The SpaceX IPO Gives Elon Musk Even More Power w/ Sean O’Kane

If these companies don't need as much compute as we think they think they do and the data center build out stuff starts to slow which there are signs that that's already happening. Who needs data centers in space? Right? Like he can sell a lot of dreams to people. That one specifically I do not think he will have much luck selling to public markets over, you know, especially if these other pieces of space X start to fall apart. Hello and welcome to Tech Want Save Us made in partnership with the Nation magazine. I'm your host, Paris Marks and this week's guest is Sean Okin. Sean is a senior reporter at TechCrunch. Before we get into the topic of this week's episode I do have a quick request for you though. It's been a long time since I've done a survey of the Tech Want Save Us audience and I figured now is probably a good time to do a new one to get some insights into what you would like to see more of from the show, maybe even less of to kind of guide where the show goes from here. So I can hear a bit about what you are thinking and that can go into informing my decisions and my thought process as to the kind of guests we have, you know, the goals of the show all that kind of stuff. So if you have a few minutes to give me your insights and your thoughts there will be a link in the show notes where you can go fill that out as I said it won't take you more than a few minutes and I would really appreciate it. So with that said let's get to this week's episode and the subject which is of course the SpaceX IPO as you will probably know by now SpaceX which has been a private company for more than two decades is finally going public and there is a lot of discussion about it for very good reason. It's demanding a very high valuation it will mean a lot for Elon Musk and the power that he wields not just over the company but you know over society more broadly because this is still quite an important company especially in the space sector but increasingly in the AI sector as well as it has absorbed X AI and the X social media platform in recent months. And so I wanted to have Sean on the show so we could get a bigger picture as to what is going on here so we could understand the context of this moment you know what is driving this IPO the kind of science fictional ideas that Elon Musk is using to justify the valuation and the explanation for why this is necessary and how most worryingly this is doing a lot to change corporate governance rules and even the way that many major stock market indexes work to really benefit. SpaceX and Elon Musk in a way that could set some really worrying precedence going forward when we look at these billionaires who have so much power in our society and want to make sure that they hold on to as much of it as possible so I think that this is a really interesting conversation for us to understand where this is going and what Elon Musk is doing now to you know further reshape the world to benefit himself it's not a great development but we should know what's happening and that is of course why I talk to Sean. So I think you're really going to like this one if you do of course make sure to leave a five star view on your podcast platform of choice you can share the show on social media with any friends or colleagues you think would learn from it and if you do want to support the work that goes into making tech won't save us every single week so you keep having these critical in that conversations with so many great guests so that you understand what is going on with the tech industry these tech billionaires what they're doing to our world that all depends on the support of listeners like you so you can join supporters like Ryan and Richmond Virginia and Andre from Google. And Andre from Google rest by going to patreon.com slash tech won't save us where you can become a supporter as well thanks so much and enjoy this week's conversation. Sean welcome to tech won't save us happy to be here I'm really happy to have you on the show I'm following your work for ages you know obviously we're both interested in a very similar person and his companies you can say that yeah and have been writing about them for quite some time you know I feel like you generally write more about Tesla but today we're talking about space. Because you know for potentially obvious reasons the company is finally going public after more than 20 years of being a private company and so there's a lot to dig into in understanding what is going on here because this is likely going to be the largest public offering in history as much as I understand it and I feel like a good place to start you know we we think of space. Think of space X and we think of rockets right you know Starship and the Falcon 9 and and that kind of stuff but there's more to this company than I think people potentially realize especially today so what is space X in 2026. Fantastic question how much time do you have. You know that was still the truth up until not that long ago right like space X was still mostly a rocket launch company an engineering company one that was you know performing missions for NASA sending people to the international space station sending cargo up there and sending satellites to space for other companies. And you know that started to augment a few years ago when they built up this thing called starlink which is its own the company's own sort of satellite internet network you know that's still pretty complimentary and and makes some sense in a lot of ways but it was really the last year where things started to change dramatically where. Elon Musk had started up an artificial intelligence company called X AI he had as we all know bought Twitter and rebranded it to X and turned it into whatever it is now and about a year or so ago he started to fold those companies into space X first X into X AI and we can talk about some of the reasons for you know why he may have done this and then. Last year he acquired using space X stock acquired X AI at you know sort of the alleged valuation of around 250 billion dollars for X AI but no cash really change stands there so now it's a company that still does those launch provider things it's still I mean just this morning as we're recording it just sent a whole new batch of starling satellites into space. I did a cargo mission for NASA a few weeks ago from memory serves me correctly and and they've done some really impressive things on that side but as this IPO filing that was made public recently shows that is not. Not now or maybe no longer a very good business in the way that space X is treating it because it's throwing so much of its money into developing starship for many years space X relied on the Falcon 9 Falcon 9's done hundreds of launches it's proven to be very reusable which is a really novel thing in the space industry but now the company is throwing a ton of effort billions of dollars into developing starship much bigger rocket the biggest rocket that's ever been created. And then on top of that we see that starlink is really the only profitable part of the business I think you could be able to maybe argue if you stripped away some of that stuff and just stuck with Falcon 9 space X may have a profitable business there but starlink is the only one throwing off profit right now and it generated more revenue than the either two sides of the business or three sides of the business combined last year. So something like 11 billion dollars out of the sort of total 18 or 19 billion dollars last year and then the third leg of this is X AI and the sort of various things attached to that so that's X that's rock and sort of the data center component of this which I'm sure we'll talk about too so that's that's a rough estimate and that's losing a ton of money by the way they are not just because it's losing money as a social media company as an AI company but because they're also investing a ton of money into developing data centers in Memphis and Tennessee and and and sort of all this other stuff so that is just absolutely sucking you know down all of the profits that starlink is throwing off right now. Yeah so there's a bunch that I can jump into