Latest / Elon Musk Podcast / Grok Scandal, $8 Billion Burn Rate, and Musk's Algorithm Promise

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Grok Scandal, $8 Billion Burn Rate, and Musk's Algorithm Promise · Elon Musk Podcast

• 0:01
  Elon Musk's XAI just close to $20 billion funding ground from
• 0:05
  NVIDIA, Fidelity and the Qatar Investment Authority, valuing
• 0:10
  the AI startup at $230 billion and putting it in direct
• 0:14
  competition with open AI for the top spot in artificial
• 0:19
  intelligence. Now, internal documents obtained
• 0:22
  by Bloomberg reveal the company burned through $7.8 billion in
• 0:25
  the first nine months of 2025, with quarterly losses
• 0:29
  accelerating from a billion dollars to 1.46 billion.
• 0:33
  And the documents also expose something Tesla shareholders
• 0:36
  should find it deeply troubling. XAI executives told investors
• 0:41
  their goal is to build the AI that willpower Tesla's optimist
• 0:44
  humanoid robot. And why is Musk's private
• 0:46
  company developing the core technology for product that
• 0:48
  Tesla shareholders were told would be built in house?
• 0:53
  Now, there are lawsuits happening against Musk for
• 0:57
  breach of fiduciary duty right now.
• 0:59
  And we'll breakdown XA is financial picture and what it
• 1:03
  means for the AI race. And we'll cover the Grok
• 1:06
  deepfake scandal that triggered investigations in six countries
• 1:09
  this week. We'll also examine Musk's sudden
• 1:12
  promise to open source X's algorithm in seven days.
• 1:17
  And we'll get right into that right after this very short
• 1:21
  break. Now, Elon Musk's empire had his
• 1:24
  most turbulent week of 2026 with a $20 billion capital injection
• 1:28
  global regulatory probes in an algorithm transparency promise
• 1:32
  that some say he has made before without any sort of follow up.
• 1:37
  Now the three stories are interconnected in ways reveal
• 1:39
  the tensions inside the world's most valuable private AI
• 1:42
  company. And the $20 billion funding
• 1:44
  round closed on January 6th. Exceeding XA is original $15
• 1:49
  billion target. NVIDIA committed up to 2
• 1:52
  billion, according to Bloomberg. Cisco, Fidelity, Stepstone
• 1:56
  Group, the Qatar Investment Authority and Abu Dhabi's MGX
• 2:00
  sovereign wealth fund filled out the investor list.
• 2:03
  Now the round valued XAI at approximately 230 billion,
• 2:07
  placing it in the same valuation tier as Open AI and Anthropic.
• 2:11
  Just one week earlier, Open AI had closed its own $22.5 billion
• 2:16
  round from SoftBank. The AI funding race has become a
• 2:19
  capital arms race where entry costs are now measured in 10s of
• 2:23
  billions of dollars instead of hundreds of millions of dollars.
• 2:27
  Now. These internal documents show a
• 2:29
  different picture than the headline valuations suggests.
• 2:32
  XA is revenue nearly doubled quarter over quarter 270 million
• 2:37
  from the three months ending September 30th, 2023 or 2025.
• 2:41
  That sounds like progress until you compare it to its expenses.
• 2:44
  Though the company reported an A Bibita loss of 2.4 billion
• 2:51
  through September, exceeding its original projection of 2.2
• 2:55
  billion for the full year, gross profit improved to 63 million in
• 2:59
  quarter 4, up from 14,000,000 the prior quarter.
• 3:03
  But the company is burning roughly a billion dollars per
• 3:06
  month on data center construction, GPU acquisitions
• 3:10
  and also on talent. Now I've been digging through
• 3:13
  the analytics of the show and noticed that 37% of you are
• 3:16
  following this channel right now.
• 3:19
  Thank you, you're amazing. You're part of this community.
• 3:22
  The other 63% haven't hit the follower subscribe button yet.
• 3:26
  That's OK, I get it. You watch or listen to a couple
• 3:29
  episodes and you're like got to figure out what's going on.
• 3:32
  Now I'm going to ask you for a favor in one second here.
• 3:36
  I've been doing this for about 7 years and I plan to do it for
• 3:39
  the next 10 years of my life. All I ask is one second of your
• 3:43
  time to hit the follower subscribe button.
• 3:45
  You have no idea how grateful I am for that and how much it
• 3:48
  helps the show. And if you've been a long time
• 3:52
  listener or watcher, please take a moment and leave a five star
• 3:57
  review for the show on whatever app you're on right now because
• 4:02
  that helps us even more, helps us grow in the algorithms.
