Key Takeaways:
Elon Musk’s xAI is burning cash at an accelerating rate in its bid to challenge competitors like OpenAI and Anthropic, with newly released financials showing a $6.4 billion operating loss in 2025 ahead of a planned public offering for parent company SpaceX.
"The future of AI will be determined by control of the physical stack," SpaceX said in its S-1 filing with the Securities and Exchange Commission, justifying a plan to scale its Grok model to “multiple trillions of parameters” through massive infrastructure spending.
The IPO prospectus, filed ahead of a reported June roadshow, reveals the AI unit’s losses widened from $1.56 billion in 2024 to $6.4 billion in 2025. The cash burn continued into 2026, with the AI segment losing another $2.47 billion in the first quarter alone on just $818 million in revenue. Capital expenditures on AI are set to more than double year-over-year, hitting a $30.8 billion annualized run rate based on Q1 spending of $7.7 billion.
The filing frames a stark choice for investors in the upcoming IPO, which could value SpaceX at $1.75 trillion. They will be funding a high-risk, capital-intensive vertical integration strategy—from data centers to orbital satellites—against competitors like Anthropic, which reportedly expects to post its first operating profit in the second quarter.
The gap between what xAI earns and what it spends is widening significantly. While revenue grew 22 percent from $2.62 billion in 2024 to $3.2 billion in 2025, operating losses ballooned by more than 300 percent. The 2025 revenue included $365 million from X and Grok subscriptions and $88 million in data licensing, per the filing.
Despite the heavy investment, active use of the company's AI features remains limited. As of March 2026, SpaceX recorded 117 million monthly active users for Grok, representing just over one-fifth of the 550 million total users across the combined X and Grok ecosystem.
SpaceX is betting that owning the entire AI stack, from chips to satellites, will ultimately provide a competitive advantage. The filing highlights the rapid deployment of its Colossus and Colossus II data centers, which collectively provide about one gigawatt of compute power for Grok's training and inference. The company claims this vertical integration allows it to "train and iterate frontier models at lower cost and higher velocity."
The next generation of Grok, described as a "step change in reasoning in depth and overall intelligence," will require a dramatic expansion of this infrastructure. The filing also provides the first concrete timeline for Musk's vision of orbital data centers, stating SpaceX intends to begin deploying its AI compute satellites as early as 2028, promising a cheaper alternative to terrestrial compute.
SpaceX's public debut, expected on the Nasdaq under the ticker "SPCX," is poised to be one of the largest in history. It will test public market appetite for a business model that prioritizes long-term, capital-intensive projects over near-term profitability. The AI unit's heavy losses are currently being subsidized by SpaceX's profitable Connectivity segment, primarily driven by the Starlink satellite service, which generated $7.17 billion in adjusted EBITDA in 2025.
The IPO arrives as AI rivals OpenAI and Anthropic also prepare for public offerings, creating a potential three-way battle for investor capital in 2026. While xAI's losses mount, Anthropic is reportedly on track for a 130 percent revenue jump to $10.9 billion in the second quarter, a sharp contrast that will be front-and-center for investors evaluating the AI landscape.
This article is for informational purposes only and does not constitute investment advice.
