twenty thirty, you'll need between thirty and fifty gigawat.
Years of compute in training.
It's and there because say I started later and they're trying to build their own infrastructure, it's very difficult for them to catch up on that amount of kind of R and D compute thrown at their model. With the caveat that if assuming that they merge with Tesla over the next couple of years, cash flow from Tesla could actually fund.
Catch up for you have seen that.
I think it's a reasonable assumption or more likely than not. After the company li and it shares, we're all floating that there is a merger between the entities.
It makes us a ton of strategic sense.
And as we model Tesla like the cash flow flowing off Robotaxi, they can't effectively deploy it, so you know, I'm not going to want a special dividend out to shareholders for Tesla. I want them to continue to reinvest in growth after miss the robot business, you know, requires it's not capital constrained, it's really like capability constrained. And so whereas SpaceX actually can use additional capital to continue to accelerate growth.
Bret Winton, we could talk for hours, chief futurist at our covestor. We are very thankful for the time that you've given us. Now coming up, Oracle makes a costly bet on AI and then massive spending plans are grabbing wall streets attention.
It doesn't look pretty. This is rubg Tech.
Oracle shares having their worstday in six months. That's sixty one billion dollars wiped out in market cap after they reported quarterly capital expenditure which is above what the market thought, raising investing concerns about the profitability of AI infrastructure buildouts.
Pimbugs Brodie Ford breaks it down. Look, they sort of try to tell us that they weren't going to raise more debt equity this fiscal year, but we're looking now at next year and there is going to be a lot more raising needed to do.
Right.
The whole question for Oracle is how quickly can you convert this massive AI demand into actual revenue and what are the capital requirements associated? And so last night when a lot of different spending metrics came up a little high, whether it was capex in the corridor or debt plans for the next year, all of these things came together to make investors a little bit indigested.
In the top line, right, like, yes, okay, they're going to go to equity and debt markets again. They've told us that, But are they growing, Like are they able to actually operate this business effectively?
They're growing massively. The question is whether it's empty calories. It's all about that margin question, Becau. As we see as the AI business ramps up, the gross margins come down, and they fired thousands of people this quarter to try to control those costs. But it's still crunching them right. It's still a question around what is the margin of offering AI infrastructure.
And is this a good business to be in?
Generally, Oracle has gone up quite a bit in their share price and investors are hopeful, but it's all about how quickly they can deliver on the big promises.
Bloomberg's Brady Ford, thank you very much. The world's largest private equity firms and deal makers are gathering in Berlin for the annual Super Return Conference, Navigating a tough fundraising environment, where AI is reshaping, where capital is flowing. Blue Box Danny Berger joins us live from the ground for an exclusive interview with Reddit co founder and seven seven six founder Alexis a Amian.
Danny and thank you so much. That's right, I am here alongside Alexis Lexis. Thank you so much for joining.
Wonderful to see you, Hey, thanks for having Danny. So.
Look, the big news that we it's inexcapable, is a SpaceX IPO listing tomorrow. You're obviously very intimately familiar with it, having owned xai got sold to SpaceX. Well, what does it just mean to have this behemoth coming to market tomorrow?
Look, we are all excited, you know. I think right now most of us in venture and in tech have been waiting for some watershed moment IPO to hopefully get the markets back open.
Looks like that is upon us.
And just generally speaking, I've been so excited about space tech for about five six, seven years now, and that to me is I think this feels like a milestone moment. This was an investment thesis that was unthinkable a decade ago for most investors, and I think now people are coming to grips with the fact that space technology is really here. What would have been science fiction US maybe ten years ago is now science fact. And I think we're only going to see an acceleration of that.
Okay, what is it all a fact?
When we start talking about like a twenty nine trillion dollar tam and ten million people on Mars. I mean, you own space companies yourself is just like this the way you need to think or is a little bit of a fantasy.
