“Elon Musk rammed through the combination of his space company, SpaceX, with his AI startup, xAI, on Monday, merging the shiniest jewel in his business empire with his most money-losing firm. The deal—which valued xAI at $250 billion and SpaceX at $1 trillion, according to people familiar with the situation—comes as xAI battles to catch up to rivals such as OpenAI, Google and Anthropic.”
“The deal shows how quickly the world’s richest man is moving to gain a fundraising advantage in the expensive AI race. On a call with about 100 SpaceX investors Monday afternoon, Chief Financial Officer Bret Johnsen gave assurances that the deal wouldn’t delay its initial public offering, planned for the summer or fall, said one person on the call and another briefed on it.”
“The acquisition of xAI, which owns the social media site X and the chatbot service Grok, may muddy the story. Not only is it burning cash at the rate of a billion dollars a month, it has lately faced problems with AI development, not dissimilar to those other AI firms have faced. Musk had grown frustrated with delays to new Grok AI models in recent weeks, according to a person with direct knowledge of the matter.”
“SpaceX made it official on Monday, acquiring xAI ahead of the decade’s most hotly anticipated IPO.”
Again, as I argued a few days ago, this could be another chess move to when he eventually merges SpaceX/xAI, with a now private market $1.25 trillion valuation mark, with the ‘mother of all meme stock’ public market $1.6+ trillion valuation of Tesla:
“Why it matters: Elon Musk is making one of the most audacious moves in the history of business and tech, arguably betting his empire on the idea of orbital data centers that are powered by the sun.”
“Don’t be surprised if this is a prelude to a future merger with Tesla, which recently invested $2 billion into xAI.”
“Tesla would make the chips, SpaceX would be responsible for launch and satellites, and xAI would build the models and agentic networks.”
“The big picture: If this works, it could pose a major threat to OpenAI — the only AI giant it’s impossible to see Musk partnering with or selling services to.”
“By the numbers: The combined company is being valued at around $1.2 trillion.”
“This includes a 25% valuation step-up for SpaceX, to $1 trillion from a recent $800 billion mark via a secondary offering.”
“xAI would be valued at around $250 billion, also a valuation increase but not as much on a percentage basis.”
“Zoom in: SpaceX investors need to buy into Musk’s big vision to make this work.”
“They’re adding what one investor in both companies called “a money-burning laggard,” which will make SpaceX’s balance sheet much more complicated.”
“Behind the scenes: A lot of big unicorn companies have stayed private longer because they don’t really need cash or shareholder liquidity, thanks to a vibrant venture market that’s become amenable to tenders and other secondary offerings.”
“SpaceX, however, does need the money for its massive construction projects — more than remains easily available in the private markets.”
“It’s going public out of capital necessity, not choice.”
But investor ‘Friends of Elon’ for now across his companies, seem happy with the ride thus far:
“Last laugh: For xAI investors, this is something of a lucrative bailout, similar to what the xAI-X merger was for those who helped take Twitter private.”
“In short, those who bet on Musk without asking too many questions (e.g., Marc Andreessen) are being rewarded for their unwavering faith.”
“And Musk is making good on what he told Axios in late 2023: “I have never lost money for those who invest in me and I am not starting now.”
Then after these three big Elon narratives, is his own ‘mother of all Mars narratives’ still to go. Which for many cold, scientific and human reasons will likely remain scifi fantasy for longer than most of his followers will take time to understand. Here’s a brief introduction for those who don’t want to take that ‘red pill’ just yet.
Elon clings to the Mars narrative every time.
“The bottom line: Musk joined Tesla because he wanted to make enough money to get to Mars. That’s still the ultimate goal.”
“But he needs a bigger revenue stream — well beyond his earthbound electric vehicles.”
“So that’s what he’s trying to build.”
For now, the smaller steps closer to earth are being taken.
X/Twitter is now part of Grok powered xAI. xAI is a part of SpaceX, which also has Starlink for the ride.
Please let me know the you have any questions or comments Important Disclaimer: This blog is for educational purposes only. I am not a financial advisor...
Every morning I wake up to catch up on my very limited ‘filtered’ news that I have set for myself and it seemingly gets worse. Yesterday, one rocket killed...
