The Muskonomy

SpaceX's Side Hustle

Here is a fun corporate governance story. Elon Musk’s rocket company, SpaceX, is investing $2 billion in his artificial intelligence company, xAI. This is part of a larger funding round for xAI, which is a private company. SpaceX is also a private company, but it has outside investors. Musk runs both. He also runs a public car company, Tesla, and a social media company, X, which he bought with a lot of debt and recently merged with xAI. All of these companies do business with each other. It’s an interesting arrangement!

Here’s the Wall Street Journal on the SpaceX deal:

Elon Musk’s SpaceX has agreed to invest $2 billion in his artificial-intelligence company xAI, investors close to the companies said, nearly half of the Grok chatbot maker’s recent equity raise.

Musk has repeatedly mobilized his business empire to boost the AI startup, which is racing to catch up with OpenAI. ...

Musk has long used SpaceX to support his other businesses. He personally borrowed $20 million from the company to help fund Tesla early in its history and used SpaceX’s equipment to set up his tunneling venture, The Boring Company. More recently, he turned to SpaceX for a $1 billion loan around the time he was acquiring what was then-called Twitter, which he paid back shortly after it out.

The logic of what you might call the Muskonomy is that all of his companies are part of a single, interlocking machine designed to build a specific future. X provides the real-time data to train the Grok AI model. xAI provides the intelligence for the Tesla Optimus robot. Tesla builds the robots and the Dojo supercomputers to train them. And SpaceX, with its piles of cash, can help fund the whole operation.

This isn't just theoretical. Last year, for instance, Musk had a large order of Nvidia GPUs—which are very expensive and hard to get—rerouted from Tesla to xAI. He later explained that Tesla didn’t have a place to put them yet, so it was fine. Tesla shareholders might have disagreed, but what can they do? He’s Elon Musk.

And now he’s taking it a step further. On Monday, Musk posted on X that Tesla shareholders will get to vote on investing in xAI directly, adding, “If it was up to me, Tesla would have invested in xAI long ago.” Which, you know, is sort of up to him, but a vote is a nice gesture.

This kind of creative financing is necessary because the AI arms race is so capital-intensive. Musk is planning a “million GPU” supercomputer for xAI, a project that could easily cost over $40 billion. That’s a lot of money, even for him. So it makes a certain kind of sense to treat all of his companies as one big pool of capital to be deployed against his highest priority, which is clearly winning the AI race. The main risk, of course, is that if one part of this interconnected empire runs into trouble, it could pull the others down with it. It’s a highly leveraged, high-risk, high-reward bet on one man’s vision. Which is, supposedly, what investing in Elon Musk has always been about.

The Two-Speed Chip Market

There is a lot of enthusiasm these days for state-sponsored industrial policy. The Japanese government, like the US and European governments, is spending a lot of money to bring chip manufacturing back home. It has backed a contract chipmaker called JS Foundry, which was going to make power semiconductors for things like electric vehicles and home appliances. This is a good story about building resilient supply chains and national champions.

Well, JS Foundry just filed for bankruptcy this week. It turns out that while the government was happy to give them money, customers were not. Here’s Nikkei Asia:

Japanese government-backed contract chipmaker JS Foundry has filed for bankruptcy protection with the Tokyo District Court on Monday.

The chipmaker has been hampered by operating cash shortages. It has had issues with finding customers for its services as Chinese chipmakers increase their presence in the market.

In 2025, JS Foundry began negotiations with overseas companies for a capital tie-up to enter the silicon carbide power semiconductor segment... However, the talks collapsed, leading JS Foundry to decide to file for bankruptcy.

This is awkward, and not just for the Japanese government. The failure of JS Foundry is a perfect illustration of a weird dynamic happening across the entire semiconductor industry. On the one hand, you have the AI boom, an absolute gold rush where Nvidia can’t make enough GPUs, TSMC can’t build enough advanced fabs, and companies are planning to spend trillions of dollars on AI data centers.

On the other hand, you have… everything else. The market for the less-glamorous, older-generation chips that go into cars, PCs, and industrial equipment is a bit of a mess. Demand is weak. Factory utilization is hovering around 60%, well below healthy levels. And Chinese manufacturers, who are locked out of the most advanced AI tech by US export controls, have flooded this mature market with cheap chips, crushing margins and driving competitors out of business.

This is the two-speed market. In one lane, you have a high-stakes, hyper-growth race to build the engines for artificial general intelligence. In the other lane, you have a brutal, commoditized knife fight over the chips that actually run most of the modern world. JS Foundry was trying to compete in the slow lane, and it got run over.

Its failure is a cautionary tale for the politicians in Washington, Brussels, and Tokyo who are writing billion-dollar checks to onshore chip manufacturing. It is also a useful reminder that while governments can print money to build factories, they can’t print customers to buy the products.

The Scoreboard

• AI: Cognition to Buy AI Startup Windsurf (CNBC)
• AI: Anthropic, Google, OpenAI and xAI Granted up to $200 Million for AI Work From DoD (CNBC)
• Semiconductor: Nvidia to Resume H20 AI Chip Sales to China in US Reversal (Bloomberg)
• EV: Tesla to Sell Model Y cars in India, Starting at $69,770 (Reuters)