The Musk Put
Are Elon's Businesses Too Interconnected to Fail?
Intro: When Rocket Fuel Becomes AI Cash
Image: Cath Virginia
Hi there! Alex and I are on a brief mid-summer vacation, so this latest dispatch is being sent from Sinéad, in written form. We shall resume our usual podcast-based shenanigans soon!
SpaceX—the company responsible for ferrying astronauts to the International Space Station, launching classified payloads for the Pentagon, and anchoring America’s return to the Moon—has just invested $2 billion in a chatbot. Specifically, Grok, the AI developed by Elon Musk’s latest venture, xAI.
On paper, it’s part of a broader $5 billion equity raise. In practice, it’s something else entirely: a rocket company, backed by national security contracts and government infrastructure, redirecting billions into an AI startup still best known for producing erratic responses on a platform formerly called Twitter.
You’d be foolish, however, to believe that this is a necessary space-adjacent side bet. Instead, it’s a pattern. Over the past decade, Musk has increasingly treated his companies not as discrete businesses, but as limbs of a single operating organism. As such, capital flows freely between EVs, rockets, chatbots, tunnels and social media timelines, depending on which limb needs feeding most urgently. One company’s reserves become another’s runway. One brand’s credibility becomes another’s buffer.
And now, with Grok being propped up by SpaceX cash, the latest transfer confirms what many investors have suspected for years: there’s no meaningful boundary between Musk’s ventures. There is only one portfolio. One pool. Or, as it’s increasingly clear, one Put.
This is the logic of the “Musk Put”—an implicit belief that no Musk company will be allowed to fail in isolation, because each will be rescued, absorbed, or re-capitalized by another.
Like everything that Musk does, it’s fast, flexible, and it concentrates risk in a way that traditional corporate governance was never designed to manage.
So the question isn’t just why SpaceX is investing $2 billion in xAI…
The question is: who’s really on the hook if Grok goes sideways? And how many other missions—lunar, orbital, or otherwise—might be pulled down with it?
1. Rocket Cash for Chatbots
So as has been disclosed, SpaceX is investing $2 billion in xAI, Elon Musk’s artificial intelligence company—nearly half of xAI’s $5 billion equity raise. It’s one of SpaceX’s largest known investments into another venture and marks a significant diversion of capital away from its core aerospace operations.
The funding will support the development of Grok, xAI’s flagship chatbot, whose early versions have made more headlines for controversy than capability. Until now, SpaceX’s cash was assumed to be committed to Starship R&D, satellite manufacturing, and its aggressive launch schedule. This move obviously changes that.
But why would SpaceX invest in the area of artificial intelligence, social media and technology? To create a more efficient army of lobbyists? (No, spamming the government isn’t an effective form of lobbying). To reduce customer care call center costs for when your payload doesn’t reach its intended orbit in Low Earth Orbit? Unlikely.
More broadly, SpaceX isn’t just a commercial space company—it is once which holds multi-billion-dollar NASA and Department of Defense contracts. Its revenue is largely from the public sector, and as such its obligations are strategic.
Which is exactly why this transfer stands out: cash generated from launching spy satellites and building Moon landers is now being used to fund a chatbot still struggling for product-market fit amidst technology commodification.
Nor does this investment represent traditional diversification. Instead, it’s a form of capital convergence—typical of Musk’s broader strategy, which compromises the following:
That liquidity flows wherever it’s needed most, regardless of sector or mission.
The effect is an increasingly fragile ecosystem, where risk from one domain—say, AI—can directly impact another, like launch timelines or military power.
If Grok succeeds, SpaceX may look like an unlikely but prescient backer. If it fails, the consequences ripple across not just Musk’s portfolio, but the public infrastructure increasingly tethered to it.
2. The Internal Bailout Machine
As those of us with even a modicum of interest in financial structures and their governance, Elon Musk’s approach to corporate finance is less a neatly partitioned balance sheet and more a single, gargantuan reservoir of capital—ready to be sluiced from one pocket to another at a moment’s notice.
