Can someone breakdown to me how this makes any sort of economical sense? Spending billions and billions to have the 3rd best model while even the number 1 and 2 players already seem to struggle making a profit. What am I missing here? Not trying to go full Ed Zitron but this doesn’t make sense to me.

They have the same dreams as their competitors - finding a breakthrough that gives them an edge over the others and makes them dominant. And also, having the word 'AI' anywhere near your company makes all the right numbers go up, so having an in-house AI division that Musk can bundle with the other companies to pump their valuations with is very helpful to him, even if the product itself loses some money.

„Markets can remain irrational longer than you can remain solvent.”

You could be typing the same about Google or a number of the other labs right now.

A diverse market full of choices keeps it from becoming the browser wars all over again.

Anthropic is already profitable, economics is no longer an issue as they have found PMF in enterprise software market. You might need to update your views.

https://www.wsj.com/tech/ai/mind-blowing-growth-is-about-to-...

The product is the stock.

It is very valuable when you have various bundles of services, such as satellites, AI, and so on, to keep pace with the majors so that you keep pace with their valuation.

These stacking valuations are not additive, they're multiplicative because you additionally market investors to the synergy between them.

Having the third best model statistically is extremely useful in this context.

My guess is that the use here is similar to the reason AWS started as Amazon selling their excess capacity.

Between Tesla, SpaceX, X, Boring Co and Neuralink they probably want the capability internally for a lot of different applications.

If the whole data centers in space thing works out AND people keep protesting/blocking data center build outs on land SpaceX will eventually dominate the entire AI industry just based on escaping scarcity.

Its less about the model; elon is trying to make SpaceXAI a hyper scaler that also happens to have a good model. Grok is just the cherry on top of a powerful AI cluster that can also rent compute to its competitors, like aws.

Commoditize your opponents USP then eat up their engineering talent / silicon / real estate when they fail, perhaps?

I’ll be the first to admit it seems ambitious / implausible to try to (1) undercut the megalabs (2) move everyone’s focus back to tweets and then (3) profit.

A bit like handing out free horses to undercut Standard Oil so that you can go back to reaping the profits of your wheel tapping business.

With that frame of mind, nothing would be done. Why make another search service if Altavista and Lycos already do it?

Likely doesn’t make sense, at least not immediate/mid term. They don’t have to aim for number one though, just for enough cash flow and growth.

The only thing I can possibly think of is that they could use it internally at possibly a lower cost and offer it to people who have a Tesla cheaply. Owning Cursor might help for integration or data collection.

inference is profitable, these companies are in the red because they're paying a premium to get the compute now versus later (because compute is the only moat when open models are catching up)

we're literally looking at insane margins over compute, as energy gets cheaper, margins get wider - china focusing on cheap solar is probably going to be a key reason why their AI is so much cheaper

Grok runs tools stupid fast, just about as fast as Antigravity, running Gemini 3.5 Flash.

Grok is the #1 uncensored easily-available model, and it's also tightly integrated with Twitter.

Frontier is one thing, but low-cost really good models are another. All the chatbots and day-to-day corporate bots are likely to use models that offer the best performance at the lowest cost. I think Grok has an angle here if they can build customer trust.

All they have to do to differentiate is differentiate the shape of worldview through RLAIF/RHLF and system prompts.

SpaceX offers free AI usage to users, along with using AI to power their products so it is effective for them to avoid overpriced API pricing. The models can be designed specifically for their own data centers.

Elon Musk doesn't do normal finance. Trying to understand it will melt your brain.

> this doesn’t make sense to me

My hypothesis is that all the top providers realize that, lacking vendor lock in, all SOTA models in a year or so's time will be similar in capability. Also, open weights models are continuing to catch up in a year's time, sometimes less.

So they are trying to lure you in with differentiating, superior capabilities into their proprietary, non-open, non-standard agent harness.

It's the Hotel California playbook: These amazing capabilities are to attract you like moths to a flame and keep you warm and alive around the flame but waterboard and shock you if you attempt to move away from it. Like AWS Egress charges.

It’s Elon Musk. You try explaining it

[dead]

It sounds like they are building a honeypot for Russia, given Musk's open admiration for Putin.

No one sane would use this platform.

Surely grok has a built-in market with too-online, retired boomers. It's free real estate.

It's simple. Elon's top priority now is "killing the woke mind virus" at any cost, and his Nazi AI is a key tool for that. As long as twitter users take Grok at face value, and spread its talking points all over, it's worth it to him. It doesn't matter if it doesn't make economical sense, it only matters that Elon Musk personally wants to keep it going.

3rd best chat model? 5th or 6th maybe...

GPT

Qwen

Gemimi

MiniMax

Claude

Ollama

GLM

Kimi

DeepSeek

They want your code to be facist too.

People are saying, "There are only a couple of frontier labs. This is a really hard problem and not many people can do it."

Elon's reaction to these kinds of statements is oddly predictable.

Grok build already punched above its weight and is the nicest TUI, claude and codex are clearly vibecoded by web developers that don't understand systems (eating SSDs, spaghetti logic, extinguishing kernel watch limits, etc). I think Anthropic and OpenAI are both engaged in their own theatre, trying to define and redefine what game they are even playing, trying to shift to immeasurables like safety or security or exclusivity. There's definitely room at the top.

SpaceX needs to keep raising many billions every year. The rockets part isn't going to make money for a long time, so diversion tactics

https://news.ycombinator.com/item?id=48828648

Also Elon has a grudge with Sam Altman and wants to beat him