On Monday, Elon Musk introduced that he was merging two of his firms, SpaceX and xAI, in a deal mentioned to be price $1.25 trillion. The explanation, Musk mentioned in an announcement, was that to ensure that AI to develop, it wanted to go to house.
AI depends on “massive terrestrial information facilities” that run on “immense quantities of energy and cooling,” he mentioned, which comes at nice expense to the atmosphere and group opposition. The answer: information facilities in house. “In the long run, space-based AI is clearly the one technique to scale,” Musk mentioned.
Musk isn’t the one one seeking to launch information facilities into orbit. Google has Venture Suncatcher to construct solar-powered AI information facilities in house. China is wanting into space-based information facilities, as is Europe. As we reported final yr, space-based information facilities — within the type of satellites with photo voltaic panels — are Large Tech’s newest fad and Silicon Valley’s latest investable enterprise.
On the floor, it appears like a logical resolution to the distinctive drawback introduced by power-hungry information facilities. Native communities are rising up towards information middle initiatives over issues about electrical energy demand, water utilization, and rising utility charges. Launching these information facilities into house means they aren’t taking over any house on Earth, and in a sun-synchronous orbit there may be the provision of photo voltaic vitality.
AI depends on “massive terrestrial information facilities” that run on “immense quantities of energy and cooling,” Musk mentioned, which comes at nice expense to the atmosphere
However there’s one other, easier means of taking a look at Musk’s merger: SpaceX is worthwhile, and xAI shouldn’t be. Not solely is xAI not worthwhile, it’s within the midst of a critical money burn because it races to compete with well-financed rivals like Google and OpenAI. As Bloomberg lately reported, the AI firm is burning about $1 billion a month because it spends closely to construct information facilities, recruit expertise, and run the social media platform X.
In the meantime, SpaceX generated about $8 billion in revenue on an estimated $16 billion of income final yr, Reuters reported. The principle income driver is Starlink, which accounts for as much as 80 p.c of the corporate’s income. Since 2019, SpaceX has launched over 9,500 satellites and boasts as much as 9 million broadband web customers. The corporate can be a significant authorities contractor, having secured over $20 billion in NASA and Protection Division offers since 2008. When it goes public later this yr, SpaceX is predicted to boost as much as $50 billion in funding.
In the meantime, xAI has it personal authorities tie-ups. The Division of Protection is utilizing Grok, along with different chatbots, to investigate data that flows via its army intelligence networks.
It’s not clear how buyers will really feel about merging the cash-burning xAI with the worthwhile SpaceX. But it surely’s essential to notice that Musk has accomplished this earlier than, when he merged the debt-ridden SolarCity with Tesla in 2016. Since Musk was the biggest shareholder and chairman of each Tesla and SolarCity, shareholders sued to dam the merger, alleging it was a $2.6 billion “bailout” of a cash-strapped, struggling firm. Musk finally received the lawsuit, with a decide ruling that he didn’t pressure Tesla to overpay for SolarCity.
Musk now faces a brand new lawsuit from Tesla shareholders over his creation of xAI. The lawsuit alleges that Musk breached his fiduciary obligation to Tesla by forming xAI, which competes with the automaker for AI expertise, sources, and Musk’s consideration. The information that SpaceX is buying xAI definitely received’t settle these issues; if something, it makes it extra chaotic and complicated.
So the place does this all go away Tesla? In the latest earnings report, Tesla mentioned it was investing $2 billion into xAI “to boost Tesla’s skill to develop and deploy AI services and products into the bodily world at scale.” Grok, xAI’s chatbot that’s at present beneath investigation in a number of international locations for producing nonconsensual sexualized pictures of individuals, together with kids, was lately built-in into sure Tesla automobiles as a voice assistant. Grok additionally lags behind OpenAI’s ChatGPT, Google’s Gemini, Anthropic’s Claude, and different massive language fashions in a number of key metrics.
Knowledge facilities in house is pure Musk futurism that has no assure of success. It’s not so simple as simply strapping a GPU to a rocket and hitting “launch.” First off, GPUs are whole energy hogs. Except you’ve obtained a nuclear reactor floating up there, you’re going to wish a large photo voltaic arrays to energy it. Then there’s the communication state of affairs; even if you happen to’re hitching a journey on Starlink, you continue to have to determine the finances for sending data backwards and forwards to Earth. Ultimately, the numbers begin to look fairly scary.
Musk says merging SpaceX and xAI is the way in which to make it occur. And maybe someday he’ll take the suggestion of bullish buyers to mix all his firms, together with Tesla, Neuralink, and the Boring Firm, into one large, Musk-run mega-corporation: Musk Inc., if you’ll. How will Tesla shareholders react?
“Tesla is Musk’s liquid piggy financial institution, because it’s publicly traded; his different firms usually are not,” Tesla investor James McRitchie mentioned throughout a prevote presentation earlier than the corporate’s 2024 shareholder assembly, in keeping with The Wall Avenue Journal. “Both he sticks round lengthy sufficient to make use of our shareholder capital to fund his different ventures, or he shifts his consideration sooner if we reject his pay bundle and switch off the cash faucet.”
