I completely understood the idea of Starlink and expected that it would be successful and useful, which it is. I've worked in data centers for decades now, and I am incredibly skeptical of the "data centers in space" sales pitch. It seems like an actual scam.
Data centers submerged in the ocean or placed in the desert seem much more promising. But I have only an enthusiast's understanding of rockets and physics, so I'm genuinely open-minded to the possibility.
Is there anyone credible who thinks this is a plausible pathway for SpaceX to make huge amounts of profit?
Repairability and depreciation are the main problems. A earth data center can be repaired, depreciated, and recycled at EoL recovering some of the costs. SpaceX datacenters are a total write off from the moment they are launched.
That's actually not a concern I'd have, because hardware that has been sufficiently tested and burned in tends not to fail for a very long time.
I've done builds that ran for 5+ years with virtually no physical attention, just continual degradation as hardware is taken out of service. There's also not much money to recover from 5+ year-old hardware.
I used to run AI inference GPU servers in road vehicles, which is probably an even harsher environment than a single rocket launch, and the vibration problems are real but solvable.
The rocket's payload most likely has higher peak vibration but only for a few minutes, and just one time. The road vehicle's payload is shocked by every pot hole and speed bump, for years.
5 years is a Starlink's typical lifetime. Data center satellite lifetimes will probably be shorter. Demise sooner, replace more often. GPUs get more energy efficient every year and leaving the slower, hungrier chips up there much longer than 3 years seems wasteful given the cheap cost of launch.
I think this could be done at an interesting scale even on Falcon 9 alone. If Starship does even 20% of its early design goals, it'll beat Falcon 9 and we could see orbital servers being demised and replaced every 3 years, maybe even 2, for ones with abnormally high failure rates.
Now, whether or not this will all make money in the end has a lot to do with what's going on down here on terra firma and how long it takes to get useful capacity into orbit.
(It's taken 7 years to get Starlink capacity enough for serving 10M customers. Verizon FiOS did 10M in 5 years. AT&T Fiber took 4-5 years to deploy to 10M. So, space isn't a lot slower than terrestrial.)
Starlink rushed when they put the satellites in orbit, AT&T did the opposite. They did the bare minimum. So terrestrial was faster without really trying
The Microsoft design of filling an airtight submersible structure with argon and dropping it to the bottom of the ocean floor is the alternative design - you’re not looking to do repairs but amortize the low cost of failures across the value you extract.
The biggest issue with space is not repairability but heat - when you’re in a vacuum the only way to disperse heat is through black body radiation and that’s horribly slow compared with normal mechanisms. It means you need giant physical structures whose sole job is to accept heat from the processing core and radiate it away and have so much more material that you can radiate it at the speed you generate. It’s a huge unsolved physics problem which is why everyone is skeptical.
With well considered engineering it doesn't even need to be tap water. If you have a closed loop thermal conductor that interacts with the components themselves you can then use really trashy contaminated water that just needs to be clean enough not to actively erode the heat transfer mechanism. We have setups like this all the time that use condensed air via cooling towers or salt water immersed heat sinks to discharge energy - it's more expensive than tap water but it isn't technically complex. So if it ever becomes unpalatable (likely due to politics) to use tap water there are some readily available alternatives.
The big win of being in space is just a worse alternative to using an intermediary heat transfer medium.
It's the same reason we use single use plastics. No matter the politics the business decision is going to use the cheapest option available. I'm confident that all the hyperscalers could create datacenters that don't affect the local community basically in anyway. There's been data centers hidden in plain sight for decades. The demand drives it to the lowest common denominator
It’s not an unsolved physics problem. Every satellite in space has to deal with it and even the ISS deals with it by having massive radiator arrays that face perpendicular to the sun.
The problem with data centers in space is one of materials science and engineering: how to make radiators large enough and effective enough to cool it while also being economically feasible, both in terms of construction and getting them up there in the first place.
We can make a space data center right now. It would just be terrible and expensive.
I think it's not necessarily about being the cheapest option, but a more politically acceptable one. I don't think you're going to get people protesting a data center in space considering it won't be next to their house, won't use water, and won't lead to increased electricity rates. I could see companies paying a premium to keep the political heat associated with traditional data centers off their backs.
The physics problem regarding radiator arrays isn't unsolved, but it's not a problem that scales up gracefully. Small-scale radiators could get by via passive cooling, but large-scale radiators need active cooling, and now you need fluid, pipes, and pumps that all represent additional launch mass and points of failure (and the pumps are generating heat of their own, so now you need more radiators...).
Doesn't active cooling provide counterbalancing options to improve efficiency though? For example, use multi-stage heat pumps with different refrigerants so that you can make the hot side very hot and thereby need less mass for radiators.
Apple tried the damnedest at that during their intel era. Silicon gets exponentially leakier at higher temperatures, and that will outpace quadratic growth easily.
(Electronics that works at 200C do exist, but they're not gonna meet a modern smartphone's specs, let alone a datacenter)
Right, but nobody's sure just how wasteful. And at these scales small factors make or break things. That's why it's hard to predict who's bullshitting. A fairly small unforeseen factor here and there adds up to wild financial success or failure over the course of an entire project.
I think that's an incorrect way of looking at it. A small unforeseen factor is almost always going to be a negative factor, not an unforeseen benefit. Space is a hostile and unforgiving environment without an easy way to bring things back, fix stuff, and/or re-deploy. A small mistake on the engineering, planning and/or implementation is likely to sink the whole thing worse than the napkin math suggests is almost certain failure anyway. Similarly, there are few ways to "get it right" and many ways to fail.
The maximum heat rejection capacity of the ISS is 126Kw.
Musk’s proposal is to put 1 rack per satellite drawing 150kw using 110 m^2 of radiators (1/4th that of the ISS). The only way to do that is by running the satellite at 71-100C which is a problem for the chips to actually run.
So the open questions are:
* can they actually dump the heat and can they have the racks running so hot for so long
* is it economical to in one year replace all the capacity you launched 5 years ago (you save up to 0.5B in electricity costs over that time frame but that doesn’t seem like a lot for having to replace that much capacity buildup)? And given they’re running racks way hotter than has been validated on earth, will those chips end up lasting 5 years (including space radiation).
Pretending like it’s a solved problem is neat but I’m not saying sure it’ll be so easy.
Those temperatures aren't necessarily a problem for the chips (there are some minor design changes needed, so it's more a question of having enough volume to justify doing it). The real issue is that this is yet another thing you could do better on earth.
In other words, run fully lights-out datacentres that no humans will access during normal operation - this allows you create more extreme temperature gradients and to replace the atmosphere with CO2 (or even He2), both of which will make your cooling solution much more efficient as well as increasing rack density and perhaps even taking the place of a fire suppression system.
The reason that no-one's actually doing that at scale is that it's currently significantly more expensive than traditional datacentre designs. And yet, that's still much less expensive than boosting racks into space and then letting them burn up in the atmosphere five years later.
That's how space heat radiators already work. Which, by the way, add significant costs to both energy and weight for space-based data center. The problem is once you 'pump' the heat out is what happens next. With out conductive or convective heat transfer, all that is left is radiation of that heat. Which is the slow.
> It’s not an unsolved physics problem. Every satellite in space has to deal with it and even the ISS deals with it by having massive radiator arrays that face perpendicular to the sun.
The problem is not solved for something of this scale, I think its solvable, but no has done anything at the size these would have to be. And if the physics and engineering can be made to work, they are unlikely to be solved AND ALSO be economical.
It's classic type problem where the choices are:
- economical
- in-space
- big
Now pick two.
There is also the unsolved problem that the radiators would be absolutely massive in area. Making damage from flying objects, meteorites, space jump, close to 100% likely over any reasonable life span. Repairs would be expensive AF. Again economics is the driver of why this is dumb.
Right, a heat exchange is reusable though on earth and can be recycled across multiple SKUs and thus depreciates longer. In space similar to how you can’t repair you also can’t swap.
Isn't the problem also that because of radiation, processors in space either need to have larger feature sizes OR additional shielding / redundancy? Seems like a pretty high price to pay for slightly cheaper energy...
All of the losses are from the xAI/Twitter side of the house. And Elon Musk needs a flimsy story so that no one sues him. It doesnt have to be a believable story, it just needs to be enough so that no lawyer cares to bring a case in Texas vs SpaceX and Elon for breach of fiduciary duty.
The story did its job. Elon offloaded the money losing Twitter/xAI out of his personal wealth and onto the public through SpaceX. Done and done. SpaceX is now an AI company (or contains one) and needs to perform as such.
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It's literally the same story as Tesla/Solar City. Make up bullshit about solar panel synergy with EVs and buy out his cousins failing company. Make it TSLA shareholders problem for figuring out how to make a profit from the failing company, it's no longer Kimball Musks concern since the buyout
Heat dissipation isn't as big a concern as it seems: the weight of the solar panels is significantly larger than that of the heatsinks you'd need per typical modern gpu
The cooling is not an issue for their current designs. Look at their AI1 Satellite specs. They clearly have the cooling figured out. The thing is that it's not a datacenter, it's a single rack. A single rack that weighs multiple tons.
You can figure out the weight of the thing based on the total power output, and "power to weight ratio" from SpaceX's own diagrams. Then look up how much it costs to launch per ton, and even look up what they are projecting it will cost with Starship. Even if they get costs down, it's still astronomical. I just can't figure out who would pay that much money to put a rack into space. There's no way the power savings are worth it. Unless you have some niche where you need your workload in space, I can't see the value at all.
It's not just the weight some outside groups have done the calculations and to dissipate the heat at the operating temperatures in the white paper without a heat pump to increase the radiator temp and thus efficiency requires a massive pump that would have to move nearly 69,000 kg of coolant per second continuously without fail.
> Is there anyone credible who thinks this is a plausible pathway for SpaceX to make huge amounts of profit?
Scott Manly (who I think is credible) has a video where he goes over the logistics of SpaceX's space based data centers. He seems to think its an idea worth pursuing, but its important to note that his expertise is space tech, and not business strategy.
Yeah, I have no doubt that it's possible to put GPU servers in space. The Starlink satellites are servers in space. The question is whether it's even remotely profitable to do this for AI training/inference servers.
