SpaceX Tie-Up Could Give xAI A Massive Compute Edge In A $20 Trillion AI Arms Race: ARK Analyst

The SpaceX and xAI merger has got Wall Street talking, with Ark Investment’s Chief Futurist noting it as a win-win situation.

• SpaceX has acquired its artificial intelligence startup xAI to accelerate “space-based artificial intelligence” ahead of the rocket company’s initial public offering.
• On Monday, Musk said he was now looking to harness solar energy from space to power AI goals.
• SpaceX is reportedly targeting a valuation of around $1.5 trillion for the public debut.

Ark Investment Chief Futurist Brett Winton said that the SpaceX and xAI deal was “pretty simple really,” and is a win given the massive bet on computing that Elon Musk’s rocket company was going to place.

“The vast majority of SpaceX's prospective launch volume is going to power AI compute. Whether or not SpaceX and xAI combined, SpaceX was going to place a massive bet on compute remaining a scarce and valuable resource even as the volume of global (and extra-global) compute increases by an order,” Winton said in a post on X.

Winton noted that if computing remains scarce and valuable, the company with the most efficient access to massive computational scale will enjoy significant economic leverage. “SpaceX was already [potentially] committing to making the wager, the combination with xAI allows its shareholders to access the right tail skew,” he added.

SpaceX And xAI Deal

SpaceX has acquired its artificial intelligence startup xAI to accelerate “space-based artificial intelligence” ahead of the rocket company’s initial public offering, increasing retail and investor focus on the public debut. SpaceX is reportedly targeting a valuation of around $1.5 trillion, which would place it near Saudi Aramco’s market value at the time of its record $29 billion debut.

On Monday, Musk said he was now looking to harness solar energy from space to power AI goals, and the demand for electricity from AI cannot be met by terrestrial solutions, mandating space-based AI.

Winton xAI Perspective

Winton said that the foundation model opportunity is worth about $20 trillion in enterprise value over the course of this business cycle. “A precondition to winning the game is securing long-term access to exponentially scaling computational needs,” he added.

“This compute is required to service customers hungry for more-more-more, and to develop the capabilities that will sate the hunger of future customers and unlock that ~$20 trillion opportunity,” Winton said.

He noted that, by directly aligning with SpaceX, xAI secures a first right of refusal on that compute resource, which, once it begins to scale, will become available at a more predictable cadence than if it were relying on terrestrial data centers and needing to piece together infrastructure partners.

“By merging with the compute provider, xAI gets compute at a much lower cost of capital. There is an ancillary benefit for both entities, in that their respective strategies are now also completely orthogonal to that of the rest of the playing field. Win Win,” Winton said.

What Is Retail Thinking?

Retail sentiment on SpaceX was in the ‘bearish’ territory, with message volumes at ‘high’ levels, according to data from Stocktwits.

In the last 24 hours alone, retail message volume on Stocktwits jumped 325%.

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