Why Elon Musk Might Want to Merge SpaceX and XAI

Elon Musk starts and owns lots of companies. Perhaps he will change that, a bit: The world’s richest man is reportedly engaged on a plan to merge two of his Most worthy firms into one megacompany.

Musk, Reuters studies, desires to merge xAI — his very worthwhile AI firm that has already merged with the corporate that was referred to as Twitter — into SpaceX, his very worthwhile rocket firm.

“The mixture would deliver Musk’s rockets, Starlink satellites, the X social media platform and ​Grok AI chatbot beneath one roof,” Reuters says, suggesting {that a} mixed firm may assist Musk construct data centers in space. Then once more, Reuters additionally says it would not know a number of key particulars in regards to the theoretical deal, together with “its ‌main rationale.”

And to be trustworthy, the rationale appears a little bit obscure to me, too.

The principle cause I can consider to merge one non-public firm with one other non-public firm that is about to go public could be to make it simpler for the smaller non-public firm to finance itself.

On this case, that will imply that xAI would not should depend on the non-public markets because it races after the likes of OpenAI, Google, and Meta within the competitors for AI expertise and chips. It may faucet the general public market as a substitute.

The issue with that idea: Individuals within the non-public market are lining as much as throw cash at xAI, which simply raised $20 billion. The corporate boasted that it was solely going to boost $15 billion, however folks saved throwing cash at it, so it needed to go and lift extra.

And, Muskian boasting apart, that makes numerous sense: Regardless of all of the AI bubble chat, persons are keen to place cash into huge, privately owned AI firms, as OpenAI and Anthropic show each time they increase a ton of cash, which occurs to be on a regular basis.

Simply as essential: Individuals are keen to present Elon Musk cash as a result of he is made lots of people some huge cash from Tesla, they usually’re keen to present him one other probability. (That is why the individuals who helped him fund his value-destroying Twitter deal by no means as soon as complained about it in public: They wished an opportunity to put money into his subsequent deal.)

I’ve requested Musk, SpaceX, and xAI for remark. It might be value noting that Musk, who complains about protection of his firms on a regular basis, didn’t complain when somebody retweeted the Reuters story Thursday afternoon.

I suppose you would additionally attempt to argue that SpaceX and xAI make sense collectively as a result of a bunch of their work overlaps, just like the theoretical xAI house information facilities that might get constructed with SpaceX rockets.

However Elon Musk has all the time handled his numerous firms as one huge firm when it fits him. He strikes engineering and managing talent from one firm to a different when he desires — even when these staff work for Tesla, which is publicly owned, and theoretically ought to have an issue with lending its workers to different folks’s firms.

Typically there are complaints about Musk using resources from one company to help another — or, maybe, himself. However Musk has just about ignored all of these complaints. I can not consider he is all for shifting xAI into SpaceX as a result of he cares about company governance.

One more reason to mash the businesses collectively may be to reward traders who guess on one non-public firm by giving them publicly traded shares within the mixed firm. However, once more, that does not actually monitor right here: Musk has a bunch of loyal backers, like Constancy and Valor Fairness Companions, which attempt to get into all his offers, and are already in each firms.

So possibly there shall be a giant galaxy-brained rationale for mushing xAI and SpaceX collectively, and we simply have to attend for Musk to unveil it. Within the absence of that, here is my final guess: Musk, who’s already reportedly attempting to time his SpaceX IPO to “coincide with a uncommon planetary alignment and his birthday,” per Financial Times studies, simply desires his big SpaceX IPO to be even greater. Previous to Thursday’s report, SpaceX was speculated to go public at a $1.5 trillion valuation — the most important IPO in historical past. So possibly he is simply attempting to spice up that valuation by a half trillion extra.

Anybody have a greater thought?