• 4:04
  It means we can do more things. It means we can enhance the
• 4:08
  show, means we can get better audio, means we can get guests
• 4:12
  on the show, etcetera, etcetera. You know how it works.
• 4:16
  So I'm asking you for one second of your time to hit that follow
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  or subscribe button. And I'd be extremely grateful
• 4:21
  and blessed to have you in this community with us.
• 4:24
  Thank you so much. Now, the explosive detail that's
• 4:30
  happening right now is about Optimus.
• 4:33
  XAI executives told investors their goal is to build AI that
• 4:37
  is itself sufficient enough and will eventually power humanoid
• 4:42
  robots like Tesla's Optimus. Now that contradicts what Musk
• 4:47
  told shareholders in 2024 when he said XAI and Tesla were
• 4:52
  solving different problems. He specifically said Tesla, with
• 4:56
  its real world AI developed through autonomous driving,
• 4:59
  would build Optimist's robot brain.
• 5:03
  Now his private company, where he holds a larger controlling
• 5:06
  stake than he does with Tesla, is claiming that mission.
• 5:10
  Tesla shareholders have alleged in court filings that Musk
• 5:13
  diverted NVIDIA H100 chips originally ordered for Tesla to
• 5:18
  XAI. They claim he siphoned top AI
• 5:21
  talent from Tesla to staff that startup.
• 5:24
  Now this new disclosure about Optimist could become central
• 5:27
  evidence in these breach of fiduciary 2D lawsuits.
• 5:31
  Now the second major story involves Grok, which is xai
• 5:35
  chatbot integrated into X. In the first week of January,
• 5:39
  users discovered they could prompt Grok to generate non
• 5:42
  consensual explicit images of real people, including minors.
• 5:47
  And according to content analysis from Copy Leaks, Grok
• 5:51
  was generating roughly one non consensual image per minute.
• 5:56
  Now, researcher Genevieve O found the bot produced 7751
• 6:00
  images in a single hour, and on January 8th, approximately 85%
• 6:06
  of all images Grok generated were of sexualized content.
• 6:10
  Now the regulatory response was swift and worldwide.
• 6:16
  The European Commission ordered X to preserve all internal
• 6:19
  documents and data related to Grok until the end of 2026.
• 6:24
  An EU spokesperson called the situation illegal, appalling and
• 6:27
  disgusting, stating it has no place in Europe.
• 6:30
  India's Ministry of Electronics and IT issued a notice requiring
• 6:34
  X to conduct a comprehensive technical and governance review.
• 6:37
  Malaysia's Communications Commission open an
• 6:39
  investigation, France began to probe into alleged algorithm
• 6:43
  manipulation and EU KS communication regulator Ofcom
• 6:48
  requested information and warned the government could block X
• 6:51
  entirely if it refuses to comply with UK law.
• 6:55
  Now Australia's E Safety Commissioner is reviewing
• 6:57
  reports of non consensual images in the US Senators Ron Wyden, Ed
• 7:03
  Markey and Ben Ray Lujan wrote to Apple CEO Tim Cook and Google
• 7:09
  CEO Sundar Pichai asking them to remove X from and Grok also from
• 7:15
  their app stores for violating distributing terms.
• 7:19
  Now CNN reported that in the weeks leading up to the scandal,
• 7:22
  Musk hit expressed frustration over Grok's images guardrails in
• 7:26
  a meeting at XAI. 3 key staffers from XAI safety team, including
• 7:30
  its head of public safety and private Product Safety left the
• 7:34
  company before the controversy erupted.
• 7:36
  Timeline suggests a connection between loosened content
• 7:39
  restrictions and the departures of these people.
• 7:42
  XAIS response was to restrict image generation on X to only
• 7:47
  paid subscribers instead of just getting rid of it and setting up
• 7:53
  these guard rails. Now they want only paid people
• 7:56
  that paid to be able to use the image generation.
• 7:59
  Very odd move. Now a move that British Prime
• 8:03
  Minister Keir Starmer spokesperson called simply
• 8:06
  turning an AI feature that allows the creation of unlawful
• 8:09
  images into a premium service that allows users to create
• 8:14
  unlawful images. Now the Groc standalone app and
• 8:17
  website still allow users to generate the same content for
• 8:21
  free though. Now the third story this week
• 8:23
  arrived on Saturday, when Musk announced X would open source
• 8:26
  its new algorithm in seven days. The release would include all
• 8:30
  code used to determine what organic and advertising posts
• 8:33
  are recommended to users. Musk said the release would be
• 8:36
  repeated every four weeks with comprehensive developer notes.
• 8:41
  Now, this promise comes three years after Musk first said he
• 8:44
  would make Twitter's algorithm transparent.