there and I think that gives us a really good introduction to like what this company is right it feels like he's kind of throwing all the X companies under one umbrella and yeah we'll see maybe more companies are going to get added to that too. Which I should say like that has been a stated goal from me long must for a very long time like he sort of famously helped get paypal off the ground many years ago at one point he wanted to call that company X he held onto the X dot com domain name for a very long time even though you know after he was pushed out of paypal. And you know as Tesla really crested in the 2010s late 2020s there was always this idea that he had thrown around of sort of like combining you know sometimes he would bring it up sometimes shareholders would bring it up as like kind of it almost like a dare you know combine all your companies together and the all you know he would always sort of reference this idea this X holding company so I think SpaceX is the cleanest example we have of that so far. Yeah that makes a lot of sense and you know when we think about these companies like was there a real argument to bring you know beyond you must want to have these companies under one roof like to really combine the social media and AI stuff with the space stuff like is there an obvious argument there which is like I want to bring things together now. There wasn't until very recently I think something that we should consider in any discussion about space X is IPO but especially when we're thinking about how fast it's happening and the sort of rules that are being changed to allow it to happen so quickly and in the shape of it in that sense is that this was not something that Elon Musk was trying to do a year ago this was something that came about very suddenly at the end of last year where you know this is a guy who has. This is a guy who has professed over and over that he hates running public companies he hates the Tesla's public he tried to take it private at one point using Saudi Arabia as like the sort of cash king back in 2018 and that sort of famously ended in a settlement with the SEC because he. And misrepresented that the funding was actually there and so. I don't believe he ever accepted that was the case, but yeah. >> Yeah, we could spend a whole long time arguing about how he's wrong about that, but it is what it is. But yeah, it is something that was not on the radar. Then all of a sudden, the best explanation we get from SpaceX is this idea that as you look at the leading AI labs in the nation and around the world right now, one of their biggest constraints is the access to computing power. Computing power basically directly maps to how many data centers are built out and how full they are of GPUs and other equipment. There are a lot of hurdles to that build out right now. We've seen a lot of resistance to data centers, both for training AI and just for cloud storage, anything else that could require that kind of infrastructure all around the country. Not only does that mean public resistance and a bad public image, but also local state and even federal red tape in some places. Musk has always been pretty averse to those things. I think is a kind way to put it. He has demonstrated over and over again with Tesla and his free non-plant with the lithium refinery that he's building for, has built for Tesla in South Texas with the boring company's facility East of Austin. These are just three examples that come to mind that have had many violations on the environmental side. Rack up over the years or even just a lack of basic applying for a permit to get a driveway built into the boring company facility in Bastrop, Texas. The simplest thing that you should be doing they wouldn't do because they wanted to move faster than that process. I think that as he was building up XAI, there had been a lot of talk in the space industry, especially from some startups that were trying to run basically a shortcut to this idea that I'm about to talk about of creating quote unquote data centers in space by using satellites that would be equipped with the same kind of like data center equipment, GPUs, and processing, all that stuff. That seems to have been the animist for this. I think you can listen to Elon Musk talk about all the other benefits for quote unquote data centers in space, the abundance of solar energy. A lot of that is in the IPO filing. I think the real animating factor is no one's going to stop you in space. The FAA regulates space launches and the landings of the rockets, the air space of it all, but in space, in orbit, there's no one, there's no nimbis in orbit, there's nobody telling you that you're leaking sort of tainted water into orbit, affecting people's groundwater, there's none of that. Even if ultimately that idea proves out, which is a huge if for a number of reasons, and even if the idea of an orbit of data center is less attractive than one on the ground, or one at sea, which some other people are proposing, the fact that it has no one telling him no, I think it's just like, it's got to be at the core. I think that's one of the things that's driving this IPO and how quickly it's moving. Because again, this was not on the table seven or eight months ago, and then all of a sudden it was, and then it's been flat out since then. Yeah, the space scientists and the indigenous people who have problems with all the satellites in orbit and how it's affecting our view of the night sky and what's beyond. I guess they don't have as much influence as the people on the ground who are trying to stop developments. But even still, data centers in space, it's a silly idea. It's crazy for a number of reasons, but you have to think of this in the context of the fact that SpaceX for a very long time, although it does seem like recently this has changed to a degree, has been a company that has nominally been about reaching Mars. And if you think about that, Elon Musk has this sort of inability to think outside the engineering of it all, it is an incredibly fascinating engineering challenge to reach Mars. What you'll never hear him talk about is the biological challenge of sending people to Mars. And I'm not just talking about radiation, which is a huge challenge in its own right. But to the fact that people struggle to exist in microgravity for long times, or just even less gravity than Earth's gravity, our bodies have evolved to be very efficient at one Earth gravity. And that part has never talked about when we're talking about setting up Mars colonies, unsurprisingly, as not mentioned in SpaceX's IPO filing. But when you think of it in that context of like, he views everything through an engineering challenge lens, that makes the data centers an orbit thing interesting on some level of like, you have a ton of talented engineers at SpaceX. They've clearly done something with Starlink in a crazy amount of time, just stood up a satellite network that is in many ways better than any other attempt to create either like mobile or broadband satellite in space, in such a short amount of time. That like, there's part of me that's like, yeah, I want to see you try to figure out those engineering challenges because it does, the people who are most experienced in creating stuff like this that is space hardened and can operate an orbit, they have many reservations about this idea. And usually when those reservations are raised in the public sphere, that only animates Elon Musk to prove those people wrong. A lot of times he can and a lot of times he finds ways to basically shortcut the rules to say it didn't matter anyways. So like, we're in this position where, you know, one of the things I'm looking for in this IPO is like, will, you know, I imagine the price of SpaceX to stock once it goes public will just be mostly vibes based, because it is, that's a, that's what the market is these days, and be like, we won't see any real sort of bearing out of this space data center idea anytime soon. And, you know, I think there's a many, there's a million different ways that you could argue whether or not that is a better option than data centers that are being built online and working with the communities where you're trying