The same way that xAI has compute on the ground and there's such demand that the compute exists so it will be sold. I think SpaceX can conceivably sell the space compute easily. This goes with the business strategy of Elon which is just sell services to himself. He sells rocket launches to himself with the excuse of creating a space datacenter. The same way he sells cybertrucks to spacex because the public won't buy them. I'm pretty confident it's definitely cheaper to put the compute in Texas, but might be viable enough to sell himself rocket launches and make his company worth more to leverage for more ventures. I'm not a business person I don't really get how it's all so valuable if the only demand is itself.
They're going for an orbital height of 600–800 km, or about 2-3 light-milliseconds from Earth's surface. A lot of people think of satellites as being necessarily high-latency because of intuition drawn from satellites in geosynchronous orbit – but those are about 50x farther away from earth and have correspondingly longer ping times.
They don't go directly to the satellite but through ground stations and then bounce around on lasers between satellites. The latency is going to be worse than fiber
The ISS produces about 120 kilowatts of electricity.
An Nvidia Blackwell B200 GPU uses 1.2 kilowatts of electricity.
So, you would need a similar array of solar panels and radiators just to power 100 of them. You probably would need 2-3 launches for a satellite this big, and realistically, you would just make smaller satellites.
That's $4,000,000 worth of GPUs, A couple millon or more of RAM, SSDs, etc., a radiation-proof satellite housing to support all of that hardware, solar arrays, launch costs ($74M per Falcon launch), all for maintenance to be impossible and the hardware to become obsolete in a couple of years.
It's a delusion unless we invent some way to go to space for free.
For reasons already outlined, I have doubts about their math. Targeting $250/kg payload costs is ambitious for a rocket that has not yet successfully reached orbit or proven cost-effective.
Even if we do somehow succeed at affordably dumping tons of GPUs into orbit, what do we do about the Kessler Syndrome?
From first principles, does anyone know what the minimum costs are to put a rocket into space? There must be a minimum cost given that the rocket engines have to thrust until reaching escape velocity to get you to space.
The thing has two main parts. One, a bunch of solar panels, shielding and radiators. This the heavy / expensive to launch part, but should last for what, decades? Two, a bunch of GPUs/servers. These become obsolete, but so what? They're not that heavy, so every few years you send up another rocket and swap them out.
The only way it makes sense is if you think the massive job losses due to AI will lead to people burning down datacenters on earth. An older spec'd and unmaintainable datacenter is worth way more than one in ashes.
The ocean is worse than space from every perspective but cooling, radiation shielding, and cost/ease of installation. But that just highlights how bad of an idea space-based data centers are at this time.
> from every perspective but cooling, radiation shielding, and cost/ease of installation.
Oh is that all? Those are major data center concerns.
Don't forget the biggest one: an ocean-based system could be pulled up and serviced without the need for a human-rated rocket. Oh, and bandwidth/latency.
The ONLY benefit of space is that it doesn't require siting a major construction in a town full of angry residents, and it has abundant solar power. But given how much it costs to get the solar panels in orbit, that power sure ain't free.
Cooling is relatively easy, you just need radiators which are passive, and essentially reduce to a launch cost penalty. You are right that they can't be serviced, but that is missing the point of orbital data centers. The whole point is that you can build hundreds of thousands of these in a factory and launch them in a scalable manner. The power, cooling, etc. comes for "free". In the long run, as the cost of the chip, launches, etc. goes down, orbital data centers will scale better terrestrial ones.
As a side note, I don't understand why I keep seeing these wrong arguments on HN repeatedly. Like everything mentioned in this thread can easily be fact checked. Radiative cooling is solved, launch costs are going down, so power costs will pay themselves back very quickly, etc.
You can argue about specifics, like chips will get more sophisticated + power efficient and fabrication will be the true longterm bottleneck, or SMRs/fusion could reduce energy bottlenecks, but talking about cooling as if convective cooling is the only option is just nonsensical.
This is emphatically not true at any scale in which this scheme makes sense. Be careful with including too many Musk boosters in your information diet.
"Just" is doing a lot of work there. SpaceX is planning to launch 100 GW of compute annually, that comes with ~ 2.5 square kilometers of radiator (assuming an optimistic 800K radiator temp and emissivity of 0.9, double sided)
Go for advanced carbon composites, you can do that with just 5,000 metrics tons or so of material. That's 34 starship launches just for the radiators. We haven't solved assembly, we haven't brought up power panels or core compute. Planned launch cadence that SpaceX hopes to reach end of this year: 12/year.
> The numbers are brutal. Starcloud’s own white paper estimates that a two-sided radiator held around 20°C would emit only about 633 watts per square meter, over 1,000 times slower than water cooling of AI chips on Earth. So, a puny 1-megawatt orbital data centre, 1,000 times smaller than the gigawatt scale of hyperscale data centres on Earth, would need about 1,600 square meters of radiator, an area roughly the size of a hockey rink.
1GW needs a pretty big area for radiation.
And in space your data centers is hard to defend against foreign actors
> and essentially reduce to a launch cost penalty.
Are you arguing that all this is technically possible or something? The whole point is that the costs would dwarf the gains.
> You are right that they can't be serviced, but that is missing the point of orbital data centers.
Pointing out a downside of something isn't ever "missing the point".
> The whole point is that you can build hundreds of thousands of these in a factory
In an Earth-based factory, right? Am I to understand that we can't build hundreds of thousands of regular Earth-based datacenters in a factory?
> and launch them in a scalable manner.
Wanna bet that launching something to space will always be a few orders of magnitude more expensive than shipping it somewhere across the planet?
> The power, cooling, etc. comes for "free".
Unlike on Earth, where you pay for sunshine? Or is cooling "free" in space but not on Earth? Lol?
> In the long run, as the cost of the chip, launches, etc. goes down, orbital data centers will scale better terrestrial ones.
The costs of the chips will get lower in space than on Earth?
The costs of launches will, again, become cheaper than terrestial transport?
> As a side note, I don't understand why I keep seeing these wrong arguments on HN repeatedly. Like everything mentioned in this thread can easily be fact checked. Radiative cooling is solved, launch costs are going down, so power costs will pay themselves back very quickly, etc.
The question isn't whether this is physically possible, but why you'd want to do it instead of an Earth-based datacenter. It's all downsides basically.
The whole point is that you can build hundreds of thousands of these in a factory and launch them in a scalable manner. The power, cooling, etc. comes for "free". In the long run, as the cost of the chip, launches, etc. goes down, orbital data centers will scale better terrestrial ones.
How is this not true for terrestrial/ocean deployment as well? It will ALWAYS be easier to shed heat on Earth than it will be in orbit. Convection, conduction, radiation... in space, you only get the last one.
So take the same unattended hardware you were going to launch into orbit, and put it on a container ship instead. You'll be better off in every way. If it makes you feel better, lie and tell everyone that you launched it into space. Building orbit-capable data centers might make sense, but actually launching them never will.
The only barely sane rationale that I’ve heard for wanting datacenters in space is that they would give space-x low latency signal processing capacity it would need to turn Starlink into a real time Passive SAR constellation.
Too bad the things that really matter don't make "sense" (mostly people talk about economic sense when talking about this).
Increasing the temperature of the earth , and water usage are two things that using Space data centers will excel vs the alternatives. However society has just not been able to price that directly into these huge buildings.
Funny that I agree with EM idea on this, but the reasons are so far away.
None of these are problems if you put data centers far away from population. No one does that right now because it's a lot more expensive to set up and maintain, because you have to set up all the infrastructure from scratch. You know what's 10000x more expensive than that? Setting up the infrastructure in space.
Like much new technology, it evades regulations. Hyperscalers are getting crushed by popular backlash and resource constraints. And like typically nerds they'd rather dream up a massively overengineered solution rather than face their responsibility as human beings.
> have only an enthusiast's understanding of rockets and physics, so I'm genuinely open-minded to the possibility.
I used to be open minded too but lost all sense of credibility in anything Elon Musk touches when he called nanotechnology a pseudoscience. Since then it's only been downhill. One does not have to be subject matter expert, even China is vertically landing rockets now.
What makes you think Paul Graham knows what he's talking about re: space, data centers, and the logistics of lifting data centers into space and the ongoing maintenance of them. I don't understand the deification his thoughts receive around here.
Ok, he's not a space expert but seems quite sensible and wrote that after hanging out with the Starcloud guy who already has a GPU in space and an FCC application for launching 88,000 satellites with more. Presumably the Starcloud guy knows something about such logistics.
SpaceX has accomplished spectacular things in reusable launch vehicles and space-based networking. It will soon restore the heavy launch capability that the US lost when it retired the Saturn V in the 1970s, but in an affordable and sustainable manner. SpaceX is almost single-handedly keeping the US ahead in space.
I'm bullish on SpaceX as a company in terms of technical accomplishment.
Buying SPCX would make sense at about 1/4 of its IPO price. The IPO price and subsequent rise was inflated via hype and artificial supply restriction, i.e. publicly selling just 4% of the total company ownership.
> It will soon restore the heavy launch capability
Maybe!
>but in an affordable
Maaybe!
>and sustainable
Maaaaaaybe. Gotta start gigantic scale methane production from solar or whatever first.
We sometimes get in the habit of thinking Elon, who is a Nazi, accomplishes everything he sets out to do, since he was so incredibly effective at getting EVs going and getting the Falcon 9 going. But he has plenty of misses too, like ruining the foundations of democracy, being over 12 years late and counting with self driving cars, hyperloop, the cybertruck, etc.
Doesn't Musk want people to think of him that way? He explicitly advocates for white nationalism and did the Nazi salutes on a very big stage (he's smart enough to know what it would look like).
Yes but... All the "value" in SpaceX is in AI. Actual space launches are a tiny part of the portfolio. Talking about launch capability is almost off topic when taking about SpaceX valuation.
Not sure why anybody would downvote this, as this is exactly what the company claimed in their filing. Less than 10% was space launch and starlink. The rest was all AI.
SpaceX bids on competitive government space launch contracts and wins most of them because they're more reliable and often half the price of the competitors, or less. Government is now essentially subsidizing SpaceX's space launch competitors, giving them more expensive contracts on which they often fail to deliver, only because the government doesn't want to be dependent on a single space launch contractor. So complaints government subsidies seem misdirected.
