You can list a thousand wholly rational reasons as to why this man should not be this wealthy and argue that Tesla stock’s true value is actually $14, but the fact of the matter is that we don’t live in a rational world. We live in the one where Elon Musk is the richest man alive.
Elon Musk is the face of the saying that the market can stay irrational longer than you can stay solvent. An entire army of people have fought in the great war of Tesla shorts and lost, including yours truly.
Musk is a charlatan, a modern-day snake oil salesman who has been making promises he can’t keep ever sincewhile recklessly driving his McLaren in 2000, yet his net worth truly is up only. You can list a thousand wholly rational reasons as to why this man should not be this wealthy and, but the fact of the matter is that we don’t live in a rational world. We live in the one where Elon Musk is the richest man alive. And he got rich through financial chicanery and perpetual promises he still has yet to deliver on; like full-self driving, or Tesla being anything more thanhave roiled the courts, whose decisions to strike them down helped lead Elon Musk to poison our politics. Now he tramples all over the world doing whatever he wants, and thiswhere SpaceX is acquiring xAI at a $250 billion valuation is some of his finest snake oil salesman work yet. To be fair to apartheid South Africa’s preeminent ketamine enthusiast, there are some very rational reasons for this deal. Musk is ruthless in his business dealings, and like Trump, has demonstrated the value of simply acting like laws aren’t real in a country who told everyone in 2008 that they truly are not for powerful people. We are in a ruthless age, and there are two extremely good reasons for Elon to fold an unprofitable company into a profitable one.ChatGPT, Gemini and Claude as far as user adoption in the AI arms race. This is doubly damaging because xAI is burning immense amounts of cash, reporting a net loss of $1.46 billion for the September quarter, up from $1 billion in the first quarter, according to documents reviewed by. They report that “In the first nine months of the year, it spent $7.8 billion in cash.” If they were in better position in the AI market, those losses could be palatable the way they are for hopeful OpenAI investors, but a fourth-place company in what investors perceive to be a winner take all race is just another dead company walking. So from an xAI equity holder perspective, they just hit the jackpot. They invested in an unprofitable company not gaining significant market share whose primary utility isgetting a seven to one exchange rate to swap their bad xAI investment for a good SpaceX investment. This is a great move for xAI investors, but a subpar one for SpaceX investors seeing their shares get diluted and their company’s relative value weighed down by a CSAM generating anchor. Musk is psychologically incapable of ever making everyone happy. But this move and Musk’s subsequent rush to get SpaceX an initial public offering by June makes tons of sense in the broader context of the AI arms race. xAI is not the only unprofitable AI company propping itself up with venture capital deals and just trying to get to the finish line of an initial public offering where early investors get to cash out their shares on the public markets at far higher valuations than they invested in. The entire AI industry is one big IOU note to a totally unknown future, and the only way to get paid in the present on these gargantuan private valuations is to IPO and dump on the public before anyone wisens up to the fact that none of these AI companies make money. Saudi Aramco, the country’s oil company, is the largest IPO in mankind’s history, launching on public markets in 2019 at $29 billion. Should these AI companies IPO, they will dwarf that total. OpenAI is reportedly looking for a $1 trillion IPO, possibly in theof this year, and that target is an attempt to get ahead of Anthropic’s planned IPO. By folding xAI into amore attractive and larger company in SpaceX while targeting a June IPO, Musk is actually making a very savvy move to cut out the other AI companies from the stock market boom, and potentially set them up for IPO disaster. Everyone and their mother knows that the stock market is already hilariously over-valued, and many investment management firms like Jeremy Grantham’s GMO arethat these coming AI IPOs will actually be bad for the stock market. It is an open question how much more demand for AI speculation exists, and these IPOs are each going to surpass the previous record, placing immense liquidity demand on a market looking increasingly exhausted from this bull run. The market simply may not have enough demand to sustain all these AI IPOs. So by moving first, Musk could soak up all the market liquidity for SpaceX, leaving less for OpenAI and Anthropic’s IPOs later on. It’s impossible to tell which aspects of this story with many moving parts motivate Musk the most, but unfortunately, intentional or not, this is a very savvy move in the context of the AI wars.But this is Elon Musk, after all, and last month, Tesla invested $2 billion in xAI. Tesla is not involved in this SpaceX deal, not yet, but it is an open question what’s going to happen to what Musk now says is a robotics company as they wind down production on two of their flagship products. Musk is creating a financial turducken