Will the SpaceX slump pop the AI bubble?
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ABC Listen, podcasts, radio, news, music and more. Hi, I'm Patricia Carvellis, the host of Politics Now. And sometimes it can be hard to cut through all the noise from the Canberra bubble. But on the Politics Now podcast, bursting it wide open is our core business. I'm joined by the brightest minds at the ABC to break down the polyspeak and have a chat about what's actually going on behind the scenes. It's called Politics Now and you can find it on ABC Listener.
At the end of last week, Elon Musk's SpaceX shares took a tumble. The shine and hype had come off just over a month after it went public. But what does that mean for the big AI companies and for the so-called AI bubble? Today's staunch AI critic and host of the Better Offline podcast, Ed Zittron, on why he thinks it will all come crashing down. I'm Sam Hawley on Gadigal land in Sydney. This is ABC News Daily. Ed, when SpaceX, Elon Musk's rocket and AI company, debuted on the stock market, there was, to say the least, a lot of hype.
Three, two, one... SpaceX is about to go public, and in the world of initial public offerings, there has never been a liftoff like the one investors will see on Friday.
And, well, initially it went really well for Musk, didn't it?
I mean, kind of. He saw a 15-20% bump.
SpaceX has raised $106 billion in the biggest ever initial public offering. The world's richest man, Elon Musk, has become the world's first trillionaire after investors got their first chance to buy shares in his company, SpaceX.
And then fairly quickly, a reversal over the next few weeks. This stock was always a dog, and I think anyone who didn't say that was trapped inside the Elon Musk industrial complex or just the hyperscaler reality created by the big tech firms.
Yeah, but at the time, and you know, this is just over a month ago when it listed, it was thought that it was a pretty good sign for other AI companies like Anthropic and OpenAI. There were musings that if they listed, you know, these three companies could make over 200 billion US dollars this year alone. There was hype, but there was also hope.
Yeah.
Right, I mean, but there's been hype and hope for this entire sordid era. The entire AI bubble has been about manufacturing consent for an AI industry that really has no business in existing, for LLM outcomes that don't exist, for statements about generative AI that have never actually touched reality, and for companies like OpenAI, Anthropic, and SpaceX that will never turn a profit from their AI services.
Just to note then, at the end of trading last week, as you allude to, SpaceX took a hit with its shares descending below its float price.
After flying up to the moon, SpaceX shares seem to have encountered a rough landing. Prices down by a massive 33% from its record high.
Well, Ed, let's consider then more deeply this AI boom and its future, particularly when it comes to OpenAI. Now, OpenAI and Anthropic, they both lodged IPOs last month, along with SpaceX. They said they intended to float this year, but that hasn't happened yet. Why do you think?
Well, I think in OpenAI's case, they lost a little under $21 billion on $13.07 billion of revenue. These figures were confirmed by the Financial Times after I reported them. OpenAI's costs are massively outstripping its revenues. And yeah, I imagine that plus the kind of dwindling hopes of the SpaceX IPO have kind of made the idea of OpenAI listing kind of difficult.
OpenAI filed to go public last month, but the initial reactions from investors, it's true to say, giving the company cold feet and giving the whole market some shivers.
OpenAI also, per the New York Times, were trying for a trillion dollar valuation. Apparently that was going to be more difficult, by which I mean impossible, than people realized. So I think that's why that held back. I think Anthropic is in a weirder position because they were doing gangbusters earlier in the year, and I'd be very curious to see where their growth is going. But fundamentally, the story about AI has moved from this kind of dreamlike hysteria.
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