Many companies have tried to launch LEO space-based communications constellations, starting with Iridium 30 years ago. Starlink is first and only so far to succeed at scale and provide truly global internet access. Indeed having the space launch and communications business joint has helped both of them. Indeed that helped SpaceX drive down launch costs, given their reusability and economies of scale. Having two very successful business lines integrated and synergistic seems like a massive plus, so I guess don't see the concern about the Starlink part of the business "propping up" the space launch part of the business.
Insiders who have locked up stocks but still want to sell could presumably just short the stock and take out a loan secured on the stock to get the financial effects of selling, without actually selling...
I wonder if that's what's happening with ~$1T of stocks currently locked up...
Of course whether or not a contract is or is not enforceable as such is also a matter of law. As I understand, this IPO was unique for a variety of reasons. The fact unique terms are promulgated in a contract does not mean (at least in saner times) that they are automatically immune to regulatory scrutiny.
If anyone knows of a broker who will let you withdraw the proceeds (cash) of a short sale, I will buy the name of the broker off you. I'll also let you know why I would pay for this (although you may already know anyway, hah).
I spent a week researching this talking to fidelity, schwab, IBKR, and Robinhood, none would allow it.
Why would anyone let you do that? What's their incentive? I assume you're offering something as security for that money (shares?) but why would people complicate an already risky proposition further or go into the money lending business that they're not in?
Against corporate policy, it's against the law only if they trade on material non public information.
Once the lockup expire they'll be able to trade (sometimes there's trading window but some tech company don't have any for lower level employees), and they'll still be insiders.
Someone who bought and expected to make a profit, but reached a point where they hit their stop loss or just wanted to get out the trade at any cost and couldn’t bear to wait longer. Quite possible a redditor who frequents r/wallstreetbets and YOLOed in.
They're not really making any money when they close out their short position. The money came when they first opened the short position and sold the shares. When they close they just lock in how much they're going to net off the position.
I kind of get it but it's the only point when money enters the books directly from the short sale and after that they're free to do whatever they want with it.
When you own stock at a broker in a margin account, you may sign an agreement to allow the broker to lend out your stock to someone else. For lending your stock, you are entitled to a stock-borrow fee which usually is quite small say 0.25%, and paid by the borrower (short-seller). The borrower then sells the stock to someone else. At a later point, the short seller closes their position by buying it back, and returning it to you. This is roughly the mechanics of it. So, to answer your question, the short seller makes money from folks who buy high and sell low. In this specific example, the stock-borrow fee say was 5% because, the float is still low, and if the short seller borrowed at $165 after the IPO and sold it, and then bought it back at $135 and closed their position, they made money from folks who bought at $165 and sold at $135.
But to sell the calls, you should own the stock first. Puts can be bought w/o owning the stock. Granted, the put buyer pays the premium, so you don’t get guaranteed money in your pocket like you would selling calls.
You’re right, but the keyword in my post was “should”. If you have to look up “short selling” in the dictionary (as in OP’s case), naked options aren’t on the menu.
I wouldn't quite go that far. The fact that markets can remain irrational longer than participants can remain solvent means that participants with deeper pockets have an inherent advantage, even if they have less information. How quickly a random walk will take you to zero depends on how far above the baseline you start.
If I inherit a billion dollars tomorrow, I will have zero additional information and be no more sophisticated than I am today. But I will have deeper pockets than any retail investor and will be able to withstand market irrationality longer than them.
But we aren’t talking probability. Your claim was that deeper pockets means you are more sophisticated. That simply isn’t true. The inheritance argument is just one example to show why it isn’t. People make large amounts of money all the time in one field or another, but that doesn’t make them sophisticated investors.
When you short a stock, you borrow shares from someone who is holding that stock and their broker gets money for lending the shares and sometimes the holder of the shares lent out gets money. You sell the shares, probably to a market maker. The cash is credited to your account and held as collateral.
Sometime later, the stock has fallen and you decide to close the position. You buy back the shares with the borrowed money probably from a market maker and close your position. You give the shares you borrowed back to the lender. Your net profit is sell_price - buy_price - borrow_fees, anything left is your profit.
Stocks are not zero sum like options or futures, they also have no expiration date (unlike derivatives), it’s possible a short seller sold shares to someone who later profited, and then it’s also possible to buy the shares from someone who profited, even if you made a profit on shorting the stock.
So the answer is “other market participants” who also may have profited on their buy or sell.
Alice holds SpaceX stock and believes it will rise. Bob believes the stock will fall. Alice and Bob reach an agreement for Alice to "lend" their SpaceX stock to Bob for a small "fee". Bob immediately sells the SpaceX stock at the current market value. After some time Bob will buy back the sold SpaceX stock at the current market value (hopefully less than Bob sold it for) and return the "borrowed" SpaceX stock to Alice thereby fulfilling the original contract.
It's also possible Bob's thesis on SpaceX could have been wrong and the shares could skyrocket. There's usually a provision in the contract for Alice to recall the shares she lent to Bob. In this case, Bob would be forced to buy SpaceX stock at the current market value and likely lose money on the overall trade.
To answer your specific question, "Who do you make money from?" It's actually not clear. Bob selling-high and buying-low doesn't necessarily mean whom Bob sells-to and whom he buys-from are on losing sides of the trade despite Bob making a profit. E.g. the buyer of Bob's short-sell could write calls and the stock could close pass the strike on expiration and turn a small profit as well.
It’s also not always the case that Alice is the loser. If SpaceX stock jumps up again after the position closes, then Alice is making money and both parties are winners.
But then Charlie, who buys Alice's shares pays. Someone holds the bag (makes the loss) eventually.
The money being made from SpaceX is money that Musk, or whoever, engineered to be lost from every pension fund that invests in Nasdaq-100; and the Nasdaq appear to have been entirely complicit, changing the rules to make it happen.
I mean Trump stole in the traditional way, using insider dealing, and going to war to manipulate markets. I guess Musk had to one-up him by getting an index itself to forcibly extract money from investors to give to him.
Not sure what his play is at this point, he can't be shorting his own stock, can he?
you borrow shares from a permabull and immediately sell them to whatever is buying
all you owe is the number of shares you sold, the original owner doesnt care what happened as long as they get identical ones back eventually. In the meantime, you pay interest on the initial value of what you borrowed and sold
You just sit on the cash
later when the shares are cheaper, you buy shares on the open market and give them back to the person you borrowed from
whatever cash is leftover from rebuying is your profit
3) rebuy it at the lower price (assuming you're right)
4) give it back to whomever you borrowed it from plus a consideration for letting you hold what's theirs for a bit
Whatever's left after you return the stock and pay the interest is your profit, which comes from the people who bought it from you in step 2. If you're wrong, and the price goes up, you have to replace the stock you borrowed at a higher price than you got for it and that's your loss (which could potentially be infinite, as opposed to long positions where you can only lose what you initially invested)
Keep in mind that unlike purchasing a stock where the most amount of money you can lose is the amount of money you spend buying the stock (assuming you didn't buy it on margin), if you directly short a stock, there's technically no limit to the amount of money you could lose. If a stock goes up 1000% after you short it, then you could lose far more money than you put into it.
It seems like a prudent warning in a thread explaining the very basics of short selling
Also worth mentioning you might be on the hook to buy it back at any time; after all, the person you borrowed it from may themselves wish to sell it. If widespread, this is the basis of "short squeezes" (e.g. of GameStop fame/infamy), if a lot of short sellers are trying to buy it back at the same time
Hopefully you have a limit order in place. You can also do more complicated hedges with options which might cost a little bit more depending on the spread but you can guarantee your hedges.
Not if you use options. Let’s say you short a stock that is priced at $100 and you want to limit your upside risk. You can buy a call option that gives you the right but not the obligation to purchase a stock at a specific price.
One call option in the US equity market gives you the option to purchase 100 shares of the underlying stock at the strike price.
Let’s say you want to limit the downside (upside since we’re short) risk of your short position and you’ve sold 100 shares short at $100.
You can buy a call option with with a strike price of $110 that gives you the option to buy 100 shares of stock at $110 a share, which limits your upside risk to $1000 plus the cost of the option, which let’s say in this case it expires in 90 days and costs $300 or $3/share.
If 90 days pass and the stock a trading at $120/share, you will have an open short position showing a loss of $2000, but you can ‘exercise’ the call option to purchase 100 shares at $110/share which you return to the person you borrowed them from and closes out your short position with a $1000 loss, for a total loss of -$1300, including the $300 the option costs.
If it is trading at $80 a share after 90 days, you buy back the shares at $80 each and return them, closing out your short position with a $2000 gain, for a total gain of $1700 after subtracting the $300 cost of the option, which expires with a vale of $0 since the share price is under the strike price of the option.
You can hedge a long position with put options, it’s just the inverse of what I described. If you buy 100 shares of stock at $100/share while simultaneously buying a $100 strike put option, your downside risk is limited to the cost of the put option. If the put costs $500 (or $5/share) that is all you can ever lose as long as you exercise the put option to sell the stock for $100/share if the stock price is below $100 when the option expires.
They're selling a borrowed stock, so any buyer on the market when you open the short position is where the money comes from. Short sellers get the money immediately and then pay fees to the people they borrowed from until they close the short position.
You essentially purchase a share into the stock from a random person and sell it immediately on the market at the current price with a promise to sell it future value in the future.
You don't actually take the money right away but a broker holds it for you.
Say Acme is worth 100$ today and you think it'll go down to 80$ in a week. You give the broker a small betting fee. So you give him 101$, he makes the purchase and holds the "position" for you.
During that week the price could do 2 things.
The Good Scenario: Price goes down to 80$. Broker buys the stock at 80$ and pockets a nice shiny 1$. You pocket 20$.
The Bad Scenario: Price goes up to 120$. Broker buys the stock at 120$ and pockets a nice shiny 1$. You owe broker 21$.
I say 1$ but it's actually more complicated than that. Some brokers allow you to do short positions only if you have other stock with them as collateral which they would sell to pay for whatever loss you might have. Shorting is a risky business because shares could go up to infinity and you could lose everything with these positions.