inside the only company he has left with an attractive balance sheet, and while these moves might benefit investors in under-performing companies like xAI who bought a company “barely breaking even”, it’s hard not to feel like this looks like someone trying to outrun the inevitable doom loop he is creating for himself with two companies that can’t justify their valuations, all by delivering that problem to a third.it makes comes from secretive government work that investors are not allowed to know about. SpaceX reported $13 billion in 2024 revenue, with $9 billion coming from its satellite internet service Starlink. That other $4 billion is where you must have a need-to-know security classification to know where it comes from. Are these long-term contracts? Are they short-term deals driven by idiosyncratic geopolitical quirks? You don’t know, and for all you know, a Democratic administration could come in and vaporize that $4 billion and give it to some other defense contractor. There is extreme political risk in SpaceX beyond just the murkiness of top-secret classified revenue. And now SpaceX is being asked to carry an AI anchor, all so it can be the profitable vehicle upon which this unprofitable venture beats all the other AI companies to market. This will likely be good for generating interest in SpaceX’s IPO–especially after it had its value inflated by, where he obtained a valuation on xAI that no one other than Elon and his group of investors would pay–but it’s hard to see how this move is good for SpaceX long-term unless we really do live in hell and xAI wins the AI wars. This is a story of how stupid and easily manipulatable America’s so-called wisdom of the market truly is. That Tesla now looms large over the future financial chicanery of what may now be the world’s largest AI company only adds to the murky future picture around SpaceX’s long-term profitability.But the future is for tomorrow to figure out, right now Elon just needs to get a pile of cash so he can make more promises about the future that he won’t fulfill. The hot new promise in tech is that data centers in space are inevitable, and while there is logic to this given how harmful they are to life on earth, tech folks talking about this as if it is easy to do is yet another example of how these self-appointed demigods in the Valley believe they are experts in everything while proving to not know shit about fuck outside their narrow skillset. Data centers in space are the furthest thing from easy or cheap to do based on our current understanding of physics. Musk is selling this merger as vertical integration, where xAI is powered by data centers that SpaceX shoots into space, all while asking investors to saddle the huge cost of a giant new data center he is building on earth in Memphis, poisoning the Black community there. This is a classic Musk-brained contradiction that wastes billions on dueling goals and asks investors to take a huge long-term loss on the data center in Memphis that would never fly in an entry-level business school class, but Musk’s investors have long proved that they enjoy being fools who will believe in illogic if it comes from their King who knows how to sell snake oil to all the biggest marks in the world. It doesn’t matter if Musk can actually do the things he says, just whether Tesla investors can be tricked into buying more snake oil. After the merger, Musk said that “In the long term, space-based AI is obviously the only way to scale.” One investor in both xAI and SpaceXthat “In an age of AI maximalism, worth trillions and trillions of dollars.” You can see the logic in the strategy to combine SpaceX and xAI here, but the math just doesn’t add up. Space is cold, yes, but as actual scientists will tell you, it’s not cold in any useful sense. Heat from data centers cannot naturally emanate outwards into space, and it“Lifting 9,000 – 11,250 metric tons of space-grade solar panels into low Earth orbit using today’s best commercial launch vehicles — such as SpaceX’s Falcon Heavy with an up to 64 metric tons payload — would cost between $13.7 and $17.1 billion at an optimistic ~$1,520/kg, assuming near-max efficiency in payload mass per launch,”in response to Jeff Bezos talking about the supposed inevitability of data centers in space. “However, at a more conservative cost of over $2,000/kg, that cost will increase to $25+ billions and will require well over 150 launches only for solar panels.” A $1.25 trillion company being weighed down by an unprofitable AI division no outside investor would pay $250 billion for, while betting its future on data center launches that conservatively cost them $25 billion a pop just to launch solar panels 150 times for a total of $3.75 trillion, is the perfect Muskian financial device for our era built on provably preposterous scams. That his so-called car company invested $2 billion into this madness before this big move signals that this is far from over, and that Musk’s long history of, shall we say, creative financial engineering is approaching its logical conclusion, where the future profitability of SpaceX, Tesla, and xAI is a pinky promise more than a firm financial measurement you could file in a 10-K report. That investors continue to buy into this nonsense of perpetual unfulfilled promises is a bigger indictment of them than Elon at this point.
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