I it's so these numbers are big, the projections, the ambitions are big. I do think though, when we think about what we are capable of as a species, space has been something that has mystified us, excited us for a very long time, especially in modern history and modern technology. This was a frontier we really believed for a long time, and I did growing up. It was only a place for governments to build and innovate. NASA putting a man on the moon, all that stuff was never something the
private sector could do. But what we're seeing now here is undeniable. The private sector's being able to accomplish a lot, and I think it's only going to accelerate. And I do think the overall market is potentially that big. I think when we're talking about human ambition, there is no limit to that, when we talk about the opportunities in space.
As Low Earth orbit.
Alone just becomes more accessible, we're unlocking pharmaceuticals, We're unlocking biotech that's going to help us here back at home. And that's the stuff that gets me fired up as an investor. That's what gets me fired up as an American. I want to see that innovation come and help us live better lives here on planet Earth.
So as having SpaceX as a public company, is that a good thing for your space investments because it shows there's a pathway for public markets Or is it a bad thing because so much money is going to get funneled into this IPO that maybe leaves less room for some of the other space companies.
Well, the goodness is where I like to invest is still so early. Very few of these companies, you know, companies like Stoke or Astro Forger are thinking about going public quite yet. They're still thinking about building and shipping
and launching. I do think you're going to have undeniably a whole fleet of newly minted millionaires multimillionaires as well as investors, So not just the early employees, but also the investors who believe in space tech, who are now going to have capital to put into the sort of next wave. And I think we've seen that play out in tech before and this will be no exception. And I do think that all continues to accelerate all of us in building the space economy.
That we're open for building.
A space economy, though it is something that certainly takes time, and I just wonder if there is room for disappointment. I mean, I don't mean to harp on sort of the crazy numbers of it all, but is there a fear that it gets too overhyped. A SpaceX IPO is just too large, and there's some disappointment and it sets the project back to humanity what you're talking about, It sets it back in some time.
I do think it is it is important to have this tempered expectation. I think, on the one hand, folks have to balance one what I think is a very important almost unbridled ambition for human progress, which is I think a very important and noble and great quest and at the same time the realistic, you know, expectations. You know, everyone should obviously do their diligence, do their own underwriting, all that important stuff before making any kind of stock decision.
Thank you for the legal leaders compliance.
Is happy with me.
But at the end of the day, I do think what we're talking about here is creating very real value. I know, even you think about anecdotally the difference of person has once they've taken a United flight with Starlink, Like there's a very very different feeling about how you interact with technology when you've experienced just a little fraction of what the space economy can do.
And I do think as we.
Start to unlock pharmaceuticals and biotech that could really only be done in zero G, we're talking about again saving lives, improving quality of life, things that I know provide a real economic value, but at the same time help us live that Star Trek future. I think a lot of us grew up wanting, so I think, be exuberant, be excited, but at the same time, obviously, you know, be thoughtful and how you're.
Interacting this stuff.
I mean it's not just obviously spacexsipon. We also have open AI filing. Anthropic does as well. And these are companies that have had a lot of VC backing. In fact, so much so we were talking about this on stage. Sixty five percent of VC money has gone to just zero point zero five percent of companies. Is something broken that Those are the statistics we're faced with right now.
It is a unique time.
I think clearly as an early stage investor, you know, I am insulated from this a bit because where the ones, these multi stages are often marking up my early investments, and so you know, it's I think where you start to see the challenge is a lot of these companies in a previous decade would have already been public, and because companies held off going public longer, the private markets became a place that was effectively dealing like a public marketplace.
So you're seeing these valuations, you're seeing this increase. I think it is a positive for America and for the world that you know, retail, that that regular folks get access to these opportunities. I frankly wish it would happen sooner because I think Historically, you know, people draw up, you know, the market cap of Amazon or revenues of
Amazon or Google when they went public. And you know, we're in a different world now where privately held companies are able to generate tremendous revenues and market caps before going public. But I do think I think this has been a long time coming, and I do think generally venture should be a place to be contring and right it should be a non consensus asset, especially on the growth side. It's looking more and more consensus. So, look, those companies are about to turn public. We'll see what
the next wave of private looks like. I'm certainly trying to do my pest to be on the non consensus and right side early. And I do think venture is healthier as an ecosystem when it's not looking like a couple of very very concentrated bets.