When people say they're "long on this stock" means they think it'll go up in price. "short on this stock" means they think it'll godown in price. It's lingo they love to use.
So the people you make it from are from people betting the opposite as you. Another person could make the opposite bet as you and end up losing their money that you pocket.
as in, you give back _a_ share not the same share.
So you buy a bunch of shares at x price, you agree to hand them back in n days time.
You make money by selling the shares immediately and then you buy shares later at a lower price, then when you hand back the shares, the profit is the difference between ho much you sold them for, and how much you bought them back again.
The risk is, you _have_ to give the shares back usually at a fixed point in time. So if the price rises, you have to pay the difference. (there is normally a fee as well, to borrow the shares.)
When you open a short position you borrow shares from your broker's other customers. Your broker then sells those shares on the exchange. When you close your short position, your broker buys shares in that same stock from the exchange at the current price. So the people losing money are the people who bought when the market was high and sold when it was low, as always.
There are two big issues with shorting a stock. One, your downside is infinite, whereas your upside is only the size of your position. If you short a medical stock worth ten cents and it zooms up to $1000 because the company discovers a cure for cancer, that's going to cost you $999.90 for every share you shorted at ten cents. If the company goes bankrupt instead, you make... ten cents for every share. If you get unlucky a single short position will wipe out all the money you made or will make shorting stocks for the next three generations.
The second problem is you don't completely control your position. If you buy a stock to hold, it's yours until you decide to sell. But when you short a stock and enough the people at your brokerage holding shares in a company you shorted decide to sell, your broker will summarily close your position at the current market price because there aren't enough remaining shares for you to keep borrowing. That can be very frustrating if the stock is at a temporary peak, especially if it proceeds to go down to a price for which you would have closed at a profit.
EDIT:
I suppose I should add a third problem to the list. If the cost of your short goes beyond a certain percentage of your account your broker will close your position to protect himself and his other customers. That usually happens if the stock is going up quickly. When your broker closes your position, he, along with all the other brokers closing short positions, needs to buy stock, which creates a positive feedback loop. That's called a "short squeeze". You can end up with prices shooting up to ridiculous levels because people have no choice but to buy.
I like Elon so much because of one reason: his multi trillion business adds completely new values without taking a single cent away from small retailers and owners, as new big corps do through various legit and not so ways. In contrast, Bezos has closed innumerable stores and every tech giant killed competition in online services. Name it socialism for the poor, but I don't care about his success as long as it doesn't interfere with other's business.
His EV was successful, his social media/AI OK but his space data center will fail and from now on he sells hype, a very fancy, trendy, sexy -name it- and expensive hype. Laws of physics don't allow it to be viable. We have a joke that originally applied to politicians and now to him: you can fool one for a long time, you can fool many for a short time, but you can't fool many for a long time.
Is disregarding laws, defrauding shareholders, and corruptly buying government contracts - as just a few examples - a 'market economy'? Is there a market for those government contracts, other than the market for the president's favor?
Interesting as some very prominent short sellers had publicly indicated they were not going to attempt this given the stock's "meme" potential and the "cult of Elon". Seems to have happened anyway. Good for those short sellers that committed. It's easy to speculate. Actually risking the bet when the market has a history of being highly irrational when it comes to Elon is another thing entirely. And the insiders haven't even been allowed to offload yet...
Also, highly related with significant discussion in the past 2 days:
https://news.ycombinator.com/item?id=48933344 - "SpaceX stock erases all its gains and slides below IPO price in intraday trading" - latimes.com | 306 points | 1 day ago | 281 comments
It's not created out of no where. It's traders saying that the stock is over priced and putting their money where their mouth is and taking on a big risk if they're wrong. They're extracting this money from folks that are putting upwards pressure on the stock saying it should be worth more. They're helping price the stock more efficiency and reducing index trader's expose to an overpriced stock e.g. retirement funds.
$9 Billion was not created, just exchanged, with some intermediary institutions and people making money for facilitating the transactions.
It's actually more like 1 trillion of value was "lost" when the stock dropped, and $9 billion was gained by some (and equivalently lost from others) for being right about the stock dropping.
Stock dropping is not literally a loss of any underlying good. It is a "assessment of how valuable something is". So when we say "omg we lost $1t in value" is not quite right. It's "we (everyone betting in the stock market) now collectively understand the value of this thing (company in this case) to be $1t less than assumed previously"
In this case, massive swings in value mean that the assessed value of a thing is very uncertain. I'd say this is extremely true for spacex, where in theory many people think it could be worth a fortune, or nothing, and no one can ever know the "true" value.
This is because there is not such thing as "absolute value" in the real world. And when it comes to things like stocks, "value" is just "hypothesized current value", which is a whole bunch of things combined: long term value of company, plus short term expected movement, even things like "who wants to own more of this this in the next few milliseconds", make up what a thing is estimated to be worth right now.
Assuming the stock market is some oracle of absolute value will make the world look insane. Seeing it as estimated value at one point in time in a very uncertain world where nothing has "true" value and all value is just relations between people and the things they want and the things they own and can exchange, is much closer to reality.
It really is not from nothing. Someone just overpaid by 9 billion for bunch of stock certificate... Not exactly common scenario in other places but could happen on smaller scale.
I completely understood the idea of Starlink and expected that it would be successful and useful, which it is. I've worked in data centers for decades now, and I am incredibly skeptical of the "data centers in space" sales pitch. It seems like an actual scam.
Data centers submerged in the ocean or placed in the desert seem much more promising. But I have only an enthusiast's understanding of rockets and physics, so I'm genuinely open-minded to the possibility.
Is there anyone credible who thinks this is a plausible pathway for SpaceX to make huge amounts of profit?
Repairability and depreciation are the main problems. A earth data center can be repaired, depreciated, and recycled at EoL recovering some of the costs. SpaceX datacenters are a total write off from the moment they are launched.
That's actually not a concern I'd have, because hardware that has been sufficiently tested and burned in tends not to fail for a very long time.
I've done builds that ran for 5+ years with virtually no physical attention, just continual degradation as hardware is taken out of service. There's also not much money to recover from 5+ year-old hardware.
I used to run AI inference GPU servers in road vehicles, which is probably an even harsher environment than a single rocket launch, and the vibration problems are real but solvable.
uhh no I dont think the road vehicle is harsher than a rocket launch
The rocket's payload most likely has higher peak vibration but only for a few minutes, and just one time. The road vehicle's payload is shocked by every pot hole and speed bump, for years.
GPUs depreciate super fast. It might last 5-7 years but it's already outdated at 2-3
Also space has more radiation
5 years is a Starlink's typical lifetime. Data center satellite lifetimes will probably be shorter. Demise sooner, replace more often. GPUs get more energy efficient every year and leaving the slower, hungrier chips up there much longer than 3 years seems wasteful given the cheap cost of launch.
I think this could be done at an interesting scale even on Falcon 9 alone. If Starship does even 20% of its early design goals, it'll beat Falcon 9 and we could see orbital servers being demised and replaced every 3 years, maybe even 2, for ones with abnormally high failure rates.
Now, whether or not this will all make money in the end has a lot to do with what's going on down here on terra firma and how long it takes to get useful capacity into orbit.
(It's taken 7 years to get Starlink capacity enough for serving 10M customers. Verizon FiOS did 10M in 5 years. AT&T Fiber took 4-5 years to deploy to 10M. So, space isn't a lot slower than terrestrial.)
> space isn't a lot slower than terrestrial
But it depreciates faster. That fiber run is lasting for 50 years, not 5. You need 10x the installation capacity just to keep up.
Starlink rushed when they put the satellites in orbit, AT&T did the opposite. They did the bare minimum. So terrestrial was faster without really trying
The efficiency of the chips only matters if the orbit is full.
If the orbit isn't full, all they are is additional compute.
The Microsoft design of filling an airtight submersible structure with argon and dropping it to the bottom of the ocean floor is the alternative design - you’re not looking to do repairs but amortize the low cost of failures across the value you extract.
The biggest issue with space is not repairability but heat - when you’re in a vacuum the only way to disperse heat is through black body radiation and that’s horribly slow compared with normal mechanisms. It means you need giant physical structures whose sole job is to accept heat from the processing core and radiate it away and have so much more material that you can radiate it at the speed you generate. It’s a huge unsolved physics problem which is why everyone is skeptical.
It's so, so cheap to buy tap water and dump it on the heat exchange.
With well considered engineering it doesn't even need to be tap water. If you have a closed loop thermal conductor that interacts with the components themselves you can then use really trashy contaminated water that just needs to be clean enough not to actively erode the heat transfer mechanism. We have setups like this all the time that use condensed air via cooling towers or salt water immersed heat sinks to discharge energy - it's more expensive than tap water but it isn't technically complex. So if it ever becomes unpalatable (likely due to politics) to use tap water there are some readily available alternatives.
The big win of being in space is just a worse alternative to using an intermediary heat transfer medium.
It's the same reason we use single use plastics. No matter the politics the business decision is going to use the cheapest option available. I'm confident that all the hyperscalers could create datacenters that don't affect the local community basically in anyway. There's been data centers hidden in plain sight for decades. The demand drives it to the lowest common denominator
It’s not an unsolved physics problem. Every satellite in space has to deal with it and even the ISS deals with it by having massive radiator arrays that face perpendicular to the sun.
The problem with data centers in space is one of materials science and engineering: how to make radiators large enough and effective enough to cool it while also being economically feasible, both in terms of construction and getting them up there in the first place.
We can make a space data center right now. It would just be terrible and expensive.
I think it's not necessarily about being the cheapest option, but a more politically acceptable one. I don't think you're going to get people protesting a data center in space considering it won't be next to their house, won't use water, and won't lead to increased electricity rates. I could see companies paying a premium to keep the political heat associated with traditional data centers off their backs.
The physics problem regarding radiator arrays isn't unsolved, but it's not a problem that scales up gracefully. Small-scale radiators could get by via passive cooling, but large-scale radiators need active cooling, and now you need fluid, pipes, and pumps that all represent additional launch mass and points of failure (and the pumps are generating heat of their own, so now you need more radiators...).
