As markets opened Friday morning, Elon Musk-owned SpaceX was poised to become the biggest new addition to the stock market — ever. The company, which also owns X — the social media cesspool formerly known as Twitter — and xAI, set an initial share price of $135. That placed the corporation’s overall valuation at $1.77 trillion. But shares surged once trading officially opened, pushing SpaceX’s value over the $2 trillion mark and officially making Musk the world’s first trillionaire. If the Securities and Exchange Commission approves confidential filings made earlier this year, SpaceX’s massive initial public offering could be followed by IPOs from two other tech giants: OpenAI, valued at more than $850 billion, and Anthropic, valued at more than $960 billion.
All three tech firms are taking steps to go public amid a high-stakes race to control the burgeoning artificial intelligence market. At the same time, questions abound about the hype surrounding AI, its safety issues and pacpotential profitability. This means those dreaming of getting rich with SpaceX’s IPO or any other tech titans should keep in mind: For all the resources Silicon Valley is pouring into these emerging technologies, it’s still possible that predictions of endless growth could turn out to be another LLM-generated hallucination.
For all the resources Silicon Valley is pouring into these emerging technologies, it’s still possible that predictions of endless growth could turn out to be another LLM-generated hallucination.
And should the AI bubble pop, the results for the global economy could be disastrous. In effect, these AI giants are strapping a time bomb to the stock market. If they go down, they might take most of those who went along for the ride down with them.
For months, economists have debated just how much of an effect massive investments in AI infrastructure have had on the U.S. economy. Regardless of its actual effect on GDP, investors have bet big on Big Tech, helping propel the major stock market indexes to record heights. Notably, that stock market boom hasn’t included the companies behind the large language models most widely used: Grok (SpaceX), ChatGPT (OpenAI) and Claude (Anthropic). So far, those firms have relied on investment rounds from venture capital, major institutions such as banks and other private deals to raise funds.
At the same time, many of the companies fueling the AI explosion are also investing in one another. Established multinational corporations such as Microsoft, Amazon and Google are pouring money into purchases from chip manufacturer Nvidia. Nvidia, in turn, has joined those giants in pumping cash into OpenAI and Anthropic, which also purchase Nvidia chips. Musk, meanwhile, used SpaceX to “acquire” xAI from himself, adding a whole new layer to the fiscal ouroboros he’s already fashioned.
But the vast sums being invested and spent have yet to generate sustainable profits. Meanwhile, advanced AI models consume a lot of energy in their computations. Between the cost to keep them running and investments in new research, even the billions in revenue being brought in aren’t enough to generate profits. And some companies that have been pushing their employees to use generative AI are feeling sticker shock as the fees associated with their licenses cut into their own bottom lines. It’s possible that cuts to that spending could depress revenue for AI companies, fueling their quest to tap new funding sources — which look likely to soon include ordinary investors or index funds that house retirement plans.
The timing couldn’t be better for the Center for Economic and Policy Research to have launched its “AI Bubble Monitor” earlier this week to track potential signs that we’re experiencing what would be the third major economic bubble of the past three decades. Economist Dean Baker, co-founder of the center, points out that “the value of the stock market relative to the economy is nearly twice as large as it was at the peak of the tech bubble.” And the stock prices of many tech companies driving the stock market far outshine their earnings.
Already, there are signs that some major financial institutions are getting worried about how much credit to offer based on stakes in AI companies. We have reached a point, then, where new money needs to be injected into this previously closed system. Whereas most firms doing IPOs reserve 5% to 10% of shares for retail customers, SpaceX held back as much as 30%, by some reports.
As things stand, the AI system is like a dazzling array of dominos — eye-catching and poised to topple with the slightest jostling.
While some might be thinking about the potential for people who believe Musk is going to terraform Mars will snap up shares, a better question could be the point made by this New York Times op-ed: “Mr. Musk could well believe his own projections. What’s harder to understand is why so many investors do, given his recent track record of missed deadlines, abandoned products and failed business predictions.”
As things stand, the AI system is like a dazzling array of dominos — eye-catching and poised to topple with the slightest jostling. Should one of these firms prove unable to meet the obligations it has to the other major players, the cascading effect could launch another recession. Rather than inoculating the financial system against this potential contagion, regulators appear poised to greenlight injection directly into the U.S. economy. Amid the talk of trillionaires, it should not be missed that a few people stand to get much, much richer in the short term — and these giant IPOs have the potential to leave everyone else holding the bag if AI proponents’ visions do not become reality.
Hayes Brown is a writer and editor for MS NOW. He focuses on policymaking at the federal level, including Congress and the White House.