• 8:47
  In March 2023, X published some code on GitHub, but most files
• 8:52
  have not been updated since that initial upload.
• 8:55
  Internal versions have a advance to Grok 3, while the public
• 8:59
  repository remains frozen at Grok one now.
• 9:03
  The context around this announcement is telling, though.
• 9:05
  X uses Grok to evaluate more than 100 million daily posts and
• 9:09
  recommend content individual users.
• 9:11
  The algorithm determines what you see in your 4U feed, and
• 9:16
  French authorities open an investigation in July 2025 into
• 9:20
  alleged bias in manipulation in that algorithm.
• 9:23
  Now, if you used to comply with France's request to share the
• 9:25
  code, calling the investigation politically motivated, European
• 9:29
  Commission extended a retention order through 2026 requiring X
• 9:33
  to preserve data related to its algorithms and handling of legal
• 9:37
  content. Now Musk's sudden transparency
• 9:39
  pledge arrives as regulatory pressure reaches its peak.
• 9:43
  Whether the release will satisfy investigators or whether it will
• 9:46
  contain the actual code driving recommendations remains to be
• 9:49
  seen. Elon has said this before.
• 9:52
  Did not deliver. He said he would do this
• 9:55
  periodically, released the code periodically, did not deliver on
• 9:58
  it. Now the financial picture ties
• 10:01
  all three of these things together.
• 10:03
  XAI needs to spend aggressively to compete with Open AI and
• 10:06
  Anthropic in the AI race. The company operates the
• 10:09
  Colossus supercomputer, which launched with 100,000 GP OS and
• 10:13
  is expanding to over 1,000,000 H 100 GPU equivalents.
• 10:17
  XAI announced a third data center in the Memphis area, this
• 10:21
  one across the state line in Southaven, Ms. representing a
• 10:24
  $20 billion investment and two gigawatts of computing power.
• 10:28
  Governor Tate Reeves called it the largest private investment
• 10:31
  in Mississippi's history. The state waived all sales,
• 10:34
  corporate income, and franchise taxes.
• 10:37
  Local governments agreed to substantially reduce property
• 10:40
  taxes. And these infrastructure
• 10:42
  investments explained the burn rate Colossus and its planned
• 10:46
  expansion require massive capital expenditures before they
• 10:49
  generate returns. Now Grok threatens that
• 10:53
  investment thesis. Altogether, XAI claims 600
• 10:56
  million monthly active users across X and Grok and the
• 10:59
  platform. 70 million daily users provide real time training data
• 11:03
  for the AI models. If regulators in Europe, the UK,
• 11:07
  or other major markets take enforcement actions against X,
• 11:10
  that user base could completely shrink over there.
• 11:13
  If Apple and Google remove X from the app stores as
• 11:16
  Democratic senators requested, the distribution channel for
• 11:19
  Grok completely disappears and it's gone.
• 11:21
  Musk appears to be balancing growth velocity against
• 11:24
  regulatory risk in the algorithm Transparency announcement
• 11:27
  suggests he recognizes the pressure is becoming material.
• 11:30
  This is a stop for him. He wants to show that Xai and
• 11:36
  Grok had nothing to do with this and that the users were in
• 11:40
  charge of the prompts that they gave the AI bot.
• 11:44
  Now, let me know what you think in the comments of whatever
• 11:47
  podcast platform you're on right now.
• 11:49
  Some of my own output on this, and I think it's disgusting.
• 11:53
  You should never be able to do that with any bot.
• 11:56
  I think it's weird, it's gross. If you do this, you're a gross
• 11:58
  freak, and you shouldn't be doing this to other people.
• 12:02
  If you want to do it for yourself, that's fine.
• 12:04
  But if you do it to other people's images, you are a sick
• 12:08
  freak and you should be banned. So that's what I think about
• 12:12
  you, not you in particular that's listening to this, but
• 12:14
  that's what I think about the people that have been doing this
• 12:16
  to other people think you're weird and you should definitely
• 12:20
  go outside or something. I don't know if you did not put
• 12:24
  up the prompt or you didn't put up the guardrails for people to
• 12:27
  stop this prompt. It's very easy.
• 12:30
  It's very, very easy. And I'm a developer.
• 12:32
  I know, I know how easy it is. This is like the most basic
• 12:36
  thing you could do. If somebody enters this type of
• 12:39
  prompt, XYZ, XYZ whatever, XYZABC, whatever, then tell them
• 12:46
  it's not allowed. The prop could be put this
• 12:50
  person in a bikini and that should not be allowed.