to build these things. You know, I think you get back and forth in that cycle a lot. I really think it is, it's an engineering challenge that he views it as such, but it is also like, he doesn't have to deal with all those headaches of, you know, people stopping him. Yeah, and, you know, even when you talk about Starlink, like, you know, there are a lot of people who would have problems with Elon Musk as a person who still use this service because, as you say, you know, it is kind of the best one that's out there right now, even as there are other companies trying to build alternatives, but, you know, there's still a few years behind where Starlink is, right? Just to get to, you know, the broader point that you're talking about there, like the reason for the IPO right now, do you think that's related to space data centers? Is that a justification? Is it related to the company, you know, needing more cash to do not just Starship, but also to build out these data centers, whether they're online or somewhere else, or is there some further motivation from Musk himself or from investors that is finally pushing this to go public after all these years? Yes, and yes, I think, you know, a big component of this, and, you know, related to the space data center thing, I think something that keeps getting lost that is important for people to remember is that Starlink is, you know, apparently a decent business on its own, and, you know, again, it's sort of threw off a couple billion in profit last year on 11 billion in revenue, but that growth of that appears to be tapering already. You know, SpaceX sort of went pretty far and wide with coverage on that. They snapped up a bunch of business deals with airlines, with commercial customers, with governments, and we see some evidence in the, in the IPO filing that that is tapering off because of, you know, sort of what they're charging customers now, and there's reason to believe that maybe there's not a ton more headroom there. This idea of orbital data centers is built around having exponentially more satellites in space than an internet network requires. Right now, SpaceX has about 10,000 Starlink satellites in orbit. As far as I remember, the plan is not to, you know, double or triple or quadruple that Starlink is really, you know, even if the network grows and the user base grows, it's really more about maintaining that network. Now, because they have a pretty decent amount of coverage already, when you're talking about many times more satellites to build a quote unquote data center in space, that naturally requires more launch for SpaceX's launch business. And so it's this thing where like one hand really serves the other of even if they're just trying to prove that tech out, they're already benefiting on the launch side because they have business for the launch side to send this sort of prototypes up in the space. So I think that's a big component of it. And, you know, as far as what they're telling the markets, this is maybe the craziest thing in the IPO filing that I keep coming back to, which is that, you know, when you go public, you show your business, you show how much money you're generating, maybe some projections about how much you're going to be generating. Although there are some limits about that with a traditional IPO, you know, we saw a bunch of companies get into trouble with that when they merged with special purpose acquisition companies a couple years ago where you could promise a lot more and be wrong. I think it's a nice way to put it. But one thing that companies will do is they they will try to size up, you know, here's what we have, you know, we have ideas of where what this will go in the next year or so. But here's like what we think is the biggest picture, you know, something that's almost a bit intangible. But, you know, here's the total addressable market of what we think the businesses that we have now could achieve if everything goes right. And SpaceX is going to the public markets and saying that their total addressable market is around $28 billion, which is roughly US GDP and is a lot of money. That's be real. Yeah, to be clear, $28 trillion, right? Yeah, $28 trillion, yes. And the craziest thing about that is that they are saying that about $22 trillion of that is, quote unquote, enterprise AI, which they don't define in great detail. I had initially assumed when I saw this chart, because I mean, you can imagine that dwarfs what they expect the total market for, launch capabilities to be for what they expect, social media business to be, what they expect, you know, all of those lines of business. I was expecting that to include, you know, this idea of, okay, if you're going to build data centers in space, you're going to rent out the compute. Is this something that we're seeing them shift to even on the ground here now with this sort of last minute deal they've struck with Anthropic very before the IPO? I had initially assumed that, okay, that, you know, how do you get to that crazy of a number and get bankers and lawyers to sign off on it? That's not it. Like it is, they are talking strictly about enterprise AI use. There's some weird language in there about like quote unquote human augmentation, which they don't really define well, but you know, you can read as sort of like, think of the craziest version of like having an agent, you know, AI agent now extrapolated out in like 10 or 20 years. I think that's kind of what they're baking into that assumption. But like we're talking about like B2B SaaS for the solar system. Like that's what they're saying. Like their biggest opportunity is. And that's just a crazy thing to talk about now, especially because XAI is the worst part of the business by far. It's so bad that like its own enterprise products that it is behind on building as it is with most of XAI stuff right now. There's been a lot of reporting about how XAI's own employees didn't want to use Grocks sort of enterprise products. And that's and space XS had to turn to cursor and basically like acquire wink wink nudge nudge will finish the acquisition after the IPO to build up something that actually resembles like a good enterprise AI product now. And so like if you're starting from a place and not to mention the fact that like all of the XAI co founders have left a bunch of the staff have left. And so that's you know it's this shell that space X just paid you know 250 billion worth of stock a couple months ago to acquire. And you're saying that starting from that point you're going to reach $22 trillion of a market. You know there's no timeline attached that that's just insane. It's a it's a the IPO filing itself is crazy in a lot of ways. It's easily the most insane thing. There's the insanity to exactly what you're describing right talking about the enterprise AI applications being a $22 trillion market that they're going to realize in the coming decades or whatnot. But it it was also wild to me to read like I was reading those numbers and I was like this this needs to be wrong you know not in the in the S1 itself in the filings itself but in the news reports that I was reading because I was like wasn't the whole point of this company initially that they're going to go to Mars. They're going to build this big city on Mars and all these kind of like commercial applications. And I'm like okay and now the pitch to investors as this goes public is not that the total address will market is like this Mars colony and all the kind of like new stuff that they're going to be in space. But it's the vast majority is now AI like it was kind of wild to me. Yeah. It yeah. I mean I think there's a lot that can be said about the Mars piece of this. It's interesting to me that the Mars is Mars is mentioned fewer times than the moon in the IPO filing. That's understandable to a degree considering that SpaceX is now you know sort of deeply in mesh with NASA's attempt to return us to the moon with the Artemis missions and it NASA's quite reliant on Starship being a successful rocket that could eventually bring astronauts back to the lunar surface on a very short timeline which is nerve wracking. But there you know it was not more a little more than a year ago