'Big Short' investor Steve Eisman: I'm 'not a fan' of the upcoming SpaceX IPO (youtube.com)
Before, Musk and SpaceX were in satellites (Starlink) and rockets, but now they're in AI, which is very capital intensive, Eisman said. It's not like software where you just have some labor and servers and you make money. AI costs money.
Google spent $90b last year on AI, which it did from its cash pile, but this year it's doing $180b so it has to raise capital and stock. Rumors Meta and Microsoft are doing this, which means a tech shift from asset light to asset intensive.
Despite massive spend, the products aren't different from each other. And really, the chatbots ime are the same as GPT3.0 in December 2019. Cursor is better, so you can code things that way, but you have to be step-by-step with it and constantly check its work.
There are no moats. What's being created is a commodity, it seems to Eisman.
For these past few years, companies have charged for tokens way below the cost for the company of those tokens. Github is now starting to actually charge real prices. (Comparable with Uber?)
Everyone thinks Musk will buy Tesla (SpaceX will buy Tesla) with the money from the IPO, but Eisman notes Tesla customers have declined steadily, that EVs aren't a great business, that it's a capital intensive business also, competitive, have to compete with China.
He expects everything's baked in. TAM of $28.5t (almost same as US GDP). But there is momentum play.
OpenAI and Anthropic are also expected to IPO. $4t added to the stock market (the US stock market $70t), with these three IPOs. Fast tracked 'Giga-IPOs'. These firms all need a lot of capital to invest. Do their current stock owners want to sell stock to the public rn? Is it the best time to do so? The public is excited about AI companies.
Index funds (that automatically track them) might have to buy these while they're still very volatile. After the trillions from the indexes, will the shares fall because the natural buyers won't be there?
IPO companies tend to underperform the market by like 20% for the first 3 years, and even more so when revenues for the company are low compared to the value. (It is good for those who owned the shares before the IPO ie hedge funds.)
Is the US stock market at a peak rn?
Very successful companies tend to stay private. They go public after they achieve their outstanding success or growth.
How much bigger can SpaceX get than $1.75t? How can it create another trillion of value?