SpaceX's record-shattering public debut has become the first major test of whether investors will continue funding AI companies that burn billions while chasing distant profitability. The rocket company's $75 billion raise, larger than all US IPOs combined over the past two years, signals both the enormous capital requirements of AI development and growing uncertainty about returns.

"The move itself is a kind of a double-edged sword for xAI," said our analyst Jacob Bourne on a recent episode of "Behind the Numbers," referring to Elon Musk's AI startup that SpaceX acquired earlier this year. "On the one hand, it now has access to SpaceX's resources and clout. The downside is that xAI now is part of SpaceX's lack of profitability story."

SpaceX lost $4.3 billion in Q1 on roughly $5 billion in revenues, even as it plans to expand AI data centers on Earth, develop AI microchips, and launch orbital AI compute infrastructure. That gap between spending and returns raises the question of whether its AI bets will ever pay off.

Why AI companies are rushing to public markets

ChatGPT maker OpenAI and Claude maker Anthropic have both filed confidential paperwork with the SEC for potential IPOs this fall, following SpaceX's lead. The timing reflects an urgent need for capital as AI development costs spiral.

"They're burning money at an unconscionable rate and they need to find new sources of capital," said our analyst Nate Elliott. "We've never seen this kind of CapEx spend."

Anthropic filed for its IPO less than 72 hours after closing a massive private financing round, illustrating the sector's insatiable appetite for funding.

"OpenAI in particular has tapped literally every source of private capital it could find anywhere on Earth," said Elliott. "And the next source of capital is almost certainly gonna be the public markets."

The companies are spending in preparation for a future where AI dominates the economy, but that vision requires believing AI will actually take over significant economic sectors, that specific companies will emerge as winners, and that eventual revenues will justify current spending levels.

Post-IPO challenges threaten focus and execution

SpaceX's stock volatility following its debut, a strong opening followed by a sharp decline, has dampened expectations for the IPO wave that many predicted would define 2026, analysts say.

"Early investors like venture funds buy into the possibilities and promise of startups and new techs like AI," said Songyi Yoon, managing partner at Principal Venture Partners. "The public market places more value on profits and practical business models."

Going public brings more than capital. It also brings distraction: quarterly reporting requirements, employee focus that drifts to the stock price, and short-term market pressure that collides with long-term product goals.

"The amount of distraction, not for investors, but inside the company, is phenomenal," Elliott said, drawing on experience at a company that went public. "Employees can lose their focus because they're pulled in a lot of new directions."

For Anthropic, whose mission centers on AI safety work, quarterly earnings pressure could threaten its core values. The company may face difficult choices between maintaining its safety-first approach and meeting investor expectations for rapid growth.

These companies need public market capital to survive. But the transition makes them harder to run and harder to compete, and the money arrives with strings that may bind tighter than they expect.

Competition blurs as AI giants expand across sectors

The emergence of the MANGOES acronym (Meta, Anthropic, NVIDIA, Google, OpenAI, and SpaceX) attempts to categorize AI's biggest players, but experts say competitive boundaries are increasingly blurred as companies expand beyond their original lanes.

NVIDIA has moved beyond chips into open-source model development. Google is competing more directly with NVIDIA on AI chip manufacturing. Meta's AI mode for social platforms positions it against Google in AI search. OpenAI and Anthropic, initially focused on consumer and enterprise markets respectively, now pursue all segments simultaneously.

"I see it basically as a racetrack with no lanes, and there's a lot of weaving around going on," Bourne said.

However, Elliott cautions against viewing these companies exclusively as AI businesses.

"Most of these companies have almost no revenue from AI, and most of these companies are not AI businesses," he said. "They're businesses that do other things."

Alphabet generated $250 billion last year from search advertising alone, a figure the entire AI industry won't approach for years. Meta derives virtually all revenues from advertising, with AI contributions rounding to zero. SpaceX's AI operations represent roughly one-sixth of its business, with the remainder coming from launching rockets.

The exception is cloud providers Microsoft, Amazon, and Alphabet, whose cloud divisions are seeing meaningful revenue growth from AI spending by other AI companies, a circular dynamic that raises questions about sustainability.

The AI narrative dominates headlines and drives massive capital expenditures, but these remain companies that make money doing other things. Whether AI eventually becomes their primary business (or justifies current spending levels) remains an open question that public market scrutiny will help answer.

Listen to the full episode.

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