Well, usually what you say when there's a consensus is that that's a dangerous thing, and it means that there can be a correction. Do you think that that's possible for this industry if everyone is crowding around similar bets.
Look, your instincts are right, and I know you always get in trouble saying why something is different this time. Yeah, And with that caveat, I still think something is different this time. And I know, look, I live through the social media wave. I naively thought the social media revolution that we were building with Reddit was like the revolution it was not. I naively thought mobile was a revolution.
It was not.
I mean it was, but in a much smaller way compared to what this is. We have seen in just a few years technology go from an interesting novelty that could help you write like a press relief, to technology that could literally write code as well as or better than even some of the most senior experience developers. And it really augments the output of folks. So there's a real technology here. It's a real shift, and I don't
think it goes away. And I also think it has, as I set on stage, a national security importance because so much of our lives are digital being able. You saw us with the way Anthropic thoughtfully rolled out mythos, like you know, we used it first and foremost to shore up vulnerabilities that we had in our businesses here in America. And so even if it never got even if AI never got any better than where it is today.
You know that is already incredibly valuable, and there's so much wood to chop as we look across so many businesses that right now don't have any software in them. This hotel, I am sure.
Don't tell me this hotel.
Is going to be an aips AS, but I am sure that whatever systems they're using right now are.
Very bad and software as a layer of user experience, these root should be able to level that up in a meaningful way.
And by the way, I do want to just ask quickly because we have forty five seconds left. There is this idea that the thing that survives in AI is just like live entertainment, and you have a lot of bets around women's sports very much. Has this whole revolution this thing we're experiencing just Mede, you double down on that.
Yeah, I mean look, I was a rare voice five six years ago saying this was in a soutional great asset not just sports, but also specifically women's sports. I love seeing this. I am certain five ten years from now we will still watch no matter how good the AI generated highlights get. You know, watching the AI version of that Knicks final last night would do nothing for the human soul yep, because it requires even though even if it was pixel perfect, if it didn't actually happen,
it is irrelevant and worthless. So live sports has to be fundamentally human. No one is going to line up to see a bunch of robots, you know, play eighteen holes of golf against each other where everyone hits a hole in one.
Right.
The end state of this technology is some version of this perfection that no one's.
Going to want to watch. Sport has to be human.
So I've been saying this for five six years now and I'm only more confident about it. And I think what this technology does is it makes these assets more valuable. It makes them more engaging for fans. It improves training, it improves so many elements, but it does not replace minding.
Is a out of time. But should we just end with nix and five?
Nix and five, I think that's fun.
That's a look into the camera and Nixon thie perfect place to end it.
Alection, thank you so much for joining me, Ed Caroline Alexis o'hanne and the founder of seven seven six and read it.
Thank you very much, Danny Berger. I really want to check back in in markets and I don't mean like what's happening in the here and now, we're like up eight ten percent on that's that one hundred.
I call it like a modest rebound.
Oracle is down on track for his worst day in six months because it warned investors is going to have to tap equity and debt markets. It needs that capital carro like it's like can't build compute fast enough. But it's interesting, like if you just take a sec calm it down most of the names and then that's like one.
Hundred a higher. It's the hyperscalers that are lower.
The software names are a little bit lower, and there must be an element of like treading water to SpaceX's debut tomorrow.
Definitely, maybe people still rearranging as to how much allocation they can have, how much money they've committed. But also, look, there's still hardware on the higher side and particular in the chip side of the equation. And let's just talk a little bit about that, because questions are clearly around the cost of the AI boom for Oracle there, but also costs for you and me for the American people in freation is spiking with tech chants scrambling to build
out data centers. Memory chip prices have skyrocketed, driving a record spike in tech, hardware and electricity costs. This is exactly the story that Bloomberg's end a Current is helping tell today. You tell it through an individual who's helping small medium sized enterprises gain access to upgrading memory.
And I mean he's just thinking this is out of this world.
