Y'all are suckers

If you're buying $SPCX, you're falling for the Gilded Age Credit Mobilier scam

This Friday, SpaceX will begin trading as SPCX on the Nasdaq exchange. It will immediately become one of the most valuable companies on earth, with an expected valuation of $1.8 trillion. Of course, that lags behind Nvidia ($5T), Alphabet (Google’s parent, $4.5T), Apple ($4.1T), Microsoft ($3.1T) and Amazon ($2.6T). SpaceX will fit in somewhere between the chip-maker TSMC and Saudi Aramco. That last mention was the previous record-holder for the largest initial public offering, raising $25.6 billion on a valuation of $1.7 trillion.

Image: Kelly Michals via Flickr

One thing observant readers might notice is that the top four companies on the humongous list are intimately involved with AI. Part of that is because OpenAI has not yet completed its planned IPO, though it’s current estimated value is about $850 billion, after massive investments from Microsoft, Amazon, and Nvidia, all of which are in the top five. Anthropic just raised $65 billion in a funding round led by investment capital firms Altimeter Capital, Dragoneer, Greenoaks, and Sequoia, putting their valuation above OpenAI at $965 billion.

And the king of them all is Nvidia, which makes the chips that power the servers that sit in the data centers that train the generative AI neural nets, which we, the public, use to fix our toilet, or pick stocks, or sell our home. At least Nvidia actually makes a physical product.

By now, you’re asking what the headline is about, because, Steve, you know SpaceX makes a physical product, right? Yes, I know, they make rockets. Good rockets. The best rockets on earth, I’d say. And as Elon Musk posted in response to Jeff Bezos-owned Blue Origin’s New Glenn rocket explosion at Cape Canaveral, “Rockets are hard.”

But rockets are not the main product SpaceX sells these days, at least not from the point-of-view of cash flow. SpaceX’s xAI component runs all the massive data center capacity and the Grok AI, including the giant 785,000 square foot Colossus facility near Memphis. Inside, there are 200,000 Nvidia H100 GPUs training that AI, among other things. SpaceX just signed an agreement with Google, where Google pays SpaceX $920 million a month to lease “compute,” which is the industry slang word for computing power. The three-year deal is worth about $30 billion, or about 160 percent of SpaceX’s latest annual revenue (2025, $18.65 billion, according to SEC filings).

Based on these revenues and the growth of SpaceX’s rocket business, and its StarLink Internet service, Morgan Stanley predicted a salivating number: up to $3.4 trillion in revenue by 2040, making it four and half times the size of the current leader in annual sales, Amazon, and five times the No. 2, Walmart. Such numbers raise the eyebrows of people in the financial industry, and certainly people who understand both rockets and the economics of data centers and the future of AI.

I must say that Elon Musk’s strategy of placing his most cash-intensive business under his most valuable leader in technology is brilliant. SpaceX is a cash cow that can feed its money, and leverage its massive valuation to fund the AI boom, while keeping itself completely insulated as basically the only human-rated rocket company capable of keeping America in the space race, and getting our astronauts to and from the aging International Space Station.

But “brilliant” doesn’t mean it’s a good investment.

Let me delve into a little history, 672 words of history, which, if you like, you can skip, by going forward six paragraphs.

Have you ever heard of Jay Cooke? If you’re not a student of Gilded Age or Civil War history, or a fan of 1860s-80s railroads, or a geek who watches YouTube videos about The Bizarre Race to Build the Transcontinental Railroad, you may not have heard of him. Cooke was a small-time banker, whose younger brother Henry published a newspaper in their native Sandusky, Ohio. Cooke’s political connections with Secretary of the Treasury Salmon Chase got his tiny firm, Jay Cooke & Company, the exclusive contract to sell U.S. “Five Twenty” war bonds during the Civil War. From this, Cooke became immensely wealthy. His opulent wealth and public fame (he owned a lavish estate, Ogontz, in Elkins Park, Pennsylvania, and a private island on Lake Erie) made him the very profile of a Gilded Age financier.

But Cooke’s main historical connection is in railroads. He is a major and recurring character in historian Richard White’s book “Railroaded: The Transcontinentals and the Making of Modern America.” He was part of one of the largest fleece operations, of both the government (the U.S., Canada, and even Mexico), and mom-and-pop investors, that built the Transcontinental Railroads, the Union Pacific and Central Pacific. Those roads were completed in the most slipshod, and fastest, methods, in order to garner the generous per-mile bounty paid by the U.S. government, along with enormous land rights running ten miles on each side of the tracks. The railroads were paid to meander their tracks as long as possible to gain the most bounty, as long as they did it fast. Both the Union Pacific and the Central Pacific used immigrant labor (mostly Chinese), and the Union Pacific paid Civil War veterans to kill buffalo and American Indians.