Doesn't active cooling provide counterbalancing options to improve efficiency though? For example, use multi-stage heat pumps with different refrigerants so that you can make the hot side very hot and thereby need less mass for radiators.
Thermal dissipation scales quartically with T, that's about as graceful as you can get from a physics POV, very few things scale at that rate.
COTs GPUs throttle at about 90-100C but that's because they have plastic parts and solder that melts. Those are relatively easy to eliminate.
We haven't tried much to scale up operating temp.
Apple tried the damnedest at that during their intel era. Silicon gets exponentially leakier at higher temperatures, and that will outpace quadratic growth easily.
(Electronics that works at 200C do exist, but they're not gonna meet a modern smartphone's specs, let alone a datacenter)
So what’s the unsolved physics problem? Everything you’re describing are engineering challenges.
Nobody said space data centers are impossible, it’s just wasteful and ineffective.
Right, but nobody's sure just how wasteful. And at these scales small factors make or break things. That's why it's hard to predict who's bullshitting. A fairly small unforeseen factor here and there adds up to wild financial success or failure over the course of an entire project.
I think that's an incorrect way of looking at it. A small unforeseen factor is almost always going to be a negative factor, not an unforeseen benefit. Space is a hostile and unforgiving environment without an easy way to bring things back, fix stuff, and/or re-deploy. A small mistake on the engineering, planning and/or implementation is likely to sink the whole thing worse than the napkin math suggests is almost certain failure anyway. Similarly, there are few ways to "get it right" and many ways to fail.
The maximum heat rejection capacity of the ISS is 126Kw.
Musk’s proposal is to put 1 rack per satellite drawing 150kw using 110 m^2 of radiators (1/4th that of the ISS). The only way to do that is by running the satellite at 71-100C which is a problem for the chips to actually run.
So the open questions are: * can they actually dump the heat and can they have the racks running so hot for so long * is it economical to in one year replace all the capacity you launched 5 years ago (you save up to 0.5B in electricity costs over that time frame but that doesn’t seem like a lot for having to replace that much capacity buildup)? And given they’re running racks way hotter than has been validated on earth, will those chips end up lasting 5 years (including space radiation).
Pretending like it’s a solved problem is neat but I’m not saying sure it’ll be so easy.
Those temperatures aren't necessarily a problem for the chips (there are some minor design changes needed, so it's more a question of having enough volume to justify doing it). The real issue is that this is yet another thing you could do better on earth.
In other words, run fully lights-out datacentres that no humans will access during normal operation - this allows you create more extreme temperature gradients and to replace the atmosphere with CO2 (or even He2), both of which will make your cooling solution much more efficient as well as increasing rack density and perhaps even taking the place of a fire suppression system.
The reason that no-one's actually doing that at scale is that it's currently significantly more expensive than traditional datacentre designs. And yet, that's still much less expensive than boosting racks into space and then letting them burn up in the atmosphere five years later.
It’s as solved as FSD.
Wouldn't it be possible to use heat pumps, making radiators 100C or hotter while running GPUs much below that?
That's how space heat radiators already work. Which, by the way, add significant costs to both energy and weight for space-based data center. The problem is once you 'pump' the heat out is what happens next. With out conductive or convective heat transfer, all that is left is radiation of that heat. Which is the slow.
> It’s not an unsolved physics problem. Every satellite in space has to deal with it and even the ISS deals with it by having massive radiator arrays that face perpendicular to the sun.
The problem is not solved for something of this scale, I think its solvable, but no has done anything at the size these would have to be. And if the physics and engineering can be made to work, they are unlikely to be solved AND ALSO be economical.
It's classic type problem where the choices are:
- economical
- in-space
- big
Now pick two.
There is also the unsolved problem that the radiators would be absolutely massive in area. Making damage from flying objects, meteorites, space jump, close to 100% likely over any reasonable life span. Repairs would be expensive AF. Again economics is the driver of why this is dumb.
Right, a heat exchange is reusable though on earth and can be recycled across multiple SKUs and thus depreciates longer. In space similar to how you can’t repair you also can’t swap.
Isn't the problem also that because of radiation, processors in space either need to have larger feature sizes OR additional shielding / redundancy? Seems like a pretty high price to pay for slightly cheaper energy...
Ars had an article that cited some HPE testing on the international space station that said regular hardware is _probably_ fine up to about 5 years
Definitely not definitive but it's plausible current hardware could survive with minimal modification
hm but "fine" as in probably won't die?
my question was more whether the hardware would need extra redundancy or shielding in order to not have unacceptably high error rates
There's a radiation section in the article, I'll let you draw your own conclusions
https://arstechnica.com/space/2026/07/how-hard-is-it-to-buil...
SPCX is valued as an AI company; any and all issues you have with AI company valuations apply to to SPCX.
I too agree that SPCX’s space business is real and valuable, but it’s (almost completely) irrelevant here.
Because SpaceX bought xAI/Twitter.
All of the losses are from the xAI/Twitter side of the house. And Elon Musk needs a flimsy story so that no one sues him. It doesnt have to be a believable story, it just needs to be enough so that no lawyer cares to bring a case in Texas vs SpaceX and Elon for breach of fiduciary duty.
The story did its job. Elon offloaded the money losing Twitter/xAI out of his personal wealth and onto the public through SpaceX. Done and done. SpaceX is now an AI company (or contains one) and needs to perform as such.
-------
It's literally the same story as Tesla/Solar City. Make up bullshit about solar panel synergy with EVs and buy out his cousins failing company. Make it TSLA shareholders problem for figuring out how to make a profit from the failing company, it's no longer Kimball Musks concern since the buyout
No. It really is a scam. Everyone with understanding of the physics involved wrote so. Heat dissipation + radiation + launch cost make it a no-go.
Heat dissipation isn't as big a concern as it seems: the weight of the solar panels is significantly larger than that of the heatsinks you'd need per typical modern gpu
The cooling is not an issue for their current designs. Look at their AI1 Satellite specs. They clearly have the cooling figured out. The thing is that it's not a datacenter, it's a single rack. A single rack that weighs multiple tons.
You can figure out the weight of the thing based on the total power output, and "power to weight ratio" from SpaceX's own diagrams. Then look up how much it costs to launch per ton, and even look up what they are projecting it will cost with Starship. Even if they get costs down, it's still astronomical. I just can't figure out who would pay that much money to put a rack into space. There's no way the power savings are worth it. Unless you have some niche where you need your workload in space, I can't see the value at all.
It's not just the weight some outside groups have done the calculations and to dissipate the heat at the operating temperatures in the white paper without a heat pump to increase the radiator temp and thus efficiency requires a massive pump that would have to move nearly 69,000 kg of coolant per second continuously without fail.
> Is there anyone credible who thinks this is a plausible pathway for SpaceX to make huge amounts of profit?
Scott Manly (who I think is credible) has a video where he goes over the logistics of SpaceX's space based data centers. He seems to think its an idea worth pursuing, but its important to note that his expertise is space tech, and not business strategy.
Yeah, I have no doubt that it's possible to put GPU servers in space. The Starlink satellites are servers in space. The question is whether it's even remotely profitable to do this for AI training/inference servers.
The same way that xAI has compute on the ground and there's such demand that the compute exists so it will be sold. I think SpaceX can conceivably sell the space compute easily. This goes with the business strategy of Elon which is just sell services to himself. He sells rocket launches to himself with the excuse of creating a space datacenter. The same way he sells cybertrucks to spacex because the public won't buy them. I'm pretty confident it's definitely cheaper to put the compute in Texas, but might be viable enough to sell himself rocket launches and make his company worth more to leverage for more ventures. I'm not a business person I don't really get how it's all so valuable if the only demand is itself.
Training, no. Latency is too high.
Inference the latency becomes trivial.
Other things, I suspect latency is too high again.
They're going for an orbital height of 600–800 km, or about 2-3 light-milliseconds from Earth's surface. A lot of people think of satellites as being necessarily high-latency because of intuition drawn from satellites in geosynchronous orbit – but those are about 50x farther away from earth and have correspondingly longer ping times.
They don't go directly to the satellite but through ground stations and then bounce around on lasers between satellites. The latency is going to be worse than fiber
Let's just put it this way:
The ISS produces about 120 kilowatts of electricity.
An Nvidia Blackwell B200 GPU uses 1.2 kilowatts of electricity.
So, you would need a similar array of solar panels and radiators just to power 100 of them. You probably would need 2-3 launches for a satellite this big, and realistically, you would just make smaller satellites.
That's $4,000,000 worth of GPUs, A couple millon or more of RAM, SSDs, etc., a radiation-proof satellite housing to support all of that hardware, solar arrays, launch costs ($74M per Falcon launch), all for maintenance to be impossible and the hardware to become obsolete in a couple of years.
It's a delusion unless we invent some way to go to space for free.
SpaceX would be launching these on Starship, which has a much lower targeted launch cost.
For reasons already outlined, I have doubts about their math. Targeting $250/kg payload costs is ambitious for a rocket that has not yet successfully reached orbit or proven cost-effective.
Even if we do somehow succeed at affordably dumping tons of GPUs into orbit, what do we do about the Kessler Syndrome?
From first principles, does anyone know what the minimum costs are to put a rocket into space? There must be a minimum cost given that the rocket engines have to thrust until reaching escape velocity to get you to space.
I don't really get the obsolete argument.
The thing has two main parts. One, a bunch of solar panels, shielding and radiators. This the heavy / expensive to launch part, but should last for what, decades? Two, a bunch of GPUs/servers. These become obsolete, but so what? They're not that heavy, so every few years you send up another rocket and swap them out.
Launches are not $74M. That's retail pricing.
SpaceX's launch cost, the internal spend to put one Falcon 9 Starlink payload in orbit, with a return to launch site booster recovery, is about $15M.
If you're going to make such assertions, do the legwork to make sure your numerical claims aren't off by 500%.
The only way it makes sense is if you think the massive job losses due to AI will lead to people burning down datacenters on earth. An older spec'd and unmaintainable datacenter is worth way more than one in ashes.
Datacenters in Antarctica or deep ocean also fulfill that.
