A weekly thread to discuss financial matters - from personal all the way up to global.
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Notes -
Looping in @Mantergeistmann. My pet theory is that the whole thing is a massive cash grab to bootstrap xAI while the funding dries up for Claude and ChatGTP. The latter two keep saying they want to do IPOS soon, even though the CFO of xAI said the company is nowhere near ready, and there's talk that venture capital is pretty much tapped out. Meanwhile, these companies have contracts requiring them to spend eye-watering sums over the next few years, mostly on data centers that are already behind schedule. In the AI space, ChatGTP is the one everyone knows and has the top because of inertia, Claude is the "better" one that all the smart people use, and Gemini is the one backed by Google that everyone uses all the time without realizing it. The others are all bit players with no real path forward, xAI included.
If Musk can turn xAI into a barnacle riding the hull of another IPO, he can secure a lot of cash that would keep the company afloat. Since he's a true believer, I doubt he cares whether SpaceX suffers that much because he'd rather be the AI guy that he currently isn't. Claude and OpenAI are pushing for their IPOs out of desperation, where he at least has a legitimate one. Why else bundle xAI in with it when it was already part of another company? The other suspicious thing is that I've read reports of Grok getting progressively shittier since the merger was announced. There's some discussion that it's because of NSFW stuff, but that doesn't explain why people on the Heavy plan are getting rate limited to hell (it used to be practically unlimited image generation, now I've seen reports that it allows as few as 15 per day, which is less than you used to get on the free tier). The explanation I see is that since he already has a bunch of subscribers under opaque ToS that allow arbitrary limits, he needs to cut monthly compute costs to make the company look better to investors than it is, and can do so without losing too much revenue since only a small number of subscriptions will come due and not be renewed.
So I looked this up and apparently this is the coldest take out there, though I'm always proud of myself for coming to the same conclusions the experts do on my own. It could still be a shrewd business move if OpenAI and Anthropic run out of cash in the near future, but he could have just bought Anthropic outright.
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