Yeah, indeed, I mean this is the word AI boom is spilling over into real living costs. So you mentioned, for example, I spoke to a couple of companies, one of them in bolted More. He deals with small businesses.
He does for it services. So they come in the door looking for memory storage upgrade or maybe even new computer, and he's saying to them, look, because of the AI boom demand for chips, that's driving up the cost for the components he needs, like RAM storage ssd' sa' driving it up significantly, and as a result, obviously that means their upgrade job will be much more expensive, to the point where he says, it's telling some customers looking motophill gone by a new computer or new laptop, and the
cost of the new computer new laptop is also going up as a result. So this these chips go into everything that we use in every walk of life and flowing through now to the inflation data.
I'm going to just read this and because I couldn't believe it, it's the AI summary of your story. But the memory squeeze will add zero point four percentage points to headline inflation before it eases. According to Blue Megeconomics, it is shocking to me that there is a single basis point. We're talking about a category of specific hard
round chips impacting inflation at a the substantive level. Like I've spoken to you for years, you've been all around the world looking at different economies, different supply chains.
Is that shocking to you?
What have you learned in the real world economy about that data point.
It's certainly an impact. I mean, the official data that we had yesterday to your point, showed that the technology and computer components part of the inflation indicators was actually up by just about fifteen percent from a year ago. That's a record increase. So it is having the impact now. To be clear, obviously it's not the only issue driving
inflation right now. They ran more of course because of the impact and energy is the bigger driver, but it is filtering, is filtering through in a meaningful way, and economs are saying it's going to be enough to keep inflation simmering at a point where it wouldn't otherwise be and that's a critical thing, and of course that's a real worry for policy makers. So the AI inflation story may not be the only factor of what's keeping in terms of what's keeping US inflation elevated, but it is
certainly one of the factors. In a direct consequence of this AI boomlet rolls.
In and when we were discussing markets a moment ago, I should also se like, of course the warring around the Middle East is like a driver a catalyst. And what's happening in equities at least today Bloomberg's end of
current in DC awesome, Really appreciate it. Thank you, So stock stage, let's say a cautious rebound with tech stocks somewhat leading the way, like as we were talking about, there's a little bit of bifurcation in the bucket of then as like one hundred, but concerns about the potential escalation escalation right of the conflict in the Middle East are keeping investors a little bit on edge. Oil prices are still a factor. Again, I still think SpaceX has
quite a lot to do with this. Let's bring in Christina Hooper for her read chief market strategist in the Man Group two undred and twenty eight point seven billion dollars in assets under management. You know, I say this quite often, particularly for the tech sector, Like one session the market does not make But what is the story you see in the numbers on the screen in front of you right now?
Well, I think there is a lot of excitement around SpaceX. This is a I think creating a very significant level of positive sentiments, so much so that markets can really look through all the geopolitical risk and say, hey, this is something exciting. This is something that has incredibly long term potential. Long term it is you know, it is to me a story about markets that want to focus on the positive and this is giving them a reason to be positive.
As a market strategist, Christina, when you're getting bombarded with cools, should I buy in space X? Should I be looking at open AI and and throw picking all the IPOs and might becoming what is your answer?
My answer is, I think we need to think of it in terms of the context of a diversified portfolio, there is certainly potential there. As I talked about, there's growth opportunities. We also have to recognize that valuations are high, and when valuations are high, stocks are vulnerable to a rerating, especially in an environment in which you have an enormous amount of geopolitical risk.
Now that may.
Impact some stocks more than others, but typically when you have rates going up, that exerts downward pressure on equities, particularly long duration equities like tech names. So if you're looking out far longer term for your earnings, for your payoffs, so to speak, then you could very well see some kind of a rerating because.
In a part of the space x IPO equation is slightly mechanical, so some of the index fast track inclusion right and in very simple terms, the passive funds will have to buy their own by laws rebalance. Could you explain that a little bit a the basics of it. But when you're a strategist looking across assets, what you think will happen as a result of.
That, Well, essentially you have a built in demand that is vast because if you think about all the different owners of index like.
Fund products.
