On Monday, Elon Musk introduced that he was merging two of his companies, SpaceX and xAI, in a deal stated to be value $1.25 trillion. The explanation, Musk said in an announcement, was that to ensure that AI to develop, it wanted to go to area.
AI depends on “massive terrestrial knowledge facilities” that run on “immense quantities of energy and cooling,” he stated, which comes at nice expense to the surroundings and group opposition. The answer: knowledge facilities in area. “In the long run, space-based AI is clearly the one strategy to scale,” Musk stated.
Musk isn’t the one one seeking to launch knowledge facilities into orbit. Google has Project Suncatcher to construct solar-powered AI knowledge facilities in area. China is looking into space-based data centers, as is Europe. As we reported final yr, space-based data centers — within the type of satellites with photo voltaic panels — are Big Tech’s latest fad and Silicon Valley’s newest investable venture.
On the floor, it feels like a logical resolution to the distinctive drawback introduced by power-hungry knowledge facilities. Local communities are rising up against data center projects over considerations about electrical energy demand, water utilization, and rising utility charges. Launching these knowledge facilities into area means they don’t seem to be taking over any area on Earth, and in a sun-synchronous orbit there may be the supply of photo voltaic power.
AI depends on “massive terrestrial knowledge facilities” that run on “immense quantities of energy and cooling,” Musk stated, which comes at nice expense to the surroundings
However there’s one other, easier manner of Musk’s merger: SpaceX is worthwhile, and xAI shouldn’t be. Not solely is xAI not worthwhile, it’s within the midst of a severe money burn because it races to compete with well-financed rivals like Google and OpenAI. As Bloomberg recently reported, the AI firm is burning about $1 billion a month because it spends closely to construct knowledge 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 primary 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 also 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 anticipated to lift 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 research info that flows by means of its navy intelligence networks.
It’s not clear how traders will really feel about merging the cash-burning xAI with the worthwhile SpaceX. Nevertheless it’s necessary to notice that Musk has carried out this earlier than, when he merged the debt-ridden SolarCity with Tesla in 2016. Since Musk was the most important 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 ultimately gained 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 responsibility to Tesla by forming xAI, which competes with the automaker for AI expertise, assets, and Musk’s consideration. The information that SpaceX is buying xAI definitely gained’t settle these considerations; if something, it makes it extra chaotic and complicated.
So the place does this all depart Tesla? In the newest earnings report, Tesla said it was investing $2 billion into xAI “to reinforce Tesla’s skill to develop and deploy AI services into the bodily world at scale.” Grok, xAI’s chatbot that’s currently under investigation in multiple countries for producing nonconsensual sexualized photographs 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 area 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 an enormous photo voltaic arrays to energy it. Then there’s the communication state of affairs; even in case you’re hitching a journey on Starlink, you continue to have to determine the price range for sending data backwards and forwards to Earth. Ultimately, the numbers begin to look fairly scary.
Musk says merging SpaceX and xAI is the best way to make it occur. And maybe in the future he’ll take the suggestion of bullish traders to mix all his firms, together with Tesla, Neuralink, and the Boring Firm, into one huge, 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 are usually not,” Tesla investor James McRitchie stated throughout a prevote presentation earlier than the corporate’s 2024 shareholder assembly, according to The Wall Street 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 package deal and switch off the cash faucet.”