Take 2016, when SolarCity teetered on the brink of insolvency. Rather than allow a market correction, Musk orchestrated a $2.6 billion stock merger that folded the struggling solar installer into Tesla. Investors were sold on the idea of “vertical integration” between panels and electric drivetrains, but behind the scenes, it looked remarkably like a bailout for family members (the Rive brothers) masquerading as strategic synergy. In one fell swoop, downside risk was socialized outside of familial ties, leaving Tesla shareholders to absorb losses that bore little relation to battery chemistry or EV market share.
Roll forward to 2022, and the capital conservation imperative takes on a new twist.
Musk could have tapped credit markets or issued new equity to fund his $44 billion acquisition of Twitter. Instead, he turned to SpaceX’s coffers, drawing a $1 billion loan against the rocket business’s own balance sheet.
That year, he pledged 267 million Tesla shares as collateral—a move that transformed EV investors’ equity into the de facto backstop for a social‑media takeover. This internal arbitrage may have been efficient for Musk’s purposes, but it also amplified agency costs: the interests of SpaceX and Tesla stakeholders, and Twitter creditors, suddenly converged in ways none of these groups likely anticipated.
And now, in 2025, we witness the latest—and perhaps most audacious—chapter: SpaceX underwriting nearly half of xAI’s $5 billion equity round, with a $2 billion infusion earmarked for Grok’s development.
To contextualize, SpaceX’s annual R&D budget for Starship and Super Heavy hovers in the low single digits of billions; diverting such a substantial sum to an unproven chatbot smacks of both bold vision that borders reckless overreach. Conventional wisdom warns against straying beyond one’s core competence—after all, rocket propulsion and natural‑language models inhabit very different risk landscapes—but Musk appears to relish the challenge of synchronizing them under one corporate umbrella.
And how exactly does one define “core competence” in the case of a man whose sense of mastery—and entitlement to mastery—has no discernible boundary?
From a portfolio perspective, these moves promise an illusion of diversification: rockets, electric cars, solar panels, social media and AI all tucked into a single holding company. Yet once you merge funding streams, you also merge their tail risks. A server‑overload in Grok could now translate into budget belt‑tightening for Starlink launches; conversely, a Falcon 9 anomaly might slow the rollout of xAI’s next model iteration.
Ultimately, Musk’s financing playbook hinges on unparalleled agility: the ability to redeploy capital in minutes without the friction of public roadshows or underwriter syndicates. That agility is not merely a tool—it’s a feat. No other executive in modern history has commanded such sweeping, personal control over capital across industries as vast as space, energy, transportation, AI, and media. In that context, why wouldn’t he use it?
To Musk, this flexibility isn’t a red flag—it’s the whole fucking point.
But even miracles have limits. When every arm of the empire is simultaneously drawing on the same bucket of funds, the very mechanism meant to cushion shocks becomes the source of systemic fragility. In this grand experiment, the line between strategic brilliance and overextension blurs—until even vision begins to cannibalize itself.
3. The Fed Put: Confidence as Policy
To understand what Musk is doing—and where this model of implicit rescue and capital elasticity might lead—it helps to look at where we’ve seen a version of this playbook before, and even today: The Federal Reserve.
Famously, the financial markets are built on risk. Investors buy, sell, and speculate with the constant knowledge that prices can fall, confidence can crack, and liquidity can vanish overnight. But behind it all—quietly, and very unofficially—there’s a powerful assumption at work: that if things get bad enough, the Fed will step in.
(This idea, you’ll soon realize, is a cousin-once-removed to the old adage: If I owe the bank $100, that’s my problem; if I owe the bank $100m, that’s their problem.)
This belief is known as the Fed Put. And it’s so central to how markets operate today that Alex and I recently broke it down in our podcast—you can listen here.