that Elon Musk was out sort of in the public saying the moon is a distraction you know Mars was always you know sort of the goal of this and I bring that up not because like I truly believe that he believed it but I do bring it up because like a lot of the people who work at SpaceX believe that like I've you know it is rare to see a lot of SpaceX employees speak out publicly some of them post on X which is no surprise but like you know there have been some interviews where you hear people who are working on the engineering side of things who are working even on the construction side at starbase in Texas they're sort of company town there or even on like the health side like they do have some like science you know scientists folks inside the company who do occasionally publish papers and things and are trying to tease out some of the bigger scientific problems that they have to deal with not just with like space flight in general but in particular with human space flight in orbit for potential moon missions in the future all of them seem pretty realistically bought into that or have been bought into that idea of trying to get to Mars in a way that is I think harder to dismiss than you could with Musk you know changes so many things on a whim including this like where now you know Mars has taken a very big backseat to SpaceX's plans in a way that is not like you know I think a lot of people have spent the last 20 years saying you'll never get to Mars and would not be surprised that they're now focused on moon missions I don't think that's really the you know the sort of animating factor here I think it really is like there's more money to be had in the near term by focusing on something that is a little bit more achievable. Yeah that makes a lot of sense and I was hoping we could dig into some of like the risks around this business as well right you know obviously they're saying there's this massive total addressable market they're going for evaluation of like $1.75 $1.8 trillion in this IPO right it's a massive one but even as you're talking there it's clear that there are issues right that you know this company could clearly run into that would make it not as valuable as it's suggesting and as you mentioned you know the financials are still kind of up in the air where a lot of parts of the business are losing money the business as a whole I believe lost over $4 billion last year and you know there's been top for a while obviously it's been a private company so we didn't know exactly the finances but I believe it's been kind of expected for years that SpaceX wasn't really making money and this is kind of reflected in the details here so if we can break it down by piece and maybe we'll start with the space piece like what are the biggest risks to that part of the company is it that Starship doesn't work out as planned or is there even something something bigger there that risks kind of the vision of what that aspect you know the kind of a regional part of SpaceX would be. Now I think you hit it I mean I think it's Starship all the way and for a few reasons one just the basic will it work let's pull back a minute and think about what Starship is Starship is a much you know SpaceX started really with you know they had some smaller prototype versions but the Falcon 9 the Falcon 9 was like the first real rocket that they developed that became reliable had some of its own problems you know exploded on the launch pad at one point and blew up a satellite that Facebook was going to send into space lost a NASA cargo resupply mission at one point as well so it survived a number of you know sort of call it life of death you know corporate life or death challenges but it ultimately proved out that the Falcon 9 is a very reliable rocket and reusable like I said before in a way that no one has ever made in the space flight industry you know we used to take the space shuttle and refurbish the space shuttle but all the rocket parts that would send the space shuttle into space basically discarded and so it started there Starship began as like okay we have this other kind of elevated version of Falcon 9 which is called the Falcon Heavy which is the one where you have essentially three Falcon 9 stack next to each other in a taller one in the center and that was you know built not only to just send larger payloads into space but also to tap more into government missions it allowed them to send heavier national security missions into space and that really you know beyond NASA that was the thing that really I think helped them click over into becoming a defense contractor because it allowed them to sort of work with the Pentagon much more closely starship is a radical ground up sort of rethink of that system like I said Falcon Heavy is like an iteration really starship they literally started with what looked like a water tower in kind of the middle of nowhere Texas and you know sticking rockets on it and having a sort of like hop up and down which is really how they started the earliest Falcon rocket tests and it issues a lot of traditional aerospace ideas in service of again that kind of like engineering focus of like initially we won't need to make something like this that is like human rated so like what is the most bear cheap version that we can do and then build it out from there and it's an interesting approach for a number of reasons but that's one of the reasons why this is a stainless steel rocket it is not built with composites like we have seen so many other you know rocket systems around the world built with and they've just been sort of steadily scaling that up since then and they have accomplished a lot with starship so far as far as being able to go from water cool you know water tower launching in like the desert you hear the Texas like scrub to a system that is far more evolved and mature and is starting to resemble aspects of the Falcon 9 and Falcon Heavy as far as sophistication and in some ways even taking it further. But the company has yet to prove that the whole system itself, we're now in the third version of Starship. It has yet to prove that that is able to complete a full mission by getting a payload into orbit and also reusable. There are still a lot of those things that they need to prove out. And then the real complications come into even if it SpaceX accomplishes that, which I think there's a chance it does. Even if it gets to the point where Starship works and is reusable, SpaceX has built its component of NASA's attempt to bring us back to the Moon around some really complicated ideas. One of them, and it may be the primary, most complicated one being that takes a lot of propellant to get to the Moon, and it takes a lot of propellant to move astronauts to the Moon. And there are a few different ways you could try to figure out that problem. With SpaceX's solution, especially when you're talking about building a Moon base or anything beyond just one trip of a few humans for a few days or whatever it may be, their solution is in space refueling of like Starship kind of tanker versions of the other stage. And that is just, no one else is trying anything really like that. No one has ever really proved that that could work at a giant scale, especially because it's going to need multiple of those kinds of refueling sort of interchanges for missions like what NASA wants to accomplish. So there are a ton of complications there. So like all of that still needs to be done. And if any of those pieces don't work, that is like the sort of foundation, I think, in a lot of ways of what the IPO is built around. And you see a lot of the risk factors in the IPO mentioned some of this stuff. I mean, there's a lot of hedging in the legal language about, you know, you can see that the SpaceX board essentially says it's, you know, quote, improbable that, you know, the Mars colony and orbital data centers, especially at the scale that Elon Musk has talked about, those are improbable of being achieved. But I think that the more foundational ones are like, you can't even start thinking about those until Starship works. And so I think that's really the biggest thing here of like, and that's why there is so much attention on every