Tech • IA • Crypto
Claude & ChatGPT fall into Musk’s hands
9.4/10TL;DR
Elon Musk dismantled xAI and pivoted toward controlling AI infrastructure, leasing massive compute to rivals while positioning SpaceX as a central player ahead of a historic IPO.
KEY POINTS
xAI dissolved and absorbed into SpaceX
Elon Musk shut down xAI, the AI company founded in 2023, folding it into SpaceX AI. Its flagship model, Grok, became a product line within a broader aerospace and infrastructure business. The move erased xAI as a standalone entity just months before a major SpaceX IPO, signaling a strategic reset rather than continued direct competition in AI models.
Clear competitive lag in AI models
xAI trailed significantly behind rivals like OpenAI and Anthropic in both revenue and adoption. While Anthropic reached roughly $47 billion annualized revenue, xAI remained near $500 million, about 18 times smaller. Enterprise adoption reflected this gap: Claude reached about 48% usage, ChatGPT 56%, while Grok lingered near 7%.
Failure in the key battleground: coding AI
The most lucrative AI segment—code generation and automation—accounted for about 55% of enterprise AI spending. Anthropic dominated with 54% market share in coding tools, while Grok failed to gain traction. Weak training data and late entry left Musk’s model largely irrelevant in the highest-value segment.
Internal instability and financial losses
xAI faced major internal challenges, including the departure of all 11 cofounders and multiple senior engineers. Financially, the company burned up to $1 billion per month, losing $6.4 billion in 2025 alone. These issues made it difficult to justify xAI as a centerpiece asset for investors.
Pivot to infrastructure and compute dominance
Rather than competing on models, Musk shifted toward owning AI infrastructure. SpaceX now focuses on compute power, chips, energy, and satellites, aiming to supply the backbone of AI systems. This includes ambitious plans for orbital data centers powered by solar energy.
Massive compute deals with rivals
SpaceX leased its Colossus supercomputer—over 220,000 Nvidia GPUs—to Anthropic in a deal worth up to $1.5 billion per month through 2029. A separate agreement with Google adds roughly $900 million per month for additional GPU capacity. Together, these deals generate around $26 billion annually.
Strategic flexibility in compute supply
The agreements allow SpaceX to reclaim compute capacity if needed, giving Musk leverage over competitors. While rivals gain immediate access to scarce resources, they remain dependent on infrastructure controlled by SpaceX.
Bet on Cursor and vertical integration
Musk secured an option to acquire Cursor, a leading AI coding platform with over $2 billion in annual revenue, for up to $60 billion. The deal can be partially paid in SpaceX stock, turning IPO valuation into acquisition currency. This would give SpaceX a full stack from infrastructure to applications.
IPO narrative shift
By embedding AI within SpaceX, Musk reframed the narrative from “Is Grok competitive?” to a broader vision involving gigawatt-scale compute, satellite networks, and energy systems. This repositioning aims to justify a valuation potentially exceeding $1 trillion, despite skepticism from analysts.
Energy and chip manufacturing ambitions
Musk is investing over $100 billion in semiconductor production and energy infrastructure. Projects like Terafactory and Tesla’s battery systems aim to solve a critical bottleneck: powering large-scale compute. This layer is increasingly seen as more defensible than AI models themselves.
Long-term strategy: owning the ecosystem
The overarching strategy mirrors Musk’s past successes with Tesla and SpaceX—not leading with the product, but controlling the infrastructure behind it. By supplying compute, energy, and hardware, SpaceX positions itself as indispensable regardless of which AI model wins.
CONCLUSION
Musk’s retreat from direct AI model competition appears to be a calculated pivot toward infrastructure dominance, aiming to control the foundation on which the entire AI industry depends.