The combination of xAI and SpaceX before much anticipated IPO has analysts expecting big things but financial queries remain.
Elon Musk move past week to combine xAI and SpaceX has created one of world mega and most valuable private companies which analysts says offers a mix of potential growth and financial danger as it move towards public markets.
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The two companies are different SpaceX was founded in 2002 and has establish itself as premiere nongovernmental space exploration operation.
Musk XAI venture was started less than three years before to focus on AI and latest social media.
XAI acquired the social media platform x last March.
As spaceX prepares to go public later this year the merger could be Musk way of positioning SpaceX strategy to contest with expected IPO of two of his biggest contest.
OpenAI and Anthropic in AI race said Ali Javaheri a research analyst.
Analyst told media that both entities have something to gain from coming together.
SpaceX gets edge ahead of its IPO and xAI can expand its AI infrastructure while getting much needed injection of cash as one expert put it.
In Monday reveal Musk said the merger will create company with AI rockets space based internet direct to mobile device communication and world foremost real time information and free speech platform.
Space with its massive payload capacity and basically a near monopoly in space.’
I think it is going to help Musk other companies kind of catch up in AI data center race and AI training race said Rocco.
Musk added he desire to create AI data centers in space by launching a constellation of million satellites that operate as orbital data centers.
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Musk is pushing forward this concept.
SpaceX described the satellite plan to regulators according to fling submitted to Federal Communications Commission and reviewed by NBC News.
There is industrial logic behind combining SpaceX which would launch and design satellites that would host the compute with XAI which has experience operating these compute clusters and has Grok model that would run on it.
The concept of data centers in space is conceivable.
Del Deo said one Cynical view of the merger is that SpaceX need sexy narrative ahead of its IPO to get investors more excited in stock and drive sort of valuation that they are hoping for.
Bloomberg said that the merger would value the combined companies at $1.25 trillion with bulk of valuation $1 trillion coming from SpaceX.
A Tuesday note co authored by Dan Ives global head of technology research at Wedbush securities said this would mark largest tie up across Musk enterprises yet.
Forest analyst wrote in Tuesday report that aligning the merger as well as the FCC filing ahead of its Potential IPO as classic Musk valuation inflation.
SpaceX is packing a narrative of hype scalable lo lowest cost AI compute from space the kind of storyline that expands TAM lifts growth multiples and reframes starship as structure cost moat the analyst wrote.
These are classic ingredients for pre IPO narrative life and familiar pattern in Musk era market signaling its positions ambitions are inevitability inviting investors to price in future that emerging has to substantiate.
I can not think of another one that would be more hyped than this everyone is attempting to get a piece of SpaceX he said.
I think it is going to price higher than most people expect and most people expect it to be largest IPO in history.
SpaceX and xAI joining forces has driven gossips over what this means for Musks electric company Tesla.
Tesla announced it earning release that it is investing about $2 billion to acquire shares of XAI is proffered stock.
The two companies entered into framework agreement to evaluate potential AI collaborations Tesla added.
In the long Run, Rocco said he thinks it would be good synergy but that it would be very hard sell.
He said if he were private investor in SpaceX he would just want to come public on its own they have monopoly.
Gene Muster managing partner said in interview that he thinks Tesla shareholders would welcome combination.