Starship test launch where, you know, they need to be making progress and they need to be understanding what goes wrong when things do go wrong because that's their whole approach to things is sort of, we'll let things fail and then we'll figure it out. And if they don't figure all of that out and then start proving out the really crazy stuff like the sort of in orbit refueling, then, you know, none of this really goes anywhere. Yeah, that makes sense. And I feel like I've been reading more and more about, you know, kind of the question of whether Starship will actually end up being as reusable as it was initially envisioned to be. And then if it's not what that does to kind of like the economics of the launch and what that means because obviously it wouldn't be nearly as cheap if you can't reuse as much as the, as much of the, the rocket, right? It's, I mean, like at the basic level, it's very tough to do because you're launching a much larger rocket that's suffering through far greater atmospheric pressures on the way up and, and sort of internal forces from the most powerful assemblage of rocket engines you could ever imagine. You're like, it is just, you know, they, again, they've proven reusability, not endless reusability, very robust reusability without denying it. Just think that's an important distinction. But it is just, you know, it just becomes a greater challenge that scales up with the scale of the rocket and the things that it has to endure on the way up and on the way down. Yeah, it makes perfect sense, right? And so if we, you know, that's kind of the space piece of the business. If we then look at, you know, the newer AI and social media part of the business, like, is the risk there? Obviously, the social media business, I'm sure that's not as big of a thing. We know it kind of loses money, like, you know, but it's not the biggest. He's a, what's the cost of free speech to you? He's a free speech. Right. You know, we can afford to lose money for free speech, right? But, you know, then, then the other piece is obviously the AI bit. And as you're talking about, you know, this is where they're really, you know, putting the idea that this is where most of the kind of the future growth of the business is, right? It on this AI section. And I would imagine there, you know, part of the risk is one that they can actually pull off these, these tools as you're talking about. There's already even the people internally don't want to use them, which is not a great review. And then, of course, there's the bigger piece of like, is the gender to AI market really going to play out as these companies are expecting it to, you know, in the longer term? So yeah, what else is, you know, is that part of it? What else is there? You know, what are the risks to that? Yeah, you know, it's, I laugh at the internal use situation. I mean, it's funny on its face, but it's funny at another level because one of the reasons that Musk has pushed, one of the directions, I guess I should say, that Musk has pushed X AI in. And one of the reasons that it now has two data centers in and around Memphis, Tennessee, both of them aren't quite there, is that he has this fixation with Microsoft being like this pervasive, corporate software behemoth and has criticized the quality of its products, I guess you could say, which like fair. Like, as a news organization, we just had to switch to Microsoft products last year. And it's the first time I've used them in a long time and like, I get it, man, I don't want to use these things anymore. They're terrible. They're big problems. And especially as they've been like trying to inject co-pilot into like every bit of it now too, it's not helping. No, but even the basic stuff, it's like, why is Microsoft were changing the font without me asking it to change the font, whatever. So I am sympathetic to that piece of things. But there is an enormous golf between what he's starting to try to build with X AI and you know, the ultimate version of that goal. As far as the risk stuff goes, you know, you mentioned Gen AI, like, I think there's really interesting thing happening in the AI world that I feel like is going kind of unspoken, which is, you know, we're getting some reports, believe them with as much a grain of salt as you want. But some reports that like Anthropics business is looking better than the others. Let's put it that way, right? Like, they are losing far less money than an open AI. One of the reasons I think they're doing that is because they're easily arguably the most focused of these companies. They are not out here buying a podcast. They are not out here, you know, going in a million of directions. You don't have an image generator generator, which is open AI to be clear buying the podcast for listeners who aren't aware. Yes. And open AI has to be closed. Got help us all. But they are the most focused and aren't doing things that you would think they might be doing, which is like even having an image generator. And I think even other companies like open AI and even Google to a certain extent are not getting the return that they thought they were going to get on some of those things, including image generation, which is like, I think to me, that's a pretty radical thing, considering that that was a lot of people's first touch point for a generator AI alongside LLMs. And so I think there's a huge risk there. There's a huge risk there just like at the highest level of like, is there ever a situation in which you can justify the amount of money you have to spend to make that technology work set against how much you can get from people as customers. And I think that's just an enormous question. That's just one piece of XAI and the challenges that it faces. There are many others like involving the fact that it has a lot of legal challenges around the world because it's been generating CSAM. And there are darker challenges too that I think presenter is to it. And SpaceX at least acknowledges those in its IPO filing so that investors are aware of those too. So I think it's worth pointing that out. Yeah, absolutely. And I think you're spot on there. And I feel like the flip side of what you're talking about with what's happening on the side of the AI companies, right? And the returns and what's making sense is I feel like we've also been seeing more reports from other companies questioning the, I guess the value of spending so much on generative AI and like what they're getting out of it. You know, the most recent being the president of Uber. And I know another Uber executive has talked about this in recent months just about how you know, they don't seem to really feel that the amount that they're spending on AI tokens is really, you know, benefiting them in the long run. And that they should be focused on using humans. Or at least this is what they're saying, you know. That's another, I think, foundational risk here, not just for SpaceX and XAI, but also for the other AI companies, which like I feel like people don't want to talk about this, which is that what people are paying now to use these tools is not necessarily anywhere close to what they should be paying, you know. We are talking about hyper-growth companies that are trying to accumulate and hold on to users for as long as they can so that these other companies like Anthropic and OpenAI can go to their own IPO. It's interesting, like there are aspects from the biggest tech company, IPOs, that they all want to replicate. They want to replicate Amazon being able to lose a bunch of money for a decade or more before they ever even come close to turning a profit. They all want to copy Google and Meta's governance structure or mutate it even farther to basically remove all power from shareholders. But there is that fundamental sort of like the math isn't mapping yet and like nobody cares because there's tens of billions or hundreds of billions of investment going into these companies either through private investment or through this SpaceX IPO that can keep that furnace sort of going for a while. And with respect to XAI, that is why we saw them in some respects take an L and turn to Anthropic and say, "Okay, we've got this IPO coming up. I'm sure