Richard Campbell did a great talk at NDC a month about about this - https://www.youtube.com/watch?v=eo7MEPgWGic
The ocean is worse than space from every perspective but cooling, radiation shielding, and cost/ease of installation. But that just highlights how bad of an idea space-based data centers are at this time.
> from every perspective but cooling, radiation shielding, and cost/ease of installation.
Oh is that all? Those are major data center concerns.
Don't forget the biggest one: an ocean-based system could be pulled up and serviced without the need for a human-rated rocket. Oh, and bandwidth/latency.
The ONLY benefit of space is that it doesn't require siting a major construction in a town full of angry residents, and it has abundant solar power. But given how much it costs to get the solar panels in orbit, that power sure ain't free.
Cooling is relatively easy, you just need radiators which are passive, and essentially reduce to a launch cost penalty. You are right that they can't be serviced, but that is missing the point of orbital data centers. The whole point is that you can build hundreds of thousands of these in a factory and launch them in a scalable manner. The power, cooling, etc. comes for "free". In the long run, as the cost of the chip, launches, etc. goes down, orbital data centers will scale better terrestrial ones.
As a side note, I don't understand why I keep seeing these wrong arguments on HN repeatedly. Like everything mentioned in this thread can easily be fact checked. Radiative cooling is solved, launch costs are going down, so power costs will pay themselves back very quickly, etc.
You can argue about specifics, like chips will get more sophisticated + power efficient and fabrication will be the true longterm bottleneck, or SMRs/fusion could reduce energy bottlenecks, but talking about cooling as if convective cooling is the only option is just nonsensical.
> Radiative cooling is solved.
This is emphatically not true at any scale in which this scheme makes sense. Be careful with including too many Musk boosters in your information diet.
"you just need radiators which are passive
"Just" is doing a lot of work there. SpaceX is planning to launch 100 GW of compute annually, that comes with ~ 2.5 square kilometers of radiator (assuming an optimistic 800K radiator temp and emissivity of 0.9, double sided)
Go for advanced carbon composites, you can do that with just 5,000 metrics tons or so of material. That's 34 starship launches just for the radiators. We haven't solved assembly, we haven't brought up power panels or core compute. Planned launch cadence that SpaceX hopes to reach end of this year: 12/year.
radiators about the same size and weight as solar panels will do the trick
there is already a h100 in orbit
1GW of compute is a lot in 2026. comparing 100GW of annual compute to SpaceX 2026 goals does not make sense
if Starship launch cost predictions are accurate, data centers in space will happen within 10 years
> The numbers are brutal. Starcloud’s own white paper estimates that a two-sided radiator held around 20°C would emit only about 633 watts per square meter, over 1,000 times slower than water cooling of AI chips on Earth. So, a puny 1-megawatt orbital data centre, 1,000 times smaller than the gigawatt scale of hyperscale data centres on Earth, would need about 1,600 square meters of radiator, an area roughly the size of a hockey rink.
1GW needs a pretty big area for radiation.
And in space your data centers is hard to defend against foreign actors
chips run way hotter than 20C, and radiative cooling scales to the fourth power of temperature. check the math
> Radiative cooling is solved,
By that logic, climate change is also solved, just built a giant radiator.
My back of the envelope maths:
Suns energy at ISS is about 1.4KW/m2 Solar panels about 35% efficient but let’s say 50% for fun
700w/m2, or about one H100 worth per sq metre (hey, I could run my own H100 off a roof top panel !!)
We want a small 70MW data centre - which is 100,000 times the size so 100,000 m2 or an array 316mx316m or 15 football pitches
Then as it’s energy in and energy out you need radiators on dark side of same size
The ISS is ~ 2000m2, so that’s fifty ISSes
I mean it’s physically possible. But the engineering, the space launch costs they are staggering. And the upside is … Im not sure
All the win seems to be is free sun energy, but a data centre in Texas or Nigeria just needs about twice the solar panels and some big ass batteries.
Im not costing that out but, honestly it seems like a marketing pitch or a really obscure need to put compute beyond the reach of governments.
> and essentially reduce to a launch cost penalty.
Are you arguing that all this is technically possible or something? The whole point is that the costs would dwarf the gains.
> You are right that they can't be serviced, but that is missing the point of orbital data centers.
Pointing out a downside of something isn't ever "missing the point".
> The whole point is that you can build hundreds of thousands of these in a factory
In an Earth-based factory, right? Am I to understand that we can't build hundreds of thousands of regular Earth-based datacenters in a factory?
> and launch them in a scalable manner.
Wanna bet that launching something to space will always be a few orders of magnitude more expensive than shipping it somewhere across the planet?
> The power, cooling, etc. comes for "free".
Unlike on Earth, where you pay for sunshine? Or is cooling "free" in space but not on Earth? Lol?
> In the long run, as the cost of the chip, launches, etc. goes down, orbital data centers will scale better terrestrial ones.
The costs of the chips will get lower in space than on Earth?
The costs of launches will, again, become cheaper than terrestial transport?
> As a side note, I don't understand why I keep seeing these wrong arguments on HN repeatedly. Like everything mentioned in this thread can easily be fact checked. Radiative cooling is solved, launch costs are going down, so power costs will pay themselves back very quickly, etc.
The question isn't whether this is physically possible, but why you'd want to do it instead of an Earth-based datacenter. It's all downsides basically.
The whole point is that you can build hundreds of thousands of these in a factory and launch them in a scalable manner. The power, cooling, etc. comes for "free". In the long run, as the cost of the chip, launches, etc. goes down, orbital data centers will scale better terrestrial ones.
How is this not true for terrestrial/ocean deployment as well? It will ALWAYS be easier to shed heat on Earth than it will be in orbit. Convection, conduction, radiation... in space, you only get the last one.
So take the same unattended hardware you were going to launch into orbit, and put it on a container ship instead. You'll be better off in every way. If it makes you feel better, lie and tell everyone that you launched it into space. Building orbit-capable data centers might make sense, but actually launching them never will.
The ocean poses two major threats to any construction - water pressure and corrosion.
> Data centers submerged in the ocean
Sooner or later it's going to leak.
I think corrosion is the big issue here. perhaps that is where the leak comes from.
Water under high pressure will find any weakness. (For example, the places where the wires go in and out.)
Corrosion indeed is always a problem.
Not if the datacenter itself is operating at the same internal pressure as the water around it
Interesting point. But also consider:
1. pressure may compromise the electronics
2. water pressure increases very rapidly with depth. You'd have to pressurize the data center with a liquid with the same density
3. even a small differential will produce leaks
To me it feels like a way for Musk to justify directing AI money towards his first true love, which was space.
The only barely sane rationale that I’ve heard for wanting datacenters in space is that they would give space-x low latency signal processing capacity it would need to turn Starlink into a real time Passive SAR constellation.
Too bad the things that really matter don't make "sense" (mostly people talk about economic sense when talking about this).
Increasing the temperature of the earth , and water usage are two things that using Space data centers will excel vs the alternatives. However society has just not been able to price that directly into these huge buildings.
Funny that I agree with EM idea on this, but the reasons are so far away.
For something to be a viable product it has to solve a problem. What problems are data centers in space solving? I can't think of a single one.
No noise pollution or actual pollution from gas turbines. No using water in the desert. No angry communities.
None of these are problems if you put data centers far away from population. No one does that right now because it's a lot more expensive to set up and maintain, because you have to set up all the infrastructure from scratch. You know what's 10000x more expensive than that? Setting up the infrastructure in space.
Facebook put a data center up in Luleå, Sweden, which is in the north, far from cities, so it's not unheard of.
Their datacenter at Datavägen 15 is about 100 meters/yards away from residential buildings, not a great example.
Like much new technology, it evades regulations. Hyperscalers are getting crushed by popular backlash and resource constraints. And like typically nerds they'd rather dream up a massively overengineered solution rather than face their responsibility as human beings.
> have only an enthusiast's understanding of rockets and physics, so I'm genuinely open-minded to the possibility.
I used to be open minded too but lost all sense of credibility in anything Elon Musk touches when he called nanotechnology a pseudoscience. Since then it's only been downhill. One does not have to be subject matter expert, even China is vertically landing rockets now.
Paul Graham has been positive about the YC startup doing data centers in space https://x.com/paulg/status/2009686627506065779
For the idea to make sense I think you have to project forward some years to launches being cheaper and compute demand outrunning the energy grid.
What makes you think Paul Graham knows what he's talking about re: space, data centers, and the logistics of lifting data centers into space and the ongoing maintenance of them. I don't understand the deification his thoughts receive around here.
Ok, he's not a space expert but seems quite sensible and wrote that after hanging out with the Starcloud guy who already has a GPU in space and an FCC application for launching 88,000 satellites with more. Presumably the Starcloud guy knows something about such logistics.
SpaceX has accomplished spectacular things in reusable launch vehicles and space-based networking. It will soon restore the heavy launch capability that the US lost when it retired the Saturn V in the 1970s, but in an affordable and sustainable manner. SpaceX is almost single-handedly keeping the US ahead in space.
I'm bullish on SpaceX as a company in terms of technical accomplishment.
Buying SPCX would make sense at about 1/4 of its IPO price. The IPO price and subsequent rise was inflated via hype and artificial supply restriction, i.e. publicly selling just 4% of the total company ownership.
> It will soon restore the heavy launch capability
Maybe!
>but in an affordable
Maaybe!
>and sustainable
Maaaaaaybe. Gotta start gigantic scale methane production from solar or whatever first.
We sometimes get in the habit of thinking Elon, who is a Nazi, accomplishes everything he sets out to do, since he was so incredibly effective at getting EVs going and getting the Falcon 9 going. But he has plenty of misses too, like ruining the foundations of democracy, being over 12 years late and counting with self driving cars, hyperloop, the cybertruck, etc.
> Elon, who is a Nazi
Not much point to read any further.
way to out yourself, my dude
Doesn't Musk want people to think of him that way? He explicitly advocates for white nationalism and did the Nazi salutes on a very big stage (he's smart enough to know what it would look like).
Indeed, Hacker News is going the way of Reddit, dominated by the unknowledgable dealing only in tropes, memes, and stereotypes.
Yes but... All the "value" in SpaceX is in AI. Actual space launches are a tiny part of the portfolio. Talking about launch capability is almost off topic when taking about SpaceX valuation.
