Musk’s $1.25 Trillion Bailout or Moat — And What He and Altman Are Really Building

The SpaceX-xAI deal is the largest merger in history. OpenAI is building a social network that may require your iris scan. Two moves, one race: who controls the infrastructure of the AI era?

Two announcements in the past fortnight have revealed more about the future shape of the AI industry than anything said at Davos, any earnings call, or any policy paper. The first was Elon Musk merging SpaceX and xAI into a single entity valued at $1.25 trillion. The second was the leak that OpenAI is developing a social network — one that may require biometric verification to prove you are human.

On the surface, the two stories have nothing in common. Look closer, and they are both answers to the same question: in a world where AI models are rapidly commoditising, who controls the infrastructure layer — the data, the compute, the identity, the distribution — that makes those models valuable?

The $1.25 Trillion Bet on Space-Based Compute

Musk announced the SpaceX-xAI merger on 3 February in a blog post describing the combined company as “the most ambitious, vertically integrated innovation engine on (and off) Earth.” The deal values SpaceX at $1 trillion and xAI at $250 billion, and is structured as a share exchange ahead of what is expected to be the largest IPO in history later this year.

The stated rationale is orbital data centres. Musk argues that terrestrial power grids cannot meet the electricity demands of AI infrastructure without imposing hardship on communities — an ironic claim given that xAI’s own data centre in Memphis, Tennessee has faced community protests over emissions and noise. His pitch is that SpaceX’s launch capabilities and Starlink’s satellite network can solve the energy bottleneck by moving compute into space.

The strategic logic is more straightforward. SpaceX generated an estimated $8 billion in profit on roughly $15 billion to $16 billion in revenue in 2025. xAI, by contrast, is burning cash at pace trying to compete with OpenAI, Google, and Anthropic in a race where it is widely considered to be behind. The merger gives xAI access to SpaceX’s profitable balance sheet and, critically, offers xAI’s investors an exit route through the upcoming IPO. Critics have drawn a direct parallel to Tesla’s 2016 acquisition of SolarCity — another Musk-to-Musk transaction that bailed out a struggling entity using the balance sheet of a healthier one.

The deal also complicates Musk’s relationship with Tesla. Just weeks before the merger, Tesla invested $2 billion of public shareholder money into xAI. That investment is now effectively an indirect stake in SpaceX, a transaction Tesla shareholders did not vote on. A lawsuit alleging breach of fiduciary duty was already underway before the merger was announced.

Musk now presides over two companies worth over a trillion dollars — SpaceX-xAI on one side, Tesla on the other — with his net worth exceeding $845 billion. If SpaceX reaches a $1.6 trillion valuation at IPO, he becomes the world’s first trillionaire. Whether xAI’s Grok chatbot can justify its $250 billion price tag is almost beside the point. The real asset is the infrastructure: rockets, satellites, bandwidth, and the promise of limitless compute.

OpenAI’s Social Network: Owning the AI-Era Identity Layer

While Musk is building vertically — rockets to chips to chatbots — Sam Altman is building horizontally. And the social network project, still in early development with a team of fewer than ten people, may be the most important product OpenAI has announced since ChatGPT.

The concept is a human-only platform where users must verify their identity through biometrics — potentially Apple’s Face ID or the Orb, the iris-scanning device built by World Network, another company co-founded by Altman. The goal is to create a social space free from the bots and synthetic content that have degraded trust across every existing platform.

But the strategic play runs deeper. OpenAI needs data. Real-time, human-generated, continuously refreshed data. Publishers are increasingly restricting access to their content; licensing deals are expensive and legally contested. A social network solves the data problem while also creating a distribution channel, an identity layer, and a feedback loop that improves models in real time — the same flywheel that makes X valuable to xAI’s Grok.

Altman has been asking outsiders for feedback on an internal prototype that pairs a social feed with ChatGPT’s image generation capabilities. The project surfaced publicly in April 2025 and has accelerated since. Sora, OpenAI’s AI video app, already functions as a proto-social network with its TikTok-style feed and “characters” feature that lets users insert themselves into AI-generated scenes.

The question is whether users will accept biometric verification as the price of entry. Privacy advocates have flagged the risks of centralised iris data, and multiple countries have already investigated or restricted World Network’s biometric collection. But Altman is betting that the problem of bot-infested platforms has become severe enough — and trust in existing social media low enough — that people will trade a scan for authenticity.

If it works, OpenAI doesn’t just own the model. It owns the identity layer of the AI internet. And that may be worth more than any chatbot.

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