they didn't say this explicitly." But without. Our AI technology really catching on anywhere in any meaningful scale, we built out these two data centers that we don't really have the use for, and you seem like you're constrained a little bit because these data centers aren't being built out as fast as we thought, which is another red flag. You can use the compute in one of ours and we'll take a bunch of your money. Just on its face, that agreement shows that XAI and Elon Musk are coming, sort of emitting a bit of defeat there. People have framed that as like, "Oh, this is a huge win," because they're doubling the revenue that's coming from that business in an instant. But you look at the terms of that deal, at least as it's spelled out in the IPO filing, and it is just very tellingly coming from a place of weakness on XAI's side. It is a thing that anthropic can walk away from it any point, just 90 days notice. You do not see that kind of thing hammered into an agreement, unless one side of the agreement has an enormous amount of power over the other one. That is just an unheard of thing. Even in this weird world of AI self-dealing and fast-moving data center releases and all that stuff. That is a huge thing. The last big risk here on the AI side related to all this stuff that we've just talked about is if these companies don't need as much compute as we think they do, and the data center build out stuff starts to slow, which there are signs that that's already happening. Musk has this grand vision of like, "That's not just for powering B2B SaaS for Jupiter or whatever." Also because he wants compute to be able to spread throughout the solar system and the galaxy and help spread consciousness to the stars like whatever. There is a version, but that is, you know, he can sell a lot of dreams to people. That one specifically, I do not think he will have much luck selling to public markets, especially if these other pieces of SpaceX start to fall apart. Yeah, I think very well said. And I feel like one of the other risks is obviously Musk himself. And you mentioned the legal structure. These companies wanting to copy what Google and Facebook had where as people are probably aware, Mark Zuckerberg basically rules over Facebook and can't be displaced because he has this special class of shares that gives him extra voting power or what not. So he controls the company even though he doesn't have, you know, majority of the total shares. And it feels like what Elon Musk wants to do at SpaceX is just kind of turning that up, like putting that on steroids. So what are we seeing there and how is Musk trying to make sure that even though this company is going public, he will still be the emperor of the empire. Yeah. I've been really turning this over in my head, like trying to think of a way to explain it at a simple level, what is SpaceX going to be as a publicly traded company? And I feel like the best thing I can think of is like you're buying like a sort of tokenized bet on like the destruction of corporate governments in America. Like that is like the maybe the cleanest thing I can think of of like as a shareholder of this company, you won't have basically any power for a number of reasons. And so like you can buy it to trade the stock and try to make some money or you can buy it and hold on to it and expect your return to grow over the years and that's fine. But that's not the only reason to go public. Like the reason that we have public markets is that we have people who have a say in those companies. And you know, that power has been diminished over the years for a number of reasons. And you brought up meta, we talked about meta in Google before, you know, that idea of like this dual-class super-voting share structure had not actually been around. Like it was around in the very early days of the stock markets in the United States and it really went away in the great depression for obvious reasons. And they brought it back, you know, sort of with a lot of help from Silicon Valley and a lot of help from VCs and just sort of the way that they were sort of pressing, pressuring financial regulators at the time. Is this also kind of because of the narrative of like the founder that they were able to use and like the idea that certainly helped it. Yeah, yeah. Yeah. But yeah, this is taking things a lot farther for a number of reasons. I'll try to send them up quickly. One, yes, voting control. I mean, you, you, you, Musk is never going to lose voting control of this while he's alive. He has 85% of the voting power now as the company heads to IPO. I am, you know, the expectation is that we'll dilute some, but probably not it, you know, it will not dilute beyond 50, you know, lower than 50%. The company has set itself in the IPO filing. It is what's known as a quote-unquote controlled company, which means that somebody has more than 51% of the voting power. And so don't expect that to change. He helped. He holds essentially all of the class b shares that hold the super voting powers. 10 shares. Everybody else who owns class a shares, which will be offered in the IPO only get one vote per share, you'll never be able to outvote him. That not only means he gets to basically approve every change of the company. It means he'll be able to essentially, there are fewer restrictions on how many independent directors they have when you're a controlled company. So that means you can fill the board with friendlier people. They already have quote-unquote independent directors on their board of directors, which are just not independent directors. There are people with relationships to him or reasons to sort of go with what he wants to do. And it's just, you know, they're not going to really break from him. So the control is an enormous piece of this. And then the other piece is sort of like stuff that SpaceX is doing in its filing and also the result of some of the things that Musk has done with Tesla. Tesla recently had a big fight about its corporate governance that lasted from like 2018 up until last year, essentially, where they had approved a financial compensation package for Musk that was going to be worth around $56 billion. But they didn't really properly disclose to shareholders sort of how that was negotiated. And through this lawsuit that happened in Delaware, we found out that Musk essentially admitted he was negotiating against himself. Like usually in the situations you're supposed to recuse yourself, the board is supposed to handle that stuff. There are compensation committees assembled. But he didn't do that. And ultimately the judge ruled that that was the case. And so therefore, this shareholder got one the case and was supposed to take a bunch of money and the pay package got struck down. That pissed off Musk a lot. Eventually it got turned around by the Delaware Supreme Court. So good on him. It didn't really ultimately matter. But it pushed him to move away from Delaware and into Texas. And the reason that that's important is that Delaware has spent decades century really building up a body of case work and a very clear understanding of sort of and a quick turnaround in the court cases of sort of corporate power and challenges that shareholders can bring and being able to resolve those disputes quickly. Texas doesn't have any of that sort of case law history to rest on. They have a new business court that could go in any direction. You can imagine which directions it's going to go with the way that Texas goes with these things. And so SpaceX is basically, there are a couple different ways as a public company shareholder. You can try to sue the company or sue on behalf of the company against directors if you think that there's fraud. And to put it simply, all of those ways, all of those avenues that you typically have, SpaceX has thrown up a ton of red blocks for. So it's going to force some of these challenges through the Texas business court, which will be very friendly to SpaceX. Some of the challenges that you typically could have taken in federal court, you now have to own 3% of SpaceX's stock by Texas's state rules in order to bring those challenges, which if they IPO at 1.75 trillion, it means you have to own a $52 