SpaceX Makes Bold Investment in xAI... Funding Crisis Concerns Emerge

The Wall Street Journal (WSJ) reported on July 13 (local time) that SpaceX, the space development company founded and led by CEO Elon Musk, has decided to invest $2 billion (approximately 2.8 trillion won) in the artificial intelligence (AI) startup xAI, which is also managed by Musk.

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This investment is part of the xAI equity fundraising announced by Morgan Stanley last month and accounts for 40% of the total $5 billion (approximately 6.9 trillion won) being raised. This is the first time it has been revealed that SpaceX will invest in xAI.

This is an extremely rare case of SpaceX investing in a company outside of its own affiliates, and is interpreted as a sign that the connections between Musk-led companies are becoming even stronger. Reuters reported, "SpaceX's $2 billion investment in xAI is an unusual move for the aerospace company, which has rarely invested outside its core business areas."

Recently, SpaceX's internal cash reserves have reportedly exceeded $3 billion (approximately 4.1 trillion won), but the company has not been very active in investing in other companies. In 2021, its acquisition of the satellite communications company Swarm Technologies for $524 million (approximately 721 billion won) was one of the few major external investments SpaceX has made in recent years.

There are concerns that this investment could pose a risk to SpaceX. xAI spends billions of dollars annually on AI model training, which could excessively deplete its liquid assets. Additionally, some point out that investing a large amount of capital in a field not directly related to its core aerospace business also presents a strategic risk. If xAI fails as a business or is unable to generate profits, SpaceX could see its funds tied up and incur losses.

WSJ pointed out that the $2 billion investment could also be a financial burden for SpaceX. By committing $2 billion to xAI, SpaceX would be allocating about two-thirds of its total cash reserves. This would leave the company with less capacity to respond to unexpected costs, such as rocket failures or satellite damage, in the future.

There are also views that internal transfers of funds between affiliates could become a leadership risk for Musk. One investor told WSJ, "By entangling his various companies with each other, Musk may strengthen his control, but the transparency and independence of each company could be weakened."

Some analysts say that this type of internal funding arrangement was influenced by difficulties in raising external capital due to conflicts with U.S. President Donald Trump. The Financial Times (FT) reported that the fundraising process has been disrupted as the relationship between Musk and President Trump has soured, and that Trump's threats to cancel Musk's government contracts have heightened investor concerns. This has raised the possibility that debt financing could become more expensive as a result.

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