GoKawiilis a reporter who writes about tech, money, and human behavior. She joined The Verge in 2014 as science editor. Previously, she was a reporter at Bloomberg.
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Once, I had some questions about why SpaceX, Elon Musk’s healthiest company, acquired xAI, his sickliest one. Now I have some questions about why we’re calling the whole thing SpaceX.
Look, what we have here, by revenue, is primarily a telecom company and a company that rents compute, according to SpaceX’s first quarterly earnings statement as a public company. The space sector of the business didn’t break a billion dollars this quarter and contributed only a touch over 10 percent of the company’s revenue. SpaceX remains its own biggest customer. There just aren’t enough other people who want its rockets. And, I dunno, maybe if the rockets were a primary focus of the company, SpaceX wouldn’t be in danger of blasting a new crater into the Moon with its space trash.
The lion’s share of the spending (and the hype) is nonetheless around what is graciously being referred to as “AI”
The telecom part — SpaceX calls it “connectivity” — is Starlink, the satellite internet service, which had $4.2 billion in revenue, and was the only part of SpaceX that did not have a loss from operations. And while Gwynne Shotwell, on the call, outlined plans for a phone service meant to compete with AT&T, Verizon, and T-Mobile, the lion’s share of the spending (and the hype) is nonetheless around what is graciously being referred to as “AI” to capture whatever contributions Grok may be making. Analyst Alexander Potter expects spending on the neocloud business, which leases data center capacity to AI companies, to climb to $65 billion next year, $17 billion more than he’d previously estimated, Bloomberg notes.
It was hard to miss how important leasing data center space was to SpaceX. Not only did it make more money than SpaceX’s rockets, it also drove more spending — $15.8 billion on AI alone in the second quarter. (By comparison, spending on the space and connectivity sectors was a touch over a billion each.) That business makes it a competitor with neocloud companies such as CoreWeave and Nebius.
Except that wasn’t originally the plan.
Musk built SpaceX’s Colossus 1 data center in Memphis for Grok, his also-ran AI that also occasionally refers to itself as MechaHitler and has a penchant for undressing women and children without their consent. But xAI had trouble running the complex, and decided to rent it out instead. In addition to encountering latency that made it hard to train in-house models, the center employed a mix of newer and older chips that created bottlenecks. On the earnings call, Musk said that only 10 percent of the compute SpaceX builds will go to Grok.
Revenue isn’t profit, and building data centers is expensive
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