billion stake in the company. Like, hey, no one's going to be able to own that other than an enormous institution and then be those institutions are going to be disincentivized from ever trying to challenge him. And so there's just all of these things that are happening. And then he also is ensuring that he's controlling the company. It's interesting. I heard Ann Lichten who is a law professor who I spoke to about this for the story that I wrote has also made a good point elsewhere where she's looking at, she didn't say this specifically, but she was essentially looking at like some of the vulnerabilities that he has had at Tesla, where he owns 20% of the voting power at Tesla. But there have been a lot of lawsuits like I've wanted to just mention, and a lot of other challenges and questions about his consistency of leadership there going forward. What she has said is he's like, duly insulated himself from all of those challenges here at SpaceX. So not only is he making sure I won't have to face X, Y, or Z problem again as the ruler of SpaceX. I'm also going and creating an outer wall of defense against my control. And one more of those things that happens is there is this like already kind of heavily marked compensation package that he has at SpaceX where he can unlock untold amounts, you know, it's a billion shares. So like, I think there's been reporting that the IPO price will maybe be around $100 or $100. So, you know, already that's $100 billion, maybe worth of a compensation package. If the, you know, it scales up, he has to accomplish a bunch of different things. He has increased SpaceX's valuation to multiple trillion dollars. So like, you can imagine that package could be worth far more, maybe a trillion dollars or more. The value of it almost doesn't even matter. Though his billion shares are all more super voting shares, the mocking has happened around he gets, he gets to, he can't sell any of it until they have a colony on Mars of a million people. But he doesn't need to sell them. He already has them and he can vote them. And I think more importantly, so that insulates he already has crazy vote control. So now he will have an assurance that, you know, even if there is some kind of delusion down the road of shareholder power, He can insulate against that because he has these new shares he can vote. But more importantly, I think for a lot of reasons, he can borrow against those shares. And that's something that he's done for a long time at Tesla and at SpaceX. He uses his giant stakes in these companies and he borrows a ton of money against them. That's not only a way to dodge paying tax on those unrealized gains now, or dodge taxes by issuing a salary that you would have to pay tax on. But it's also a way for him to access a ton of capital and deploy at how he sees fit, whether that's in a presidential election or starting up other startups and things like that. There's just so much power funneling to him here that, again, back to the original point made, it's hard to really, cleanly explain to people what this is because this is not a public company in the sense that we've been used to these days. And while things have been moving in this direction, this is just a singular example of something mutated that is going to be on public markets. Yeah, and I guess it sets up the risk then that if this company can do it, what other companies are going to try to replicate in the way that we had other tech companies wanting to replicate what Google and Meta did with their structures. If Elon Musk and SpaceX can get away with this, which it looks like they're very much going to, then what does that set up for the future? And just to pick up on a few of the points that you were making there, you mentioned how only institutional investors are going to be able to own this big of a stake in the company to be able to challenge him. And I already saw, you know, Denmark's, I think, public pension fund or something saying that they wouldn't invest in SpaceX because of the governance issues with it. And so then I guess the question sort of becomes if bigger institutional investors are not even going to be willing to get that big of a stake because of the risks that could come with being associated with this company. And I guess you have to imagine that, you know, if he doesn't want to be held to account at all, and there have been these issues at Tesla, as you've been mentioning, rolling Tesla eventually into SpaceX would make even more of those go away because at SpaceX, I believe it was in one of the stories of yours that I read. He will be the CEO, the CTO, Chief Technology Officer, and the President of the board. So he's like just taking up all of these major positions, you know, feel free to comment on any of that. But I also have a question around the kind of inclusion in these index funds, right? You know, the NASDAQ 100 and potentially the S&P 500, you know, which basically bring together all of these major companies. And a lot of the reporting suggests that SpaceX is going to get like inclusion into these funds or, you know, these kind of collection of companies very quickly, which will also help to maintain, you know, kind of its value or kind of like flood in money. What do we make of that? And again, feel free to comment on any of the other things I mentioned there. Yeah, I mean, we should definitely, let's talk about that really quickly because that's a, you know, a thing that I think has gotten a lot of attention. I think it's important. SpaceX will list on the NASDAQ stock exchange. You basically have two choices of the company like this, the NASDAQ or the New York Stock Exchange. The stock exchanges themselves are not just a place where stocks get treated, but they also play this other important role where they kind of hand select, they have criteria that are supposed to be met, but they kind of hand select companies to fit into these indexes than the NASDAQ 100 or, you know, New York Stock Exchange has its own. And one of the things that's happened with public market investing over the last, you know, especially the last decade and the last five years is that there has been this sort of proliferation of what are called index funds. So like you investor, you know, you 401k holder, it can be tough, you know, like there are all these people out there who are telling you, you know, buy into my fund because I actively manage and I'll pick the best stocks for you or, or you can, you know, do spend all your time doing your own research and reading 10k filings or S1 filings and making your own bets. But like, what if we just told you that like you could put your money in this fund that owns, you know, and an assemblage of percentage of stock of all these other companies that are kind of similar, some might just be the ones that make the most money on a certain exchange. Some might be tied together by what they do and they may have similarities there. But these index funds that sort of are meant to say like, head your risk, pick this one. And in particular, these exchanges have their own indexes that a lot of index funds map to and the reason that's important is because like, even if you're looking at all of this stuff where boy, I'm interested in SpaceX, but this governance stuff really scares me because I'm afraid I'll never be able to take any action as a shareholder because I don't like what the company is doing. You may still wind up invested in this company anyway as if you own a 401k or if you're, you know, just sort of a public markets investor who's bought into an index fund. You can have a lot of feelings about that either way. I think the index fundification of the market has some downsides to it. I think the bigger risk to people is this idea that not only is SpaceX going to be included to those things, that was always going to probably be the case, but it has pressured these exchanges to change the criteria for those index listings. And so not only change their criteria, but accelerate them. So it used to be like, you would do a public, you do this thing called seasoning where the exchanges are just basically trying to say, let's just see how you float for a bit, you know, on the public markets and let a