The Prior Merger

Let’s start with this: not everyone is aware that SpaceX acquired xAI in February. For the uninitiated, NNNN is the company behind the Grok models of Muskian branding, not to be confused with Groq, both of which are named after a strange synonym for “to understand.”

The financial breakdown goes like this: with a SpaceX valuation of $1 trillion, and an xAI valuation of $250 billion, the combined value of the newly merged firm is $1.25 trillion.

A Feb. 5 Reuters release explains how the deal was structured:

“The approach, ​known in corporate M&A as a triangular merger, is a commonly used structure in public-company transactions designed to be tax-efficient and limit legal exposure, M&A attorneys say. As a subsidiary, xAI's debt, legal liabilities and contracts remain separate from the corporate parent, allowing xAI to run its operations independently while helping to insulate SpaceX ​from any investigations and litigation X may ⁠face.”

Part of that liability is around Grok allegedly creating its own kind of strange peep art that many see as exploitative of real people, deepfakes of women and children in bikinis, that sort of thing.

The bottom line is that since xAI is now part of SpaceX, whatever happens with the IPO deeply impacts Musk’s AI play.

XAI and Anthropic

The Information also just published a piece about how xAI is now “powering” Anthropic.

A piece at Analytics Insight words it differently, announcing that the Amodeis’ firm “signed a massive long-term deal with Elon Musk’s xAI to secure AI computing infrastructure.”

“The agreement … reflects a broader trend across the AI industry,” writes Somatirtha. “Companies are increasingly investing in giant GPU clusters and renting computing power much like cloud service providers.”

But this particular partnership, again, bears on what isn’t just a single-vertical play: the SpaceX IPO will be a much broader part of the market fabric, especially where AI is consolidating the market in particular ways. For one, an AI chip maker (Nvidia) is now the largest American tech stock by market cap. And there’s another trend underway, too.

Other IPOs

This has to be factored into the equation: Cerebras, the maker of the enormous myriad-core “dinner plate” chip, also went public, May 14, as CBRS, at $185 a share. At press time, the stock’s value is hovering around $220, which might get retail investors excited about other tech stocks like SpaceX, on the prima facia ability of the shares not to get immediately devalued.

The bottom line is this: the pending IPO of the country’s most prominent space exploration enterprise is also a referendum on AI. To think otherwise misses a lot of the critical information that traders need to make good decisions.

“If SpaceX’s IPO goes off as planned, it’ll be a pivotal moment for many of the company’s thousands of employees, who’ll finally be able to sell shares into the public market,” writes Dylan Sloan for Bloomberg. Won’t some also be buying? Maybe, but it does make sense for a career professional to incrementally sell stock, in order to get cash on hand.

I also wanted to add this interesting little tidbit: apparently Fidelity, as one of the more traditional online brokers, is lowering the entrance fee for IPO investors, just for this one offering, and quite a bit, too, from $100,000 or half a million dollars, down to just $2000.

In coverage at Barron’s, Paul La Monica notes how Fidelity is probably doing this due to pressure from brokers like Robinhood that don’t have the same usual requirements.

“Each broker has their own criteria to determine which bids will receive an allocation;” La Monica writes. “Factors can include how big an account is, or in Robinhood’s case, the selection will be random. SoFi said it would be unlikely to give shares to investors who had previously flipped an IPO, or, in other words, selling the stock within 30 days for a quick gain.”

This isn’t a commercial – it’s more to show how the SpaceX IPO is really part of the tech boom. Practically speaking, any new IPO is a secondary AI play, since any forward-thinking company is utilizing models and agents in workflows. But this one just happens to involve a vendor, too.