The list of crimes and sins of these two companies are far too long to delve into here. I recommend you read White’s book if you want more detail.

But the biggest sin is perhaps decades of lies by many people who became filthy rich from the construction and raping of the American prairie and mountains, while they connected (sort of) coast-to-coast in our Manifest Destiny to own this continent. The Central Pacific railroad for years filed fictional, completely fraudulent annual reports with the California Secretary of State. The infamous Credit Mobilier, which built the Union Pacific railroad, created a back-slapping, interconnected group of businessmen, politicians and families who all said to each other “we’re not criminals!” as they proceeded to commit every possible financial crime imaginable, from stock manipulation, to causing entire banks to fail, in order to protect their ring of lies.

The group of owners of the Central Pacific included such revered people as Leland Stanford, the former California governor who founded Stanford University. He was in on every lie, manipulation, and financial shakedown that laid tracks from Sacramento to Promontory Point, Utah, a ghost town that never really existed except for the public photos of Stanford hammering the “golden spike” that sent a telegraph message to across the continent to both shores. There is literally nothing at Promontory Point other than the Golden Spike. The cycle of fleecing went on through the Canadian Northern Pacific transcontinental railroad, which was one step over the line: there is always a pin that pops the bubble.

In 1873, when the entire railroad speculation bubble burst, Jay Cooke was ruined. He went, in the span of one week, from hosting President Ulysses Grant, to ordering his Ogontz estate to be shuttered. This event kicked off years of economic downturn, bank failures, and depression in America. The criminals who engineered the bubble were never prosecuted, punished or jailed. Gilded Age figures such as Jay Gould and Leland Stanford kept their respect and their wealth—Gould left $72 million ($2 billion today) to his children, who promptly squandered it over decades of mismanagement. The only judgement these people faced was the one each of us faces when we meet our maker. But don’t worry about Cooke, he rebuilt his fortune by investing in a Utah silver mine.

The losers in 1873 were the people who bought Jay Cooke’s bonds, which were used to finance a railroad that could not be built, because there was no economic reason for it to exist. There was also no economic reason for the original transcontinentals to exist, because nobody lived in the places the railroad went, other than American Indians. But our patriotic duty was to build the railroads and connect our continent. So people invested. The people who knew railroads did not invest. The ones who put up other people’s money to build the roads profited off their financial deals, while the banks and investors repeatedly got fleeced by the lies and illegal operations of the financiers.

There is a reason SpaceX’s IPO has reserved 30 percent of the shares for retail investors, far more than most public offerings. There is a reason the underwriters and investment bankers are okay with the public buying up SpaceX shares, and why Morgan Stanley has advanced such ridiculously sanguine estimates of the company’s potential. This is because people with money who know the AI industry, data center economics, and space operations don’t value SpaceX at its $130 initial share price.

Like the Credit Mobilier, which was created to profit off the building of the Union Pacific railroad, which was guaranteed by government bonds, and paid for by bounties authorized by Congress, while absolving itself from the responsibility of actually running a profitable railroad, SpaceX is a company which is absolving itself from the current AI bubble, or having to run a profitable rocket company. In fact, the money spent on data centers and AIs will keep SpaceX in the red, up to around $60 billion, for years.

Elon Musk is the Jay Gould, or the Leland Stanford, of today. He, along with the people running OpenAI, Google, Nvidia, and yes, even Jeff Bezos of Amazon, are the club that curries favor in Congress, at the White House, and with people who suffer from FOMO, who will plunk down cash to buy SpaceX shares, and be part of the effort to go to Mars. We simply must go to Mars, because Elon says so. It is the destiny of the planet. We must build Starlink V3, using Starship rockets, which will (?) take us to the surface of the moon.

The unholy cluster of self-promoting, cross-investing, and market manipulating companies that make up the top of the valuation list today is heading for a bubble pop. Nvidia makes the chips that are used by companies building data centers to train generative AIs that have little to no chance of being the vehicle that carries compute to General Artificial Intelligence. Generative AIs hallucinate, make terrible mistakes, write wooden literature, and create visual slop that is frequently damaging to real people, and used by actual criminals to commit cybercrime.

Like the railroads of 1873, there is always a pin to pop the bubble. I don’t know what that pin will be, but I can guarantee someone is concocting a scheme to make money off it. Some people will be ruined, only to rebuild their wealth. Some will get off scot free (likely Musk, Bezos, Sam Altman and their buddies).

The ones who will be left holding the bag are the people emptying their life savings to go to Robin Hood and buy SPCX. Those are the people, the marks, the suckers, that the new Gilded Age industrialists and barons—Elon Musk is today’s Collis P. Huntington—who lie as easily as they wag their tongues, count on to place their trust, their confidence, in projects that will make money for nobody except those who foist their grand plans on the public.

If you buy SPCX at the offering price, y’all are suckers.