Musk-Altman Rivalry Could Become A 'UFC Match' Funded By Shareholders, Says ‘Dean Of Valuation’ Aswath Damodaran

• Damodaran said SpaceX faces various risks in its AI-linked business, including competitive pressure, heavy investment, and an “ego” battle with OpenAI CEO Altman.
• Musk has been a vocal critic of OpenAI and Altman, but recently lost a high-profile lawsuit against the AI company.
• SpaceX and Anthropic have filed paperwork for their IPOs, while OpenAI's submission is imminent.

New York University professor Aswath Damodaran, widely known as the “dean of valuation,” on Thursday highlighted several AI-related risks facing SpaceX ahead of the rocket and AI company’s anticipated initial public offering, including the fierce rivalry between founder Elon Musk and OpenAI CEO Sam Altman.

“There are a multitude of risks that SpaceX faces in each of its businesses, but the one that I would be concerned about the most is that it will overreach in the AI business, beginning with an overestimate of the target market for AI products and services and the strength of its own competitive position in that market, and following through with investments that reflect those misplaced assessments,” Damodaran wrote in a blog post published on Thursday.

SpaceX’s $1.8 Trillion Valuation Untenable? 

Outlining the risk from Musk’s control of the company, Damodaran said it might become concerning if he doubles down on capital expenditures and acquisitions in the AI space, even after it becomes clear that the AI market is much smaller than anticipated or that xAI's offerings are not as good as the competition.

“If you add to this mix the antipathy that exists between Musk and Sam Altman, you have the potential for a UFC match between two monstrous egos, funded by tens of billions of dollars of shareholder money,” Damodaran wrote.

Damodaran's main points are that, while the post-prospectus data slightly increase SpaceX's equity value to $1.3 trillion, anchored by Starlink's strong growth, the rumored $1.8 trillion market cap is too high due to massive margin pressures and the capital intensity of its overhyped xAI business.

Musk Vs. Altman

Musk, one of the co-founders when OpenAI started as a research lab in 2015, has been a vocal critic of OpenAI and Altman. He sued OpenAI over what he believes is the company’s reversal of its stated business goals after it converted to a for-profit entity; in another lawsuit, Musk has complained that OpenAI and Apple were engaging in unfair business practices by promoting ChatGPT on Apple’s App Store.

Last month, Musk lost the first lawsuit. A California jury ruled that Musk waited too long to file his claims, effectively tossing the case out over expired statutes of limitations. Many observers saw the event as the clearing of a major hurdle for OpenAI's planned initial public offering.

SpaceX's AI positioning is not entirely bad, Damodaran argued later in his blog post. “The positive twist that a SpaceX optimist would put on these numbers is that the spending on AI in particular is a positive, indicating that the company is not planning to settle on a niche market strategy, but instead will go head-to-head with Anthropic, Google and OpenAI for the enterprise solutions markets.

SpaceX and Anthropic have filed paperwork for their IPOs, while OpenAI's submission is imminent. These listings are expected to be among the largest in public market history.

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