Former Tesla Inc. (NASDAQ:TSLA) board member Steve Westly said Elon Musk’s xAI could challenge Anthropic, OpenAI and Alphabet Inc.’s (NASDAQ:GOOG) (NASDAQ:GOOGL) Google, but warned that entering artificial intelligence’s top tier will demand heavy spending and execution.
Westly Warns AI Push Demands Heavy Lifting
"Can xAI really break in with the big boys Anthropic, OpenAI and Google? I think they can, but that’s going to be heavy lifting," Westly said on Bloomberg Television on Tuesday. He added that beating General Motors (NYSE:GM) and Ford (NYSE:F) in electric vehicles was "a lot easier" than tackling those AI leaders.
His warning followed SpaceX’s (NASDAQ:SPCX) first earnings report as a public company. Second-quarter revenue nearly doubled to $7.8 billion, while the company posted a $541 million net loss, or 9 cents per share. Starlink revenue rose 66% and subscribers doubled to 12 million. Shares fell 9% in premarket trading on spending concerns.
SpaceX Earnings Reveal Costly Compute Expansion
The results exposed the cost of SpaceX’s AI push after its February acquisition of xAI. Quarterly capital spending reached $18.4 billion, including $15.83 billion for AI infrastructure. The AI division generated $2.6 billion in revenue, more than triple the year-earlier level, but remained unprofitable. SpaceX signed another $6.7 billion in cloud contracts after the quarter ended.
Westly called SpaceX "an incredible growth engine," citing launch leadership and Starlink expansion. But he said xAI must add users and sell to consumers and businesses, warning, "This is not going to be easy."
Musk defended the spending. "We’re building AI compute capacity at scale faster than anyone else, we believe, and we’re significantly improving our AI models," he said. SpaceX expects more than two gigawatts of computing capacity this year and nearly 10 gigawatts by the end of 2027.
Musk Defends Spending As Competition Intensifies
SpaceX has signed compute agreements with Anthropic, Google and Reflection AI that Reuters estimates could produce more than $28 billion in annual revenue. Musk also softened criticism of Anthropic after meeting its leaders, writing, "No one set off my evil detector."
Model competition remains tougher. Similarweb data showed Grok accounted for 3.4% of global generative-AI chatbot traffic in January, versus 64.5% for ChatGPT and 21.5% for Gemini.
Westly cautioned against dismissing Musk. "You hate to bet against Elon Musk," he said.
According to Benzinga’s Edge Rankings, SPCX stock shows a weaker price trend across Short-, Medium-, and Long-term horizons.
Price Action: SpaceX stock was trading 11.24% lower at $111.24 in pre-market trading on Wednesday.
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