When I checked, Starlink seemed somewhat valuable but highly questionable addressable market (limited growth)
Starlink is the only part that is making a profit.
Not sure why anybody would downvote this, as this is exactly what the company claimed in their filing. Less than 10% was space launch and starlink. The rest was all AI.
>but in an affordable and sustainable manner
Affordable is a bit questionable. It's heavily subsidized by Starlink and government.
Not completely clear what happens to price if SpaceX doesn't keep launch demand propped up with their own business.
SpaceX bids on competitive government space launch contracts and wins most of them because they're more reliable and often half the price of the competitors, or less. Government is now essentially subsidizing SpaceX's space launch competitors, giving them more expensive contracts on which they often fail to deliver, only because the government doesn't want to be dependent on a single space launch contractor. So complaints government subsidies seem misdirected.
Many companies have tried to launch LEO space-based communications constellations, starting with Iridium 30 years ago. Starlink is first and only so far to succeed at scale and provide truly global internet access. Indeed having the space launch and communications business joint has helped both of them. Indeed that helped SpaceX drive down launch costs, given their reusability and economies of scale. Having two very successful business lines integrated and synergistic seems like a massive plus, so I guess don't see the concern about the Starlink part of the business "propping up" the space launch part of the business.
Insiders who have locked up stocks but still want to sell could presumably just short the stock and take out a loan secured on the stock to get the financial effects of selling, without actually selling...
I wonder if that's what's happening with ~$1T of stocks currently locked up...
That’s almost always prohibited.
Given the current administration’s recent market behavior I would not be shocked if people got away with exactly what OP described.
It's often prohibited by contract, not just law, so what the administration thinks is only part of the story.
Of course whether or not a contract is or is not enforceable as such is also a matter of law. As I understand, this IPO was unique for a variety of reasons. The fact unique terms are promulgated in a contract does not mean (at least in saner times) that they are automatically immune to regulatory scrutiny.
You don't "short the stock" by taking a loan secured by it.
That would be a crime.
https://en.wikipedia.org/wiki/List_of_people_granted_executi...
What happens if you get margin called in this scenario?
If anyone knows of a broker who will let you withdraw the proceeds (cash) of a short sale, I will buy the name of the broker off you. I'll also let you know why I would pay for this (although you may already know anyway, hah).
I spent a week researching this talking to fidelity, schwab, IBKR, and Robinhood, none would allow it.
I asked an adjacent question to a broker friend who flatly replied: "Not interested in being served a Wells Notice."
Which more or less answered the question for me, even if he was being a bit hyperbolic.
Why would anyone let you do that? What's their incentive? I assume you're offering something as security for that money (shares?) but why would people complicate an already risky proposition further or go into the money lending business that they're not in?
Insiders aren't allowed to short a stock. It's against the law.
Against corporate policy, it's against the law only if they trade on material non public information.
Once the lockup expire they'll be able to trade (sometimes there's trading window but some tech company don't have any for lower level employees), and they'll still be insiders.
If you make money shorting a stock, who do you make money from?
The person you sold it to after borrowing it, who paid for it at the elevated price.
Someone who bought and expected to make a profit, but reached a point where they hit their stop loss or just wanted to get out the trade at any cost and couldn’t bear to wait longer. Quite possible a redditor who frequents r/wallstreetbets and YOLOed in.
They're not really making any money when they close out their short position. The money came when they first opened the short position and sold the shares. When they close they just lock in how much they're going to net off the position.
I don't think it makes sense to say you "made money" when you still have an open-ended liability active.
I kind of get it but it's the only point when money enters the books directly from the short sale and after that they're free to do whatever they want with it.
Whether you buy or sell in the market you’re almost certainly trading with a market maker, not some other individual.
The buyer of your short sale would lose money to you. Remember options are contracts between two parties.
Shorters are selling to willing buyers at the current fair market price. So that they may survive.
It's still just "buy low, sell high". You make the money from the same folks you normally would, only the order of when you buy and sell is swapped.
> who do you make money from?
When you own stock at a broker in a margin account, you may sign an agreement to allow the broker to lend out your stock to someone else. For lending your stock, you are entitled to a stock-borrow fee which usually is quite small say 0.25%, and paid by the borrower (short-seller). The borrower then sells the stock to someone else. At a later point, the short seller closes their position by buying it back, and returning it to you. This is roughly the mechanics of it. So, to answer your question, the short seller makes money from folks who buy high and sell low. In this specific example, the stock-borrow fee say was 5% because, the float is still low, and if the short seller borrowed at $165 after the IPO and sold it, and then bought it back at $135 and closed their position, they made money from folks who bought at $165 and sold at $135.
You can also sell in the money call options in anticipation the stock will go down. You keep the premium the call buyer pays.
But to sell the calls, you should own the stock first. Puts can be bought w/o owning the stock. Granted, the put buyer pays the premium, so you don’t get guaranteed money in your pocket like you would selling calls.
I think you're referring to covered calls, but you can sell naked calls as well, meaning without owning the underlying.
You’re right, but the keyword in my post was “should”. If you have to look up “short selling” in the dictionary (as in OP’s case), naked options aren’t on the menu.
The market just redistributes wealth from less informed players to more sophisticated/informed ones.
I wouldn't quite go that far. The fact that markets can remain irrational longer than participants can remain solvent means that participants with deeper pockets have an inherent advantage, even if they have less information. How quickly a random walk will take you to zero depends on how far above the baseline you start.
> participants with deeper pockets have an inherent advantage
I do think they have deeper pockets because they are more informed/sophisticated players, so the whole argument is kind of circular.
Not sure if you've seen the price of silver, but those spoons are going for a pretty penny these days.
If I inherit a billion dollars tomorrow, I will have zero additional information and be no more sophisticated than I am today. But I will have deeper pockets than any retail investor and will be able to withstand market irrationality longer than them.
If you are completely ignorant about markets, deep pocketed and inclined to risk, chances are you are going to lose it all.
Indeed. But that doesn't invalidate the point that deeper-pockets is not equivalent to a more sophisticated or better investor.
Someone who inherits a fortune and trades it on the stock market is an extremely unlikely circumstance.
But we aren’t talking probability. Your claim was that deeper pockets means you are more sophisticated. That simply isn’t true. The inheritance argument is just one example to show why it isn’t. People make large amounts of money all the time in one field or another, but that doesn’t make them sophisticated investors.
> Your claim was that deeper pockets means you are more sophisticated.
Completely wrong, my claim is that people who have deeper pockets they do so for a reason.
And I gave a reason why that isn't true. There are many, many others.
When you short a stock, you borrow shares from someone who is holding that stock and their broker gets money for lending the shares and sometimes the holder of the shares lent out gets money. You sell the shares, probably to a market maker. The cash is credited to your account and held as collateral.
Sometime later, the stock has fallen and you decide to close the position. You buy back the shares with the borrowed money probably from a market maker and close your position. You give the shares you borrowed back to the lender. Your net profit is sell_price - buy_price - borrow_fees, anything left is your profit.
Stocks are not zero sum like options or futures, they also have no expiration date (unlike derivatives), it’s possible a short seller sold shares to someone who later profited, and then it’s also possible to buy the shares from someone who profited, even if you made a profit on shorting the stock.
So the answer is “other market participants” who also may have profited on their buy or sell.
Alice holds SpaceX stock and believes it will rise. Bob believes the stock will fall. Alice and Bob reach an agreement for Alice to "lend" their SpaceX stock to Bob for a small "fee". Bob immediately sells the SpaceX stock at the current market value. After some time Bob will buy back the sold SpaceX stock at the current market value (hopefully less than Bob sold it for) and return the "borrowed" SpaceX stock to Alice thereby fulfilling the original contract.
It's also possible Bob's thesis on SpaceX could have been wrong and the shares could skyrocket. There's usually a provision in the contract for Alice to recall the shares she lent to Bob. In this case, Bob would be forced to buy SpaceX stock at the current market value and likely lose money on the overall trade.
To answer your specific question, "Who do you make money from?" It's actually not clear. Bob selling-high and buying-low doesn't necessarily mean whom Bob sells-to and whom he buys-from are on losing sides of the trade despite Bob making a profit. E.g. the buyer of Bob's short-sell could write calls and the stock could close pass the strike on expiration and turn a small profit as well.
It’s also not always the case that Alice is the loser. If SpaceX stock jumps up again after the position closes, then Alice is making money and both parties are winners.
But then Charlie, who buys Alice's shares pays. Someone holds the bag (makes the loss) eventually.
The money being made from SpaceX is money that Musk, or whoever, engineered to be lost from every pension fund that invests in Nasdaq-100; and the Nasdaq appear to have been entirely complicit, changing the rules to make it happen.
I mean Trump stole in the traditional way, using insider dealing, and going to war to manipulate markets. I guess Musk had to one-up him by getting an index itself to forcibly extract money from investors to give to him.
Not sure what his play is at this point, he can't be shorting his own stock, can he?
Well I assume Musk will just say big things publicly and manipulate the stock back to all time high and above, like he did/does with Tesla.
you borrow shares from a permabull and immediately sell them to whatever is buying
all you owe is the number of shares you sold, the original owner doesnt care what happened as long as they get identical ones back eventually. In the meantime, you pay interest on the initial value of what you borrowed and sold
You just sit on the cash
later when the shares are cheaper, you buy shares on the open market and give them back to the person you borrowed from
whatever cash is leftover from rebuying is your profit
1) borrow the stock
2) sell it
3) rebuy it at the lower price (assuming you're right)
4) give it back to whomever you borrowed it from plus a consideration for letting you hold what's theirs for a bit
Whatever's left after you return the stock and pay the interest is your profit, which comes from the people who bought it from you in step 2. If you're wrong, and the price goes up, you have to replace the stock you borrowed at a higher price than you got for it and that's your loss (which could potentially be infinite, as opposed to long positions where you can only lose what you initially invested)
Keep in mind that unlike purchasing a stock where the most amount of money you can lose is the amount of money you spend buying the stock (assuming you didn't buy it on margin), if you directly short a stock, there's technically no limit to the amount of money you could lose. If a stock goes up 1000% after you short it, then you could lose far more money than you put into it.