But in case you haven’t listened to that yet, let me start by making clear: the term Fed Put isn’t found in any policy document or statute. It’s a nickname, borrowed from the world of options trading, where a “put option” gives the holder the right to sell an asset at a predetermined price—essentially a form of insurance against losses. The Fed Put describes the widespread belief that when markets begin to fall sharply, the U.S. Federal Reserve will intervene to stop the bleeding, acting as a kind of unofficial insurer of asset prices.
This idea didn’t emerge overnight. It crystallized over time, beginning in earnest after the stock market crash of 1987. When equities plummeted in a single day—what became known as Black Monday—the newly appointed Fed Chair Alan Greenspan swiftly cut interest rates and promised liquidity to the banking system. Markets calmed. Confidence returned. Investors took note.
That set the precedent. When Long-Term Capital Management collapsed in 1998, the Fed quietly coordinated a private-sector rescue. In 2008, as the financial system unraveled, it stepped in with full-scale bailouts, zero interest rates, and quantitative easing. And in 2023, when Silicon Valley Bank failed in a flash, the Fed guaranteed uninsured deposits within days—backstopping systemic risk before panic could spread.
Each time, the message was the same: when markets buckle, the Fed will catch the fall. Quietly. Quickly. And mostly* without being asked. (*Unless you’re the free-market capitalist Jason Calcanis, screaming into the abyss for a federal bailout).
By today the Fed Put is no longer just an idea—it has become a reflex. Traders assume that any serious decline in asset prices will trigger a response. And often, they are right. This confidence is hugely shaping investment behavior: investors take bigger risks, knowing that if things go south, the Big Bank (using taxpayer’s capital) will step in.
Of course, the Fed Put isn’t costless. It creates what economists call moral hazard—a condition in which people take greater risks because they believe someone else will absorb the downside. It distorts price signals, encourages leverage, and blurs the line between free markets and centrally managed ones.
And very importantly, it can’t last forever.
The Fed can’t cut rates below zero (at least not easily), and it can’t buy bonds indefinitely without igniting inflation or political backlash. There are limits—though no one knows quite where they are.
Still, for more than three decades, the market has moved with the quiet confidence that, should the wires shake or the wind pick up, someone will be there to break the fall. That someone, for better or worse, has been the Fed.
4. The Musk Put: Capital as Conviction
Now—if the Fed Put taught markets to believe the government would always catch them on the way down, the “Musk Put” operates with a similar, if more improvisational, flair.
Ok, so it’s not quite central bank policy—but it is instead billionaire instinct. But the effect is strikingly familiar: when things begin to unravel in one corner of Elon Musk’s empire, another steps in with a life raft.
The Musk Put is the informal assumption that no single Musk venture—whether it’s an electric vehicle company, a rocket firm, a social media platform, or now, an AI lab—will ever be allowed to fail in isolation. Because they aren’t isolated. They’re stitched together by Musk’s personal control and by his unique ability to shift capital, collateral, and attention between them with remarkable speed.
When Tesla acquired the cash-bleeding SolarCity in 2016, it was framed as vertical integration. In retrospect, it was the earliest exercise of the Musk Put: a bailout of one family-run business using the equity of another. When he borrowed $1 billion from SpaceX to help fund the Twitter acquisition, that, too, was the Put in action—converting rocket-company cash reserves into a social-media bridge loan. And now, with SpaceX underwriting nearly half of xAI’s $5 billion equity round, we see it again: capital meant for rockets redirected into chatbots. Different context, same muscle memory.
This has quietly but powerfully shaped investor psychology. Once you believe Musk will always find a way to rescue what’s failing—by liquidating equity, calling in loans, or repurposing revenue from one business to patch another—you start to behave differently. Shareholders, lenders, and even employees grow more tolerant of volatility. They accept, and often celebrate, the sort of concentrated risk that in any other context would set off alarm bells.
