UPDATE: Elon Musk has now confirmed the merger of xAI and SpaceX, "to form the most ambitious, vertically-integrated innovation engine on (and off) Earth, with AI, rockets, space-based internet, direct-to-mobile device communications and the world’s foremost real-time information and free speech platform.
-----
Well, this would certainly help to secure X’s immediate future, despite its ongoing revenue challenges.
According to reports, Elon Musk is in the exploratory stage of a potential merger between SpaceX, his reusable rocket company, and xAI, Musk’s burgeoning AI side-project, which is also the parent company of X the app.
The deal would bring together two of Musk’s biggest speculative projects, and combine his space exploration plans with his AI development ambitions, forming a trillion-dollar business entity that would then be able to more easily share resources across his futuristic concepts.
Musk hasn’t confirmed the plan as yet, but has tentatively indicated that talks are happening, which would immediately solidify X, as it continues to slowly re-establish its ad business.
According to Bloomberg, the main catalyst for the proposed merger would be xAI’s demand for capital, with Musk’s AI project burning through around $1 billion per month at present. The need to keep expanding its data processing capacity, in order to drive better, more responsive AI tools, has left Musk looking to alternative intake sources, in order to take on OpenAI, Meta and Google in the expanding AI race.
Meta would be the key challenger here. Meta has outlined plans to invest hundreds of billions into its AI infrastructure, in its drive towards true artificial general intelligence (AGI), which is the next stage of AI development.
Musk is also keen to drive the AI shift. Spurned by being ousted in the early stages of OpenAI, which he had helped to establish, Musk has dedicated himself to building his own AI infrastructure that will outperform all others, in the hopes of winning lucrative AI supply contracts, particularly to the U.S. government.
Musk has the inside running on this front, though it’ll be tough for xAI to keep pace with the resources of Meta, which has an ongoing cash stream through its successful ad business. Musk has real-time data intake from X (and Tesla to some degree), and hardware resources, which he’s also sharing across his businesses.
But with X’s ad business remaining flat, he needs more cash to keep the xAI evolving, which is why merging with SpaceX could be the move.’
Though there is also a more direct link between the two companies that Musk could be eyeing as a major potential revenue stream.
As per Bloomberg:
“In combining his cash-burning AI startup and the more mature SpaceX, Musk may also be crystallizing his vision for launching data centers into space. SpaceX is requesting permission to put as many as one million satellites into the Earth’s orbit for the plan, according to a filing Friday. Analysts have said that a merger of the two would also help Musk complete development of his heavy lift rocket, Starship, to compete for a variety of upcoming launches, including for the US Space Force, Golden Dome missile shield and Artemis moon missions.”
Linking his AI business and his plan for AI data centers in space could end up being a valuable pathway for the future of AI development, and no one else can really challenge SpaceX in this respect.
Maybe, then, a combined SpaceX/xAI would become a business superpower, that could pitch various investors on the potential of data center development in space, maximizing resources for evolving AI projects.
And in the immediate term, that would also make X a line item in SpaceX’s performance update, reducing the emphasis on its own ad intake, and thus, Musk’s need to bow to the demand of X advertisers.
Would that be a good thing?
I mean, X is already under investigation over its Grok chatbot stripping down images of people in the app, while Musk has also sought to make his AI offerings less censored, and more controversial, as a means to drive more interest.
Reducing the need to be concerned about relative ad placement could exacerbate this, though X would still come under regulatory scrutiny all the same.
But it does seem like Musk would prefer to be less burdened by advertiser concerns, as part of his mission to create a more compelling, engaging app experience. And then, maybe, the advertisers would come to the app anyway, as it's where the audience is.
Either way, the proposed merger would have real impacts for X the app, and could lead to significant changes in approach on several fronts.