You can always hedge your shorts and limit your downside. It’s not a huge issue unless you have absolutely no idea what you are doing.
It seems like a prudent warning in a thread explaining the very basics of short selling
Also worth mentioning you might be on the hook to buy it back at any time; after all, the person you borrowed it from may themselves wish to sell it. If widespread, this is the basis of "short squeezes" (e.g. of GameStop fame/infamy), if a lot of short sellers are trying to buy it back at the same time
Does market closing and not trading continuously affects this?
If market opens at significantly different price, you may be forced to liquidate and loose more than expected.
Hopefully you have a limit order in place. You can also do more complicated hedges with options which might cost a little bit more depending on the spread but you can guarantee your hedges.
Not if you use options. Let’s say you short a stock that is priced at $100 and you want to limit your upside risk. You can buy a call option that gives you the right but not the obligation to purchase a stock at a specific price.
One call option in the US equity market gives you the option to purchase 100 shares of the underlying stock at the strike price.
Let’s say you want to limit the downside (upside since we’re short) risk of your short position and you’ve sold 100 shares short at $100.
You can buy a call option with with a strike price of $110 that gives you the option to buy 100 shares of stock at $110 a share, which limits your upside risk to $1000 plus the cost of the option, which let’s say in this case it expires in 90 days and costs $300 or $3/share.
If 90 days pass and the stock a trading at $120/share, you will have an open short position showing a loss of $2000, but you can ‘exercise’ the call option to purchase 100 shares at $110/share which you return to the person you borrowed them from and closes out your short position with a $1000 loss, for a total loss of -$1300, including the $300 the option costs.
If it is trading at $80 a share after 90 days, you buy back the shares at $80 each and return them, closing out your short position with a $2000 gain, for a total gain of $1700 after subtracting the $300 cost of the option, which expires with a vale of $0 since the share price is under the strike price of the option.
You can hedge a long position with put options, it’s just the inverse of what I described. If you buy 100 shares of stock at $100/share while simultaneously buying a $100 strike put option, your downside risk is limited to the cost of the put option. If the put costs $500 (or $5/share) that is all you can ever lose as long as you exercise the put option to sell the stock for $100/share if the stock price is below $100 when the option expires.
Spoken like someone who's never actually done it. Hedging to limit max loss is extremely expensive.
I have done it before. How is it expensive, most brokers offer commission free trades now. It’s just another long order.
You have to pay money to buy those options
You can just have a limit order for the stock.
That isn't hedging, that's a stop loss.
Which is the type of order you meant, not a limit order.
From people who bought the stock when you started to short.
Normal sale - buy low, sell high, pocket the difference
Short selling - sell high, buy low, pocket the difference.
The money is coming from the same place in both cases - other people in the market.
You're missing the cost to borrow on the stock which is a daily fee to continue borrowing the stock.
They're selling a borrowed stock, so any buyer on the market when you open the short position is where the money comes from. Short sellers get the money immediately and then pay fees to the people they borrowed from until they close the short position.
Exactly the same people you'd make money from if you sold the stock high and bought it low (ending up with the same amount of the stock)
You essentially purchase a share into the stock from a random person and sell it immediately on the market at the current price with a promise to sell it future value in the future.
You don't actually take the money right away but a broker holds it for you.
Say Acme is worth 100$ today and you think it'll go down to 80$ in a week. You give the broker a small betting fee. So you give him 101$, he makes the purchase and holds the "position" for you.
During that week the price could do 2 things.
The Good Scenario: Price goes down to 80$. Broker buys the stock at 80$ and pockets a nice shiny 1$. You pocket 20$.
The Bad Scenario: Price goes up to 120$. Broker buys the stock at 120$ and pockets a nice shiny 1$. You owe broker 21$.
I say 1$ but it's actually more complicated than that. Some brokers allow you to do short positions only if you have other stock with them as collateral which they would sell to pay for whatever loss you might have. Shorting is a risky business because shares could go up to infinity and you could lose everything with these positions.
When people say they're "long on this stock" means they think it'll go up in price. "short on this stock" means they think it'll godown in price. It's lingo they love to use.
So the people you make it from are from people betting the opposite as you. Another person could make the opposite bet as you and end up losing their money that you pocket.
The key word is "fungibility"
as in, you give back _a_ share not the same share.
So you buy a bunch of shares at x price, you agree to hand them back in n days time.
You make money by selling the shares immediately and then you buy shares later at a lower price, then when you hand back the shares, the profit is the difference between ho much you sold them for, and how much you bought them back again.
The risk is, you _have_ to give the shares back usually at a fixed point in time. So if the price rises, you have to pay the difference. (there is normally a fee as well, to borrow the shares.)
This is actually a very good question.
The funniest and simplest answer is that you make money off yourself.
Options/futures market makers
When you open a short position you borrow shares from your broker's other customers. Your broker then sells those shares on the exchange. When you close your short position, your broker buys shares in that same stock from the exchange at the current price. So the people losing money are the people who bought when the market was high and sold when it was low, as always.
There are two big issues with shorting a stock. One, your downside is infinite, whereas your upside is only the size of your position. If you short a medical stock worth ten cents and it zooms up to $1000 because the company discovers a cure for cancer, that's going to cost you $999.90 for every share you shorted at ten cents. If the company goes bankrupt instead, you make... ten cents for every share. If you get unlucky a single short position will wipe out all the money you made or will make shorting stocks for the next three generations.
The second problem is you don't completely control your position. If you buy a stock to hold, it's yours until you decide to sell. But when you short a stock and enough the people at your brokerage holding shares in a company you shorted decide to sell, your broker will summarily close your position at the current market price because there aren't enough remaining shares for you to keep borrowing. That can be very frustrating if the stock is at a temporary peak, especially if it proceeds to go down to a price for which you would have closed at a profit.
EDIT: I suppose I should add a third problem to the list. If the cost of your short goes beyond a certain percentage of your account your broker will close your position to protect himself and his other customers. That usually happens if the stock is going up quickly. When your broker closes your position, he, along with all the other brokers closing short positions, needs to buy stock, which creates a positive feedback loop. That's called a "short squeeze". You can end up with prices shooting up to ridiculous levels because people have no choice but to buy.
Whoever lost money going long on it.
I like Elon so much because of one reason: his multi trillion business adds completely new values without taking a single cent away from small retailers and owners, as new big corps do through various legit and not so ways. In contrast, Bezos has closed innumerable stores and every tech giant killed competition in online services. Name it socialism for the poor, but I don't care about his success as long as it doesn't interfere with other's business.
His EV was successful, his social media/AI OK but his space data center will fail and from now on he sells hype, a very fancy, trendy, sexy -name it- and expensive hype. Laws of physics don't allow it to be viable. We have a joke that originally applied to politicians and now to him: you can fool one for a long time, you can fool many for a short time, but you can't fool many for a long time.
Well, that's a market economy, so deal with it!
Is disregarding laws, defrauding shareholders, and corruptly buying government contracts - as just a few examples - a 'market economy'? Is there a market for those government contracts, other than the market for the president's favor?
Interesting as some very prominent short sellers had publicly indicated they were not going to attempt this given the stock's "meme" potential and the "cult of Elon". Seems to have happened anyway. Good for those short sellers that committed. It's easy to speculate. Actually risking the bet when the market has a history of being highly irrational when it comes to Elon is another thing entirely. And the insiders haven't even been allowed to offload yet...
“SpaceX has created 8.7B of wealth and GDP growth within weeks!”
[dupe] Discussion: https://news.ycombinator.com/item?id=48938001
Also, highly related with significant discussion in the past 2 days:
https://news.ycombinator.com/item?id=48933344 - "SpaceX stock erases all its gains and slides below IPO price in intraday trading" - latimes.com | 306 points | 1 day ago | 281 comments
https://news.ycombinator.com/item?id=48920181 - "SpaceX bond worth 10% less than issue price – heading for junk bond status" - ft.com | 561 points | 2 days ago | 603 comments
it is just so weird to me that nearly $9 BILLION can be created out of nowhere for nothing
how can that be healthy for civilization
It's not created out of no where. It's traders saying that the stock is over priced and putting their money where their mouth is and taking on a big risk if they're wrong. They're extracting this money from folks that are putting upwards pressure on the stock saying it should be worth more. They're helping price the stock more efficiency and reducing index trader's expose to an overpriced stock e.g. retirement funds.
Those $9B are created the same way as when the stock would have risen. That's how most of the wealth in the stock market is created nowadays.
$9 Billion was not created, just exchanged, with some intermediary institutions and people making money for facilitating the transactions.
It's actually more like 1 trillion of value was "lost" when the stock dropped, and $9 billion was gained by some (and equivalently lost from others) for being right about the stock dropping.
Stock dropping is not literally a loss of any underlying good. It is a "assessment of how valuable something is". So when we say "omg we lost $1t in value" is not quite right. It's "we (everyone betting in the stock market) now collectively understand the value of this thing (company in this case) to be $1t less than assumed previously"
In this case, massive swings in value mean that the assessed value of a thing is very uncertain. I'd say this is extremely true for spacex, where in theory many people think it could be worth a fortune, or nothing, and no one can ever know the "true" value.
This is because there is not such thing as "absolute value" in the real world. And when it comes to things like stocks, "value" is just "hypothesized current value", which is a whole bunch of things combined: long term value of company, plus short term expected movement, even things like "who wants to own more of this this in the next few milliseconds", make up what a thing is estimated to be worth right now.
Assuming the stock market is some oracle of absolute value will make the world look insane. Seeing it as estimated value at one point in time in a very uncertain world where nothing has "true" value and all value is just relations between people and the things they want and the things they own and can exchange, is much closer to reality.
Ignorant yet loud opinions are even more unhealthy for civilization.
It really is not from nothing. Someone just overpaid by 9 billion for bunch of stock certificate... Not exactly common scenario in other places but could happen on smaller scale.
Now debt is money from nothing...
okay, but shorts have to take profits sooner than latter, so upside is comming
Does anyone think here shortselling should be banned?
No, nobody who has basic financial market literacy thinks that
Lots of downvotes and one condescending remark, but no knowledge shared :(