You have this captive audience that will be owning it as part of that, and so that certainly changes the dynamics. That's very different than the other IPOs we've seen, and again it's part of why there's so much excitement and there's a view that this stock price could go up quite significantly from here.
Isn't an irony that Elo Musk has always pushed and railed against past. Yeah, but passive is going to be such a driver of demand more broadly for the IPO, But so too is the commitment to the retail investor. Have you done much strategic thought around the impact of retail investor right now on broader markets because they're a loyal bunch quite often, but they can also wide in on mean themes and cause more volatility.
Oh.
Absolutely.
I think that's why there are so many firms that essentially monitor read it and other sites. I think that was learned from game stuff that retail investors are quite powerful now. I think think what we're seeing now is that retail investors are seeing opportunities in technology, particularly AI related names, and they have put their full force behind it.
That's not to say we haven't seen institutional investors as well, and so that has created quite a dynamic, and that is really, I think largely behind the kind of incredible recovery we've seen over the last couple of months. I mean, the returns are really quite astounding.
I would love to dwell on this, if that's okay, Christina. So Bloomberg reported that there was seventy billion dollars of retail demand for the SpaceX IPO, though we don't actually know the allocation yet, so it's oversubscribed. But one of the thesis, that thesis that you know, the existing investor base of SpaceX tell me over and over again, retail understands the story better, They're more likely to hold onto the shares for longer, and that will support evaluation over a longer time period.
You model for that, Do you share that belief?
So I think it can be a double edged sword.
Yes, retail does under stand the story. That's part of why there's so much excitement around it and there's so much retail demand for the IPO. But by the same token, because retail understands the story, if we see cracks form in critical businesses.
Then you could see retail react to that.
Again, we have that sort of built in demand because of the placement in the index. But having said that, you could still see a lot of volatility. You could see some kind of rerating in this environment if you see yields continue to go up, and if you see retail investors just become risk averse in general, which could easily happen.
Christina Hoover, always so measured, always so thoughtful, Thank you for coming on. MAD Group Chief market strategists there. Coming up from Zatxa Software, go Poff partners with Spacexai a new shopping experience.
We speak with the gop co CEO.
And why Spacexai, why they're offering why grow business, greenvectech.
As SpaceX heads towards its IPO tomorrow, investors are betting on more than rockets and chatbots and satellites. The company says enterprise AI represents a twenty six point five trillion dollar opportunity, but can grop actually when corporate customers. One of the few companies putting it to work is gopuff, which built its new AI shopping assistant on XAIS models.
Joining us now is Gopuff CEO Raphael Ilishaiev. It's a great case study, right I think a lot of people read the prospectus and we're like, Okay, the future of SPACEXAI is enterprise AI, but they have struggled a little to get people to use the models in a meaningful way. You are just explain the basics of the relationship and what you've actually done with the technology.
Yeah, Ed, Caroline, thank you so much for having me so Over the last thirteen years, gobov has built infrastructure to be the fastest and most affordable player in delivery, and our partnership with SpaceX and the product that we co developed called Go solves the final friction point that we really had, which is the consumer shopping experience.
So we thought about this differently.
Than I think a lot of other folks. And it's not just an LM wrapper that's built within our app, but in fact there's a co developed experience where it's a whole new consumer on new consumer product where you could shop via voice, you could talk to it, have total total conversation like you would have with your best friend.
Go will build your cart, so if it knows enough about you, it'll actually develop and build a whole cart, and it has this TikTok style scrolling experience where you can scroll and discover new products that are hyper personalized and cared for you. So this is a whole new experience that we co developed together with SpaceX over the last year and fad.
What's interesting is when you're using data from X, You'll know that I'm all in on the next in five game on Saturday, and suddenly I'm being offered chicken wings or I'm being offered chips or whatever it might be because I'm able to and gopof on that moment on the Saturday. But from actually embedding within X and within groc, did you push away other relationships? Did you decide no, thanks open Ai, no thanks anthropic?
Did you look at doing it with competitors?
