SpaceX's IPO soars amid AI industry's circular investments and risks

At a glance:

• SpaceX's IPO priced at $135 per share, making it the largest in history and valuing Elon Musk as the world's first trillionaire.
• The company's Colossus 1 data center in Memphis will provide 300 MW of compute powered by 220,000 Nvidia GPUs to Anthropic under a $1.25 billion monthly deal.
• Interlocking financial ties between AI firms and infrastructure providers like Nvidia, Microsoft, and Amazon raise concerns about systemic risk if AI demand falters.

What happened

SpaceX, officially Space Exploration Technologies Corp., finalized its long-awaited initial public offering (IPO) at $135 per share, marking the largest IPO in history. The valuation has officially made Elon Musk the world’s first trillionaire. While SpaceX is best known for rocket manufacturing and its Starlink satellite constellation, it has increasingly positioned itself as a major player in the AI infrastructure space through its data center operations. These facilities are now being monetized through high-profile deals with leading AI companies, including Anthropic and Google, which are paying substantial sums for compute resources to power their models.

The company's Colossus 1 data center in Memphis, Tennessee, is billed as "the world’s biggest AI supercomputer." In a landmark agreement, Anthropic will pay $1.25 billion per month for access to 300 megawatts of electricity powered by 220,000 Nvidia GPUs. Additionally, SpaceX secured a multiyear deal with Google, where the tech giant will pay $920 million monthly for compute services through July 2029. These deals underscore SpaceX's strategic pivot toward becoming a critical infrastructure provider for the AI boom, leveraging its data centers to generate revenue while supporting competitors in the field.

The financial web

The AI industry’s explosive growth has created a tangled web of financial interdependencies. Companies like OpenAI, Anthropic, and Google are locked in a cycle where they purchase AI chips from Nvidia, which in turn invests in these firms to fuel their expansion. For instance, in November, Anthropic agreed to a $30 billion deal for expanded Azure cloud access—powered by Nvidia GPUs—while Nvidia and Microsoft each pledged up to $10 billion and $5 billion in investments, respectively. Similarly, Amazon committed $50 billion to OpenAI in March, with OpenAI reciprocating by investing $100 billion into its existing AWS partnership. These arrangements, often described as "picks and shovels" strategies akin to the California Gold Rush, highlight how infrastructure providers profit from the speculative fervor surrounding AI, even as the core technology remains unproven at scale.

SpaceX’s data center ventures exemplify this trend. By monetizing its Colossus 1 facility and securing long-term contracts with Google and Anthropic, the company is aligning itself with the "picks and shovels" model. However, this strategy also ties SpaceX’s fortunes to the success of AI adoption. Musk’s vision of space-based data centers powered by solar energy adds a futuristic allure, but technical feasibility remains uncertain. The IPO’s initial success hinges on investor confidence in these ambitious plans, yet the risks of over-reliance on a volatile AI market cannot be ignored.

Why it matters

Critics warn that the AI industry’s circular financial structures pose systemic risks. Companies like OpenAI and Anthropic remain unprofitable, relying on speculative investments to fund their operations. If AI demand fails to meet projections from figures like Sam Altman or Elon Musk, the massive data centers built in recent years could become obsolete. This would leave AI firms unable to meet financial obligations to chipmakers and cloud providers, potentially triggering a collapse that reverberates beyond Silicon Valley. The U.S. economy, bolstered by tech investments amid inflation and tariff challenges, could face significant consequences if these interdependencies unravel.

The stakes are particularly high given the scale of capital involved. SpaceX’s IPO and its data center deals with Google and Anthropic represent billions in potential losses if the AI bubble bursts. While Musk’s track record of delivering on ambitious projects lends credibility to his vision, the lack of tangible returns from AI technologies introduces uncertainty. The industry’s trajectory will depend on whether AI delivers the transformative economic impact promised—or if it becomes a cautionary tale of speculative excess.