Musk’s empire to undergo a major merger? AI is so expensive that even the richest man has to “search every pocket.”

Musk’s empire to undergo a major merger? AI is so expensive that even the richest man has to “search every pocket.”

When AI begins devouring cash flow, even the world’s richest man—Elon Musk—must force his business empire into “restructuring mode.” On January 31, Bloomberg reported that as costs of artificial intelligence investments continue to climb, Elon Musk is reassessing the capital structure of his companies. Discussions about an IPO for SpaceX or a merger with Tesla or xAI are shifting from mere possibilities to actual options. At the Davos World Economic Forum, Musk spoke enthusiastically about humanoid robots, reversing aging, and even sending solar-powered data centers into space. But the real question is: **Where will the funding for these grand ambitions come from?** ## AI devours cash, becoming the starting point for all change The direct catalyst for this round of structural adjustments is AI’s funding needs, which now surpass the capacity of any single company. xAI currently burns through cash at a rate of **$1 billion per month**. Financial documents show the company had a **net loss of $1.46 billion in the third quarter of last year**, with cash expenditures reaching **$7.8 billion over nine months**. Even after several rounds of massive fundraising, this rate of cash burning continues to intensify the pressure. Dave Mazza, CEO of Roundhill Investments, commented: > “This isn’t a plan written 20 years ago, but AI is pulling all business much closer together.” Besides model R&D, infrastructure construction is a true money-eating behemoth. Last year, xAI told investors it needed at least $18 billion to build data centers, but even that figure now looks conservative. By comparison, OpenAI plans to invest more than $1.4 trillion in infrastructure over the next few years, and Meta has promised $600 billion by 2028. ## Discussion of SpaceX IPO and mergers is essentially “cash flow consolidation” To fill this financial black hole, Musk is turning to his most profitable asset—SpaceX. Market sources say that **SpaceX is exploring IPO plans as early as June this year, with a target valuation of $1.5 trillion and a fundraising goal of up to $50 billion, which could make it the largest IPO in history.** This is not just about raising money for rockets but also to fund Musk’s grand vision of “sending solar-powered data centers into space.” Even more radical plans are being considered: **SpaceX may merge with Tesla or xAI.** There are even rumors about a “grand unification”—bringing energy, manufacturing, satellites, and rocket launches under one roof. Musk himself wrote on X: > “Surprisingly, my companies are moving towards convergence.” Joseph Alagna, founding partner of Buttonwood Funds, pointed out: “The current market demand for AI companies simply cannot be satisfied. You’re starting to see these companies tap public markets for lower-cost funding.” ## xAI’s soaring valuation, narrowing room for financing Despite xAI’s current valuation of **$230 billion**, analysts note that its financing options are shrinking. Intelligence analyst Mandeep Singh estimates xAI’s cash burn in 2025 could reach **$11 billion**. In contrast, valuation upgrades for Anthropic and OpenAI depend more on revenue growth than mere scale expansion. This makes **acquiring assets with healthier cash flow through mergers** a practical option. ## Tesla is no longer the “safety cushion” Within this grand narrative, Tesla’s role is becoming both subtle and precarious. In the past, Tesla has been seen as the “cash backbone” of Musk’s ecosystem, but that role is fading. Despite holding **$44 billion in cash**, its core automotive business has seen sales decline for two consecutive years. The company announced this week it will put **$2 billion into xAI** and plans to **double capital expenditure**. Wall Street is wary. Evercore ISI analysts predict that due to massive spending on AI infrastructure, **Tesla could face a $5 to 7 billion cash flow deficit in 2026.** ## Investors: The game of fear and greed For this “capital stew,” Wall Street’s attitude is sharply divided. Institutional investors generally worry about the risks of financial entanglements. SLC Management Managing Director Dec Mullarkey noted investors prefer companies with clear strategies that are easy to track, not a “big conglomerate” whose performance requires deep digging to understand. Retail investors, however, are cheering. For many loyal Tesla fans, a merger means their Tesla shares become tickets to participate in SpaceX and xAI growth. Alexandra Merz, a Tesla shareholder with 220,000 followers on X, said: “At last, Tesla shareholders—the only public company—have a right to participate in the growth of the other two giants.” Regardless of the form of the deal, the direction is set: Tesla and SpaceX are feeling a gravitational pull, both being drawn toward an industrial complex centered on xAI. Risk Warning and Disclaimer The market has risks; investments should be made cautiously. This article does not constitute personal investment advice and does not take into account individual users’ specific investment goals, financial status, or needs. Users should consider whether any views, opinions, or conclusions in this article align with their own situation. Investments made based on this information are at one’s own risk.