SpaceX's forthcoming initial public offering (IPO) filing has revealed substantial risks associated with its AI chatbot Grok, particularly its 'Spicy' and 'Unhinged' modes. These functionalities, designed for less filtered outputs, may expose the company to regulatory challenges and potential reputational damage.
In its IPO preparations, SpaceX disclosed that it has set aside $530 million for potential litigation costs related to complaints against its AI division. These complaints primarily concern Grok's generation of sexualized imagery, raising alarms among investors and regulators.
The acquisition of Elon Musk's AI startup xAI in February significantly increased SpaceX's valuation, pushing it past the $1 trillion mark. However, this acquisition has also introduced new financial and reputational risks. SpaceX states that xAI's mission is to develop 'truth-seeking artificial intelligence,' yet the practical implications have led to the rollout of features with minimal safety measures, attracting scrutiny from various regulatory bodies.
Regulatory investigations are currently active in the United States and elsewhere regarding allegations that Grok has been used to produce inappropriate content involving minors. The filing also notes ongoing class action lawsuits against SpaceX, with the company warning investors that future misuse of its AI technologies could lead to further sanctions, including potential losses of market access, as seen in previous incidents.
The company’s filing describes Grok's modes as 'designed to generate more candid, direct, or less reserved or irreverent outputs.' While these features may appeal to users seeking unfiltered interactions, they also carry heightened risks, including the potential for generating explicit content, misinformation, and various harmful or discriminatory material.
As of March 31, Grok and X together have approximately 550 million monthly users, with 117 million engaging with Grok's AI capabilities. This number falls short compared to OpenAI's ChatGPT, which reports over 900 million weekly users. This disparity raises questions about the long-term viability of SpaceX's AI offerings amid increasing regulatory scrutiny.
Investor concerns have been heightened by warnings from advocacy groups regarding xAI's safety record. These groups suggest that the controversies surrounding Grok could pose a significant liability for investors as the company approaches its IPO.
Despite these challenges, SpaceX's AI division has demonstrated some financial potential. Revenue from its AI services, which includes Grok and X, reached $3.2 billion in 2025, reflecting a 22% increase from the previous year, partly due to increased advertising sales on X. However, the first quarter of this year saw a $100 million decline in ad revenue, attributed to a temporary overhaul of its advertising tools.
The subscription services linked to Grok and X are performing well, with revenues increasing by $365 million last year and an additional $177 million in the first quarter of this year. Grok subscriptions start at $10 per month, while X Premium costs $3 monthly. However, the exact number of subscribers remains undisclosed, leaving investors speculating about the growth potential of these offerings as SpaceX prepares for its IPO.
The contrast between rising user engagement and significant regulatory risks presents complex questions for investors. As SpaceX navigates these challenges, the implications of Grok’s controversial features will likely remain a central focus in discussions about the company's future prospects.