They assume, in other words, that there's a strike price. Not a formal one, like in options markets, but a psychological threshold: the moment Musk will step in. That threshold gets defined not by policy, but by precedent. The $2.6 billion Tesla–SolarCity merger. The $1 billion Twitter loan. The $2 billion Grok infusion. These numbers become reference points—not just in financial modeling, but in the collective belief that the floor is higher than it looks.
The problem, of course, is that the Musk Put isn’t backed by a central bank’s balance sheet. It’s backed by the assumption that one man can keep all the plates spinning, indefinitely.
But, here’s the kicker: capital is finite—even Musk’s.
And so is time, attention, and goodwill, as we are seeing all too clearly.
So if too many of his ventures wobble at once, or if investor patience finally cracks, the strike price could evaporate just when it's needed most.
And unlike the Fed, Musk doesn’t have a printing press. Just a remarkable track record, a cult of personality, and a corporate ecosystem that, for now, keeps bailing itself out.
5. Unchecked, Undisclosed, Untouchable
Okay, yes—corporate governance doesn’t exactly stir the soul. Who cares about board procedures and fiduciary norms when you’re busy planning a multiplanetary civilization? But when one man controls a web of capital-intensive, strategically critical companies—with minimal friction and maximum discretion—governance stops being a formality. It becomes the whole game.
In most companies, governance exists to draw clean lines: who owes what to whom, which entity controls which assets, and how capital is deployed within defined strategic boundaries. These lines aren’t just bureaucratic—they’re protective. They create accountability, enable oversight, and anchor decisions in things like contracts, fiduciary duty, and, occasionally, the law.
In Musk’s universe, those lines are less dividers and more suggestion marks—soft pencil strokes easily blurred by speed, charisma, and liquidity.
Let’s start with fiduciary duty. In a traditional corporate setting, directors are expected to act in the best interest of their shareholders. Not shareholders in adjacent ventures. Not a broader “vision.” Just the people who bought into this business.
But what happens when Tesla’s shareholders find themselves underwriting a struggling solar firm run by Musk’s cousins? Or when SpaceX, a private aerospace company backed by institutional investors, U.S. taxpayers and federal contracts, becomes a financing vehicle for a $44 billion social-media acquisition?
Governance theory assumes discrete accountability. But… Musk’s practice assumes total fluidity.
This matters not just in theory but in process. When capital moves between entities under shared leadership, arm’s‑length norms begin to fray.
Deals may be approved, technically, by independent directors, but those directors often operate under the gravitational pull of Musk himself—his vision, his momentum, his control over company narratives and board composition. The result is a decision-making environment where the lines between personal empire and institutional stewardship become hard to trace.
One clear case in point: Musk’s gargantuan 2018 pay package at Tesla. Valued at $55.8 billion, it was approved in what turned out to be “sham negotiations”—the Delaware Court of Chancery ruled that Musk, as a controlling shareholder, had dominated the process, something the board simply couldn’t escape. Chancellor McCormick found the board breached its fiduciary duties and voided the deal under an “entire fairness” standard
Then there’s the question of transparency. Most shareholders don’t sit in on board meetings, and even sophisticated investors are left piecing together capital flows from press reports, SEC filings, and back-of-the-envelope math. SpaceX investors signed up for orbital dominance and national security contracts—not to subsidize a startup chatbot that makes headlines for racist outputs on X. And yet, here we are.
This opacity is especially problematic when public money is involved.
SpaceX holds fixed‑price contracts with NASA and the Department of Defense—meant to be project-specific, performance-bound, and insulated from unrelated activity. While there’s no public evidence of misused federal funds, the optics of SpaceX’s treasury doubling as a piggy bank for Musk’s other ventures raises real concerns.
Congressional oversight committees, auditors, and inspectors general are watching—not just for fraud, but for basic accountability. If a national launch program falters because cash was diverted into an AI lab or to prop up X, who gets called into the hearing? And more to the point: who, exactly, is supposed to say “no” to Musk?