You know, this kind of relationship that we had and the kind of product that we wanted to build, this wasn't just a plug and play that we could have done with anyone. So we looked for folks that had the right technology, and SpaceX has amongst the best technology both for voice and imagine and a partner that was willing to co develop this whole new consumer shopping experience
for us. So you know, this was a long, you know, ten eleven month process that we co developed together with a partner that was willing to work with us, you know, even as early as this morning, talking with our engineers and co developing this thing together to make it even better.
So we were looking for a partner that had the right technology, which SpaceX is you know, in cutting edge and the best boat in voice and in image generation, and a partner that was willing to co develop this new product together.
Could you talk a little bit about how the economics of it work, like how does XAI price things with you? It sounds also a bit like you get good access to the forward deployed engineers, like daily access. All of that is a big facts right now because everyone is counting the cost of tokens.
Yeah.
Yeah, So it's a strategic relationship that we build together with SPACEXI from day one. And the way that we thought about the scaling is we wanted a provider that can provide you know, a super high quality product bought across voice and image and is arguably the lowest cost provider. So we built a relationship that scales are.
The lowest provider you benchmarked against open ai and Anthropic on the cost as well.
Yeah, we looked at we looked at a lot of players when we did, and costs was one of the factors here. But the quality of the product and the willingness to co develop this together, all of that kind of gave us a lot of confidence to work together with SpaceX, And I think the product kind of speaks for itself if you play with it. I think it's second to none from a consumer AI experience.
I mean, Raphael is interesting reporting out over all Wall Street Journal, for example, there's a thought that open Ai might be doing some drastic price cuts in particular basically the cost of its product.
People are who been wonderfully token.
Maxing is suddenly realizing how expensive that is and they want to do that, perhaps ahead of competitors like Anthropic. Are you seeing return on such AI investment? Is it really driving growth for the business?
You know, we're a week in to Go launching, and I'll tell you a lot of the consumer metrics really early on are great. You know, basket sizes up and frequency.
Within the first week is up.
But what's even more special is the kind of conversations that are consumers are having with Go. You know, we saw a conversation earlier today with the mom saying Hey, my kid is sick, can you help me? Or a conversation a few days ago with someone asking, Hey, I'm hosting a barbecue for six people, go can you help me?
And that kind of relationship that we're building with the customer is kind of very special and I think those kind of relationships are the ones that are going to win and lead to ultimately better KPIs across the board.
That's great speaking with you, Afair alias Cherv he's the co founder and co CEO of Gopuff. Appreciate the take on groc and AI and SpaceX Ai. But there's a lot to talk from governments around the world at the moment about adopting AI. Many countries still having delivered on that adoption. That's according to open AI's head of Countries and the former UK Chancellor of the Exchequer, George O's one. He sat down with bloombg Tech Europe's Tom McKenzie form the Founders Forum in the UK.
I think you are saying what is true is that many governments having yet really good delivered on the adoption. They've they've talked about it, they've got ambitions around it, but they're still in the process of delivering.
Now.
I know I've been in government. Things take a while. But the governments, I think the do adopt more quickly will be the big winners. They'll be the winners in their national economy, winners in the quality of their public services, and winners in potentially in like where their country is going to be over the.
Next centric coming up.
Many things about the SpaceX IPO have been unusual. We're going to talk through the mechanisms of this public market launch next ready for lift off, et cetera, et cetera. This is Bloomberg Tech breaking news crossing the terminals. SpaceX preparing to sell seventy five billion dollars worth of shares, at least a five billion dollar dollar order coming from Blackrock.
That's according to the Wall Street Journals siding sources. Bloomberg had reported right that there were several institutions that had placed orders for ten billion dollars worth of shares. The allocation will get worked out in the next twenty.
Four hours through to tomorrow morning.
Pre trade for black Rock, according to the journal, at least five billion.
Maybe it goes up. We'll see.
There are some big orders coming from institutional but also from retail ed and that is today's big number, more.
Than seventy billion dollars.
Retail orders for SpaceX's IPO have actually topped seventy billion, according to sources.
And while individual investors are expected.
