Article: SpaceX considered as a leasing company

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On the most recent earnings conference call, SpaceX’s CFO Bret Johnsen confirmed that their AI capex was seeing a payback period of less than one year.

Leasing businesses often show up during technological revolutions. For example, there was a bubble in computer leasing stocks in the 1970s...

The trouble with computer leasing is always in the break clauses; the client is prepared to pay a premium to lease equipment because it really needs the computer services, and for some reason it can’t get them any other way. 

But the client obviously doesn’t actually want to be paying out enough to build someone else a new data centre every year, so they are likely to always be looking for alternatives. And when they find another way to get the compute that they need, the lease payments dry up quite quickly.

In other words, lease revenue of this kind is something you should expect to have for a good time rather than a long time. 

The very fact that it’s so profitable tends to attract market entry. As Nassim Taleb puts it, you often get gluts that aren’t followed by shortages, but it’s very rare to get a shortage that’s not followed by a glut. And the historical record suggests that when the scarcity starts to be relieved, it very quickly becomes a good idea not to have leveraged too much, and not to have invested on the basis of valuations that depended on returns that couldn’t be sustained.