These governance challenges aren’t just ethical—they’re structural. When one person controls a web of interdependent ventures with minimal oversight, the system can appear to run brilliantly—until a single misstep triggers strain across the whole network. A misjudged capital call, a regulatory surprise, a delayed contract—and suddenly, everything is wobbling at once. In Musk’s case, brilliance isn’t the question. Structural independence is.
6. From Empire to Exposure
We’ve said it before, and it bears repeating: one of the great marvels of Elon Musk’s empire is its fluidity. Capital flows between rockets, robots, cars, and chatbots without the usual friction of shareholder votes or quarterly oversight. Where most CEOs need syndicates and board approvals to move billions, Musk simply shifts the funds—from one pocket to another, from one company to the next.
This structure confers real advantages. It allows for speed, coordination, and the ability to seize opportunities as they arise. It’s the corporate equivalent of federal power—centralized, flexible, and self-reliant. And for a while, it worked.
But that same architecture also creates systemic risk. Because when every division becomes both a source of liquidity and a potential liability, failure is never contained. A fault in one venture doesn’t just bruise its own balance sheet—it reverberates across the entire empire. This, we already know all too well after 2008, is called contagion.
The Musk Put only works when at least one venture is strong enough to bail out the rest. But today, none of them are.
The empire’s internal subsidy machine—once fueled by the seemingly endless rise in Tesla’s share price, SpaceX liquidity, and unshakable investor confidence—is now under pressure from all sides. And unlike the Fed Put, which is policy-backed and grounded in a willingness to suspend economic orthodoxy—ignore debt ceilings, cut interest rates, inject liquidity—the Musk Put is pure improvisation.
Whereas the Fed can print money, Musk can only hope his asset prices keep going up.
And when no single entity is left to play lifeboat, the fallout doesn’t stop at the portfolio level. It moves outward—to shareholders, investors, public-sector partners, and, ultimately, the U.S. government itself.
So yeah, we’re starting to see the cracks already.
SpaceX, long the jewel in Musk’s crown, is also showing signs of strain. Starship—central to both NASA’s Artemis program and Musk’s Mars ambitions—is significantly behind schedule. NASA has postponed its Artemis III Moon landing to at least 2026, citing Starship delays as a key factor. And while SpaceX has always embraced a rapid test-and-learn model, its recent launches suggest something more troubling: regression.
The last three Starship flights have repeated technical failures that were supposedly resolved in earlier tests—engine shutdowns, propellant leaks, thermal shielding issues, and structural disintegration on reentry. Engineers familiar with the program have described growing burnout and internal fatigue, with some questioning whether true progress is being made or whether SpaceX is simply "blowing up dollars on the launchpad" in a kind of innovation theater.
Crucial milestones—like successful in-orbit refueling—remain unmet. Hardware is lost faster than it can be iterated. And with capital being siphoned into non-core projects like xAI, Starship risks becoming an overhyped money sink rather than the backbone of deep-space exploration.
The longer this continues, the more government contracts slip, investor patience wears thin, and a core truth becomes unavoidable: SpaceX cannot afford to stall. But stall it may be.
Meanwhile X, the platform formerly known as Twitter, is fading fast. U.S. ad spend has dropped nearly 35% over the past three years, with revenue falling 28% in the past year alone. Musk’s attempt to rebrand X as an “everything app” has yielded a hybrid of livestreamed rocket launches, Grok outputs, and ideological brawls. Major advertisers have fled. User growth has stalled. And whatever strategic value the platform once held is now diluted by its erratic public image and dwindling commercial returns.
Even Tesla—the ballast of the entire Musk enterprise—is weakening. Operating margins fell to 2.1% in Q1 2025, revenue declined 9% year-over-year to $19.3 billion, and deliveries slipped as BYD and others continued to gain ground in China. Tesla stock still trades on momentum and myth, but the fundamentals increasingly resemble a maturing automaker—not a tech juggernaut. And if Tesla loses its valuation premium, the knock-on effect is enormous: Musk’s personal liquidity dries up, and the capital Musk has used as collateral evaporates with it.