To be allocated well at least twenty percent of the available shares at a seventy five billion dollar IPO size, many are going to be left unfilled.
That's just one of the rather unusual.
Things about this listing, joining us to discuss the IPO mechanics, the.
Market impact, the thesis.
Brian White and In, director and co head of Tech Investment Banking ever at PYPERSANDLA. You're not one of the banks working on the listening, which frees us up to discuss things at length with you. Brian, and I'm so fascinated by some of the technicalities because you've put in in your notes.
Look, this is a very small float.
Seventy five billion dollars is enormous and record ibo but compared to the valuation of the company, very limited amount of how many stock we get access to Is that an issue?
Well, it is.
It's about four percent of the float, and there's overriding demand. You're seeing demand from retail and institutional as evidenced by the black Rock order right there. But over time, hopefully they will continue to sell more and more. But right now it looks like the demand is quite high and they could probably actually increase the amount that they want to raise, and I'm sure that that's something that the underwriters are thinking about as we speak.
Ryan, they did the unusual thing and set out a price pre road show one thirty five. How do you think the bankers, the potential investors and everyone else responded to that behind the scenes.
Well, first, what they wanted to do is to back into what they believe is an appropriate valuation, and that's evaluation based on all the facets of the SpaceX business.
Number two.
SpaceX is unique and led by probably one of the best entrepreneurs of all time in Elon Musk, and there is tremendous demand for it. And instead of the normal mechanism where you're trying to determine how to price based on where you think demand is and what the market value is at, they've determined the price from the outset. What that's doing is putting an artificial floor on where
it's going to be. But what it also may allow for is a very very large pop for retail investors tomorrow, and I think that that's going to be what we want to watch, just how much it pops at the open and where it sustains itself, because much of retail may see such a large pop that what they decide to do is to sell down throughout the day tomorrow.
But run aren't the limitations as to how much retail is allowed to sell out or at least some of the brokers that they buy through will punish them if they sell on the first day.
Well, we've never seen a IPO with this much retail allocation, and so twenty percent at least is going to retail, and the retail is going to be able to have access to sell. Now what you may be referring too, some of them may have some issues with future IPOs, but most of the retail that's in this IPO is probably not necessarily planning for much more IPO investments.
You really think they're not going to be in an anthropic or open AI if they want to buy into Xai, Well.
They would like to be, but it's unclear if open AI and Anthropic will actually follow a similar mechanism. My instinct is they may not, but we shall see, because this is setting a new precedent tomorrow.
Brian, we reported yesterday that pre float SpaceX has IG rating from the three main agencies. To you, how much of a signal of that is that they will very quickly go back to the markets and raise more money through any mechanism available.
I mean, I think it's a tremendous signal. I think that they are going look at the burn that they disclosed in the prospectus, look at the ambitions that they have, particularly with the XAI part of the business, and with their vision about where they want to see their AI business and their space business over time. This is a business that will continue to consume massive amounts of capital, will continue to need to access the public markets to raise that capital.
You didn't get a brief on this. We're being transparent about that. But is there a way that Pipe of Sandler can play this IPO event.
Well, what we're trying to do is just continue to advise our clients about where defense technology is heading. You know, the exciting things that is happening in space, the future of you know, defense, Those are the areas that we're spending a lot of our time in terms of the future opportunities around SpaceX. It's something that you know, our team is very fixated on, but we're not participating in this IPO tomorrow.
Brian White, co head of Technology Investment Banking Pipe cent to thank you very much, really appreciate it. Okay, you know, this is it the final sprint and this is it for this edition of Bloomberg Tech.
Are you ready?
I'm feeling ready.
Yeah, are you ready?
Because you've got a long day ahead of you, Ed Ludlow, there's potentially coverage of these things priced there's coverage throughout the trading day here on Bloomberg after the trading day.
And of course we'll think me to take away from the game. It's all premeditated. You kind of know what's going to happen. Still lots to review on the pod.
There is Get That podcast you can find on the terminal as well as online on Apple, Spotify, and iHeart.
I have ed here for another day. In New York City, there's a bluembog Tech