• 12:56
  Or you know, take off. This person's clothes should not
• 12:59
  be allowed at all. It's weird and it's disgusting
• 13:03
  and who knows what kind of images that could portray and if
• 13:08
  the app or the company is behind that allows that they should be
• 13:13
  held accountable because that's illegal every place that I know.
• 13:19
  So Elon is releasing this information.
• 13:22
  He's releasing the algorithms to put a buffer up and he does this
• 13:28
  all the time. This is his move.
• 13:30
  If something goes wrong, he goes, you know, I, I promised
• 13:34
  you guys something. I'm going to give you something
• 13:36
  that's I'm just going to give you a little bit of something so
• 13:39
  you can look at it. And it's sort of to appease the
• 13:42
  people that are trying to take him out because he can't fight
• 13:47
  them, because he likes to battle, he likes to fight and he
• 13:49
  likes to be right. But instead of that, this time,
• 13:52
  instead of putting up those guardrails and admitting that he
• 13:54
  was completely and utterly of wrong by not putting up these
• 13:57
  guardrails, he's like, here, take some of my code, check it
• 14:00
  out. Let me, I'll show you what the
• 14:02
  algorithm does. And of course, senators from the
• 14:06
  US probably have no idea how this all works, so they probably
• 14:10
  think it's a good way for them to dig in a little bit.
• 14:14
  It's not right. Get rid of this feature.
• 14:17
  Put up those guardrails. Don't make your even though X is
• 14:21
  a trash hole right now, it's a It's a horrible, horrible place
• 14:26
  to be. It shouldn't be at that
• 14:30
  horrible. It should be less horrible than
• 14:32
  it is. And he doesn't seem to be
• 14:33
  putting up the guard rails to do that.
• 14:36
  Now let's move on a little bit of XAI and Tesla.
• 14:41
  There's another layer here. If XAI builds the brain for
• 14:46
  Optimus while Tesla builds the body, Tesla becomes a hardware
• 14:49
  manufacturer, licensing its core intelligence from another one of
• 14:54
  Elon Musk's companies. Tesla shareholders voted in
• 14:57
  November on whether the company should invest in XAI now.
• 15:00
  The non binding proposal did not pass, but there was a
• 15:03
  significant number of abstentions, suggesting
• 15:07
  shareholder uncertainty about the relationship between the
• 15:10
  companies. SpaceX has already invested in
• 15:13
  XAI. Tesla has spent hundreds of
• 15:16
  millions on Xai's Megapack batteries.
• 15:19
  The financial entanglement between Musk companies continues
• 15:22
  to deepen regardless of shareholder concerns.
• 15:26
  Moving money around, that's all. You know, they're building
• 15:28
  companies so they can move money around so they don't have all
• 15:30
  their money in one company. Almost a fall back.
• 15:33
  In a way. Large corporations do this.
• 15:35
  It's like how Google used to be. Google Now it's Alphabet,
• 15:40
  umbrella companies basically. But now he has, you know, a
• 15:43
  bunch of different separate companies, but they all work
• 15:46
  with each other to get the job done now.
• 15:49
  Xai's investor presentation included the term escape
• 15:52
  velocity to describe the company's development race.
• 15:55
  The company is training Grok 5 and plans to launch Enterprise
• 15:58
  Products that leverage Grok, Colossus and X to transform how
• 16:02
  we live, work and play. The vision is grand, according
• 16:06
  to Elon Musk. The execution carries real
• 16:08
  risks, though Xai's losses are mounting faster than projected.
• 16:12
  The Grok brand is now associated with Deepfake and Child X
• 16:17
  exploitation imagery. Regulators on 4 continents are
• 16:20
  investigating it, and it's also part of the government. the US
• 16:24
  government pays XAI for Grok and Tesla shareholders are also
• 16:29
  asking why the company's flagship AI product might be
• 16:32
  built by a private company that they do not own.
• 16:35
  Musk closed the week with a post declaring 2026 is the Year of
• 16:39
  the Singularity. He predicted AGI would arrive
• 16:43
  this year. He said AI would surpass human
• 16:45
  collective intelligence by 20-30, and those predictions may
• 16:50
  or may not prove accurate. More than likely not.
• 16:54
  And what is certain is that XAI just raised $20 billion to chase
• 16:57
  them. Grok generated a global scandal
• 17:00
  in the X algorithm will supposedly become public in a
• 17:03
  week. First day in 10 days of 2026
• 17:07
  suggests that Musk's ambitions will define this year more than
• 17:11
  rockets, cars, or government efficiency ever could.
• 17:15
  And aarently they're not sending rockets to Mars this year.
• 17:19
  And that's a whole other eisode. We're going to get into that
• 17:21
  tomorrow. So please follow and subscribe
• 17:24
  for more content like that.