So who’s really on the hook?
Well. Let’s start with Tesla shareholders, who signed up for an EV growth story and got a holding company in disguise—one whose capital supports everything from solar bailouts to social media takeovers. When Tesla stock moves, it no longer moves on factory output alone. It moves with the fate of Grok, the trajectory of Starship, and Musk’s taste for side quests.
Then there are SpaceX investors, who committed capital to a rocket company but now find themselves underwriting AI development and moderating content platforms. What was once a pure space-tech play is now exposed to reputational risks from failed chatbots and moderation scandals. This is not quite what the pitch deck promised. (Although, I have yet to actually see a pitch deck, or any documentation, for SpaceX fundraises.)
X investors, those still holding stakes, are simply along for the ride. The platform now serves as a content distribution layer for everything Musk wants to surface—Grok responses, SpaceX events, Tesla updates—but remains commercially fragile and reputationally volatile.
And finally, there’s the U.S. government—and by extension, the American taxpayer. SpaceX is deeply embedded in NASA and the Department of Defense, operating under fixed-price and milestone-based contracts. These funds are technically ring-fenced, but the practical reality is blurrier.
As more internal cash is siphoned into unrelated ventures, SpaceX’s ability to meet public deliverables erodes. If Starship stumbles further, NASA may have to renegotiate timelines, extend milestones, or inject more funding—effectively socializing the cost of the empire’s private misfires.
There is precedent for this kind of intervention. After 9/11, the U.S. rescued the airlines. In 2008, it bailed out the automakers. In 2020, it flooded the markets to keep the financial system intact. If the Musk Put collapses—if Tesla crashes, Starship fails, X implodes, and Grok continues to bleed—the next bailout may not be internal at all.
It may be contractual. Quiet. Federally funded. But it will come. Because if SpaceX fails, so does America’s lunar program, its satellite architecture, and its commercial launch strategy.
In that sense, the Musk Put is already halfway expired. The final guarantee is no longer Elon.
It’s Washington.
Conclusion: Too Interconnected to Fail?
Musk’s empire isn’t a portfolio in the traditional sense. It’s a mega-venture—a single, interlinked organism masquerading as a constellation of companies. Rocket science feeds AI, EV margins fund social media, and chatbots, in turn, animate the public faces of all the above. At its best, this structure enables staggering ambition: vertically integrated launch systems, cars with AI copilots, humanoid robots, and a direct-to-consumer propaganda machine all under one roof.
But with each cross-subsidy, risk multiplies. And the more capital flows freely between entities, the more fragile the system becomes. A fault in one venture—Grok glitching, Tesla margins collapsing, Starship falling behind, X hemorrhaging users—is no longer an isolated stumble. It’s a portfolio-level event. Liquidity problem. Reputational risk. Boardroom crises.
The Musk Put has, so far, patched the cracks. It has allowed his companies to bail each other out quietly, without needing public rescue or outside scrutiny. But the implied strike price rises with every loan, every pledge, every capital call.
And if all limbs of the organism start drawing down at once—as they now appear to be—the internal rescue machine runs out of slack.
At that point, the fallback ceases to be financial. It becomes contractual, political, and public. Because this mega-venture has embedded itself into the scaffolding of national infrastructure.
SpaceX isn’t just a private company—it’s the sole provider of American human spaceflight. Starlink isn’t just broadband—it’s battlefield connectivity. Tesla isn’t just an automaker—it’s the bellwether of U.S. industrial innovation. X, for all its dysfunction, is still a platform where policy is tested in real time.
Which means the final call may not go to a CFO. It may go to Congress.
For years, Musk has rejected legacy systems, disrupted industry norms, and bypassed institutional brakes. But even empires require boundaries. Even vision needs constraints. And even the best-built rockets can’t fly forever without fuel.
The question now is simple: when the Musk Put finally expires, who will be left holding the risk? And what—exactly—will they be willing to pay to keep the system aloft?