Senior business columnist While SpaceX and xAI are growing their revenues rapidly, they are a very long way short of where Meta is today and the valuation of the Musk companies only makes sense if the eventual sales and earnings from Musk’s extraordinary ambition are extraordinary enough to be discounted back to a trillion or so of dollars of value today. The equations become more challenging when it is recognised that, to realise his ambition, Musk is going to have to raise a lot more than $US75 billion of new capital. Indeed, it would see that the motivation for going public and disclosing the finance of SpaceX that have previously been kept confidential is to create a much larger market for SpaceX’s equity. Advertisement There’s a risk that Musk could undermine what seems to be a great business – SpaceX – by pouring the capital it raises and the cash it generates into xAI, which is an AI business competing with companies with far, far deeper pockets in what is an increasingly crowded field. There are already signs that AI investors are becoming more discriminating. xAI is burning through $US1 billion a month. Bloomberg There are two other big AI companies that have been considering their own IPOs for later this year – OpenAI (which started the AI frenzy when it released ChatGPT in late 2022) and Anthropic. OpenAI raised $US122 billion last week, at a valuation of $US852 billion. Anthropic’s most recent capital rasing was $US30 billion, at a valuation of $US380 billion, in February. Advertisement According to Bloomberg, institutions that took up shares in OpenAI but are seeking to sell down some of their exposures are struggling to find buyers in the secondary market because Anthropic is now seen as having better value and more upside – despite the stoush the company is having with the Trump administration over its insistence that its AI tools shouldn’t be used in warfare without human supervision, nor used for mass surveillance. That differentiation between two of the leading independent AI companies is occurring even as scepticism that the amounts being expended on AI, and the valuations afforded companies like OpenAI and Anthropic will ever generate a commercial return commensurate with the risks. Not every one of the companies chasing their visions for an AI future will survive, given how voraciously the sector is devouring capital and, to date, how significantly the rate of growth in AI investment has been relative to the growth in AI-related revenues. Elon does talk a good vision and, while it’s not clear how much he owns of SpaceX today, it seems likely that a successful float of the entity containing his boldest vision yet could help make him, on paper at least, the world’s first trillionaire. Author Michael Lewis, of The Big Short fame, once wrote, during the dot-com era of the late 1990s, of the “state of pure possibility” inherent in the inflated value of the stocks, saying a company had to be “every so slightly unknowable” to be desirable, in the midst of the frenzy in what turned out to be a financial bubble. Advertisement