price sort of settle out and show that you're, you know, you are what you are. That's going away now for these larger companies. And the problem with that is that if you used to know that a public company was maybe going to make it to the S&P 500 or the Nasdaq 100 in like six months or so, there would be some trading around that as you got closer to that date because you could say, oh, look, they've got a profit now and they do this and they take that box. And so like they can, they're eligible for the S&P 500. So that was its own little market. But now you know that they're going to be included in a matter of days post IPO. And when you know that they're going to be included in this index, that means you know that a bunch of investment funds are going to buy into it. And they have to buy it. The index funds themselves have to buy into it if it gets listed into the Nasdaq 100. And if you know that, then you know that now is going to be a cheaper price for the stock, most likely, then it will be when they come in because they have to buy in at whatever price it is. And so that's going to create a ton of pressure up front at the IPO to drive the price up. There are a number of other things that SpaceX is doing to drive the price up at IPO too. They're only selling a very small percentage of the company's shares relative to what IPO is normally allocated. So that also restricts the supply and increases the demand. And so there are all these things that are pointing to and you know, a sort of architected IPO that will drive the price up. Not to mention just the general sort of you know, enthusiast Elon of it all where like, you know, he used to just say stuff on Twitter and like, people would trade a stock that sounds like the thing he said up for a day, just to have fun with it. And the risk there really comes from if we get to the other side of those index inclusions and the index funds that hold your 401k or the index funds that you're directly invested in, bought in at that artificially elevated price, you run the risk of getting to the other side of that and seeing the market really finally take a sober look at SpaceX for what it is, which we haven't really said is not a business that should be valued at 1.75 trillion. And that's my personal opinion. I'm no financial expert, but like, you know, by all metrics of how companies tend to be valued, what they're making and even what they're promising in the near term does not equal that. And in any way, there's a real risk that that comes down and you get into this situation where these index funds or the 401k have bought it in a high price and now have a huge amount, potentially huge. It's limited by the fact that these funds only buy percentage of these stocks, but like, you're now starting from a worse place than you were just a few weeks or a few months ago. That's fascinating. You know, especially, you know, as I hear you describe that I think a lot about Tesla, right? And how there've been talks for a long time. You know, this isn't a controversial thing to say, but Tesla is way overvalued for, you know, the business that it is for the money that it makes for what it even might become, right? And a lot of that valuation is based on hype and excitement, but also on promises that, you know, are very wishy-washy and are likely not going to pan out. And now to see a lot of that replicated, but on a much greater scale with SpaceX, you know, obviously, I think brings up some major concerns. And so I guess my final question for you is this IPO is clearly coming quite soon. There's a lot to discuss around it. I'm sure there's still going to be more information that's coming out. It's going to come out about it, but where do you see things going in the next little while? You know, are there things that we didn't discuss that you think are worth mentioning about this? Or, you know, what are the biggest things that you're going to be watching? Well, I really do think it's important for people to think about how little they're going to be able to do as public shareholders of this company. I just really, it sounds like a real, like kind of, you know, teachery thing to profess, like, you know, you must eat your vegetables with this sort of cocaine ride that is this stock. But like, it's just important because we've never seen such an imbalance as far as I can tell of power when it comes to the people who hold the stock of a company versus the people who run it. And you know, that matters not just like at a philosophical way, but because like Elon Musk is a guy who's demonstrated over the years that he's willing to take shortcuts and also demand a ton out of the people who work for him to the level that is detrimental to those people in some ways and in differing ways. And you don't have that check over him in this situation now, you know, as you, it was still an uphill battle at a Tesla. or his privately held companies, but it is, you know, this is now a public company and that check is just not gonna be there. And you could sell the stock of you on the stock, but like you're limited there too by sort of a number of forces. I expect this to, you know, go up. Number will go up, I imagine. I don't know how far it will go up or how long it will go up, but the thing that I'll be looking for is once we get to the other side of those index inclusion, especially, there is a bigger gap here than at Tesla, as far as the fundamentals of the business and what they have to talk about to the public investors and to the analysts and a lot of the people who help shape the narrative of the stock and everything versus what they're promising. And what I mean by that is like at Tesla, yeah, they're making some really crazy promises. Optimus is gonna usher in this age of abundance and we're gonna have everybody's gonna have high universal income because robots will do everything and whatever. You know, some of the people believe that stuff and that's why they hold onto the stock and I think it's gonna go up. Other people are like, yeah, sure, that's nice to have if that ever happens. I've got an option on that in the future by holding this stock now. But I also think there's a pretty good business here as far as the car company and the energy storage business. And it's not, you know, those two things are not anywhere near each other as far as the promise and the actual practice of it. But, you know, it is a more reasonable gap to manage than its basics, where its basics, when we get on these earnings calls now with Elon Musk and whoever else will be on them, they're gonna be talking about Starlink. And boy, that's not gonna sound as exciting as like, you know, even Tesla's sort of car business that isn't growing anymore. It's not as exciting as that. And the gap between what the company is actually doing versus what is being promised is just so much larger than it is a Tesla. And I'm interested to see, for a number of reasons, I don't think that there are going to be ways for this to go wrong. But I do think that, you know, especially while Starship's being proven out, that that gap's gonna be something to watch. And, you know, will people just be too fed up with I really can't hear about how like Starlink is only growing at 20% this year anymore when you were talking about getting us to Mars? - Yeah, absolutely. I think there's gonna be a lot to watch here. And, you know, I think as you mentioned, the what it does to accelerate Elon Musk's power is something to be very concerned about as well. Sean, really great to get all of your insight on all of this. You know, we're gonna continue watching it and certainly reading your reporting on how things are going. Thanks so much for taking the time. - Thanks for having me. - Sean Okane is a senior reporter at TechCrunch. Tech won't save us with Bated Partnership, the Nation Magazine, and is hosted by me, Paris Marks. Production is by Kylie Husson. Tech won't save us relies on the supporter. Listeners like you to keep providing critical perspectives on the tech industry. You can join hundreds of other supporters by going to patreon.com/techwontsaveus and making a pledge of your own. Thanks for listening and make sure to come back next week. (upbeat music)