As AI begins to consume cash flow, the world's richest man—Elon Musk's business empire is also forced into &#34;restructuring mode.&#34;
On January 31, Bloomberg reported that as the costs of investing in artificial intelligence continue to rise, Elon Musk is re-evaluating the capital structure of his companies. Discussions around a SpaceX IPO and potential mergers with Tesla or xAI are evolving from &#34;possibilities&#34; into real options.
At the World Economic Forum in Davos, Musk spoke about humanoid robots, reversing aging, and even sending solar data centers into space. But the real question is: Where will the funding for these grand visions come from?
<h2>AI Consuming Cash, Becoming the Starting Point for All Changes</h2>
The direct reason driving this round of structural adjustments is that the funding demands of AI have exceeded the capacity of any single company.
xAI's current cash burn rate is approximately $1 billion per month. Financial documents show that the company incurred a net loss of $1.46 billion in the third quarter of last year, with cash expenditures reaching $7.8 billion in the first nine months.
Even after completing multiple rounds of large-scale financing, this rate of cash burn is amplifying pressure.
Dave Mazza, CEO of Roundhill Investments, commented:
<blockquote>
&#34;This isn't a plan that was written 20 years ago, but AI has pulled all businesses closer together.&#34;
</blockquote>
In addition to developing models, infrastructure construction is a cash-consuming beast. xAI informed investors last year that it would need at least $18 billion to build data centers, but this figure has now proven to be conservative.
In contrast, OpenAI plans to invest over $1.4 trillion in infrastructure over the next few years, and Meta has also committed to investing $600 billion by 2028.
<h2>SpaceX IPO and Merger Discussions, Essentially &#34;Cash Flow Integration&#34;</h2>
To fill this funding black hole, Musk is turning his attention to his most profitable asset—SpaceX.
Market news indicates that SpaceX is exploring an IPO as early as this June, with a target valuation of up to $1.5 trillion and a financing scale of $50 billion, potentially becoming the largest IPO in history.
This is not only for rocket financing but also to fund Musk's grand vision of &#34;launching solar data centers into space.&#34;
An even more aggressive plan is in the works: SpaceX may merge with Tesla or xAI. There are even rumors of some form of &#34;unification&#34; that would integrate energy, manufacturing, satellites, and rocket launches under one roof.
Musk himself wrote on X:
<blockquote>
&#34;Surprisingly, my companies are heading towards integration.&#34;
</blockquote>
Joseph Alagna, founding partner of Buttonwood Funds, pointed out: &#34;Currently, the market demand for AI companies is unmet. You will see these companies starting to access funding at lower costs through the public market.&#34;
<h2>xAI's High Valuation, Financing Space is Narrowing</h2>
Although xAI's current valuation is about $230 billion, analysts indicate that its financing difficulties are increasing
According to intelligence analyst Mandeep Singh's estimates, xAI's cash burn could reach $11 billion by 2025. In contrast, the valuation increases of Anthropic and OpenAI rely more on revenue growth rather than mere scale expansion.
This makes the option of &#34;binding&#34; cash flow-rich assets through mergers and acquisitions a realistic choice.
<h2>Tesla is no longer a &#34;safety net&#34;</h2>
In this grand narrative, Tesla's role is becoming subtle and dangerous.
In the past, Tesla was often seen as the &#34;cash backup&#34; within Musk's system. However, this role is weakening.
Despite having $44 billion in cash on its balance sheet, its core automotive business has seen sales decline for two consecutive years. The company announced this week that it will invest $2 billion in xAI and plans to double its capital expenditures.
Wall Street is cautious about this. Analysts at Evercore ISI predict that due to the massive investments in AI infrastructure, Tesla may face a cash flow deficit of $5 billion to $7 billion in 2026.
<h2>Investors: A game of fear and greed</h2>
Wall Street's attitude towards this &#34;capital stew&#34; is extremely divided.
Institutional investors are generally concerned that financial entanglements could pose risks. Dec Mullarkey, managing director at SLC Management, pointed out that investors prefer companies with clear strategies that are easy to track, rather than a &#34;hodgepodge&#34; whose performance requires deep digging to understand.
However, retail investors are cheering. For many loyal Tesla fans, the merger means that their Tesla shares will become tickets to the growth of SpaceX and xAI.
Tesla shareholder Alexandra Merz, who manages an X account with 220,000 followers, stated, &#34;This finally gives retail shareholders of Tesla, the only publicly listed company, the right to participate in the growth of the other two giants.&#34;
Regardless of the form of the transaction, the direction is set: Tesla and SpaceX are feeling a tremendous gravitational pull towards an industrial complex centered around xAI

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As xAI accelerates its cash burn rate, discussions surrounding the IPO of SpaceX and potential mergers with Tesla or xAI are emerging. Essentially, this is an attempt to integrate cash flow, computing power, and infrastructure. For the market, an AI-centric "Musk consortium" is taking shape, but transparency and risk assessment are also on the rise

- Elon Musk's business empire is entering a restructuring phase due to rising AI costs impacting cash flow.  
- SpaceX is exploring an IPO and potential mergers with Tesla or xAI to secure funding for ambitious projects, amid rising operational expenditures.  
- Analysts express concerns about Tesla's diminishing financial safety net as its automotive sales decline, while investor sentiments vary between caution and excitement over potential business consolidation.

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Musk's empire merger? AI is too costly, even the richest must "search every pocket"