San Francisco Frontiers - Musk defends AI ambitions as IPO reveals trouble

"Whether it is the best remains to be seen, but I will never give up. Never," Musk wrote on his X social media platform this week.

The pledge came after SpaceX's newly filed stock market prospectus disclosed that Anthropic -- the AI company behind the Claude chatbot -- will pay SpaceX $1.25 billion a month for access to the Colossus data centers, the vast computing facilities built to train Musk's Grok AI models.

Musk said the arrangement is a short-term deal and that SpaceX, which owns xAI, could reclaim the capacity if needed. "We might need it back at some point," he wrote.

XAI's main product is the Grok chatbot, now in its fourth generation, which is built into the X platform and competes with ChatGPT and Claude across text, image and video generation.

It has also landed a Pentagon contract worth up to $200 million alongside rivals including Google and OpenAI.

Built quickly, the Colossus facilities in Memphis have been a source of controversy, after xAI installed dozens of natural gas turbines to power the site -- drawing protests from civil rights groups who said it worsened air pollution in a predominantly Black neighborhood.

The deal with Anthropic has fueled questions about xAI's competitive standing.

The IPO filing revealed that xAI and social media platform X -- formerly Twitter, and merged with xAI last year -- posted an operating loss of $6.4 billion on total revenue of $3.2 billion.

More than 50 researchers and engineers have left since SpaceX absorbed xAI in February, with departures hitting teams working on Grok's coding, voice features, and the infrastructure used to build new frontier models.

Musk in March said he was rebuilding the company "from the foundations up."

XAI's Grok has also courted controversy, after the chatbot generated nonconsensual explicit deepfakes that spread across the X platform -- prompting regulatory investigations in the UK and EU and a French police raid on X's Paris offices.

- Rocky years ahead -

Musk urged patience, comparing xAI's trajectory to SpaceX's own rocky early years.

"SpaceX had achieved nothing of note after 3 years and was written off as dead after 6 years," he wrote. "Let's see where things stand 3 years from now."

SpaceX is targeting a valuation of as much as $2 trillion in an IPO expected next month, anchored by Musk's pledges to build data centers in space and settle humans on Mars.

Anthropic and ChatGPT-maker OpenAI are also preparing for their own public offerings.

The broader question of whether eye-watering AI spending will ever pay off is also dogging Meta.

Chief executive Mark Zuckerberg told shareholders Wednesday the company could pivot to selling cloud computing services if it ends up with more data center capacity than it needs.

Meta has projected capital expenditure -- primarily for AI data centers -- of between $125 billion and $145 billion this year, even as its AI offerings have so far struggled to gain traction.

K.Torres--SFF