Economic Impact of the AI Boom

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On with today We're going to go behind the scenes today, looking at why Elon Musk has become a trillionaire and why the US needs him to succeed as financial institutions and investors all around the world take a huge gamble on his unique vision becoming reality. We want to be able to take anyone who wants to go to the Mon, anyone who wants to go to Mars, or anywhere in the solar system, and maybe beyond the solar system at some point We want to be able to take you there. U not just not just a few astronauts. I mean You Literally year. So as financial institutions, investors across the world put their money behind Elon Musk and his sci fi strategy, which includes putting artificial intelligence data centers into space as well, as well as sending people, of course, how risky is all of it? And it's not just Elon Musk with big AI companies also planning to float on the stock exchange later this year with promises of what AI will do What does it mean, not just for the US economy, but the global economy as well Welcome to Ameraast. Americast from BBC News. You hear that J? I think when I hear that sound, it reminds me of money. We didn't start this war, but under President Trump, we are finishing it. This is a big cover up, and this administration is engaged in it. This guy has Trump arrangement syndrome. for you, turn the volume up Hello Justin in the worldwide headquarters of Americast in London, England. and it is just me, at least just me in the worldldwide headquarters, but I'm delighted to say I'm joined on the line by Ryan Mack, who iss an investigative technology reporter and an author as well. At the New York Times, he's been investigating not just Elon Musk But the tech companies, the tech billionaires years So he's exactly the right guest to talk to about Elon Musk, but also about the wider world that is beginning to take shape around us and indeed the wider world that is beginning to take shape potentially outside this world as well. So Ryan, so good to talk to you. Thanks for joining us. Thanks for having me. Let's start with this word trillionaire because I'm not sure I even know what a trillion of anything is. And sometimes it's different in English English and American English. What is a trillionaire? and has he actually got a trillion dollars in the bank A trillionaire is someone with thirteen figures in their net worth You know, we've never had anyone hit that level of wealth before You asked does he have that amount of money in his bank account Technically no, most of that is in shares of SpaceX uh, which is not, you know, easily liquid, but On paper, he has reached the mark of trillionaire. And the point you make about the shares is important, isn't it? Because we should explain what has just happened and why he is now, at least on paper So wealthy. So it was a private company, wasn't it? SpaceX. What has changed? Yeah, so SpaceX has been a private company since its founding in two thousand two. You know, recently at the beginning of this year, the company decided. We want to sell our shares to the public, allow people to own this company and have an IPO an initial public offering. You know these are singular events in a company's history to raise In this case, tens of billions of dollars And that's what happened here. They sold their shares in the public market The company went public and the company raised about seventy five billion dollars in cash And I don't want to get too nerdy about this, but he's done it in a way, hasn't he? where he keeps, Elon Musk keeps. Quite a lot of control Yes, even after going public and selling shares to the world He retains about eighty two percent voting control over the company. you know, a super majority where he essentially is the sole decision maker of any major corporate decision. So he Even though people, you know around the world have shares in this thing, he's the one that makes calls the shots He has kind of said, take it or leave it. You know, you get me or you don't get anyone else Yeah, so so that's interesting. So not only are you buying into his vision But you're buying into his future visions about which you know nothing. Indeed, he might not know anything at all. Given what an unusual person he is and we'll get to that in a second, But you are buying into really into the unknown, aren't you? You are. And that's actually whats SpaceX is sort of built upon it. At least what it's selling to the public are these very fantastical concepts and if they're achievable or if they get achieved you know, the company would probably be worth that much, but right now these are just concepts. And some of the ideas that have been proposed as business plans include You know, building data centers in orbit, you know, these AI data centers Other ideas have been building a human colony. on the moon. And then of course, the kind of North star mission of the company is to get people to Mars. And you know, all Three of those ideas are just concepts on paper at this point. Yeah. Ccepts on paper that have really taken off in people's minds because the initial Days of this offer and subscriptions to this offer have been a fantastic success, haven't they Yeah, the stock in the first couple days of trading have shot up so much so that the company surpassed giants like Amazon in terms of valuation the stocks down a little bit on Wednesday, but What we're seeing here is just a lot of people wanting these shares. And part of that is because there's such a small amount of the company that is publicly traded aboutout four percent a little more than four percent of the existing shares are publicly traded. so it maybe has created a bit of artificial demand here You know The stock has gone up and has performed decently well in its first couple days of being a public company. Yeah, and nobody has pretended, least of all the man himself, Elon Musk himself, noody is pretending that any of this is not without risk. They're all being pretty open about this including Elon Musk. We ought to listen to him actually. This is a ceremony to mark the IPO in which he talked about his vision and indeed the past of SpaceX itself I gave SpaceX less than a ten percent chance of. succeeding at all to be clear In fact, I told people this. I said, look, we're probably going to fail, but you know we should give it a try because If we don't U if there's not a new company that enters space, We will never be a truly space bearing civilization. U You know, while the other aerospace companies, they build good rockets and everything, they they were simply not pursuing the technology that's necessary to make life multiplanetary to to makeense to make Star Trek, to make All right The exciting Science fiction futures that we've read about real We want to be able to take anyone who wants to go to the Mon, anyone who wants to go to Mars. or anywhere in the solar system, and maybe beyond the solar system at some point We want to be able to take you there. U, not just not just a few astronauts. I mean You Literally you. If you watch whoever you are watching this SpaceX wants to be able to take you to the Mon and take you to Mars and ultimately beyond And could we say now that he's got the money to do it I don't know. taking people to Mars is going to be quite expensive And again, unproven, you know I look at that and I I'm sort of torn. In some ways, I can see why it's inspirational and what SpaceX has done in terms of building these self landing rockets or building satellite internet That's affordable is quite inspirational for a lot of folks and they see these launches that happen. At the same time, he's talking about Mars there And what's possible? and A couple of years ago, he was predicting that we'd be on Mars essentially by this time. And so When you're an investor, you know I don't know if you can invest just on inspiration. You know, you should probably invest in financials and and achievements and whether or not you hate your promises yeah, but you're being earthbound there, Ryan. Quite properly probably. And let me make it clear. neither of us are giving investment advice here. but there's something about the man himself. And I want to ask you specifically about him, Ryan, because often he's portrayed as a kind of bond villain Elon Musk, can you think of X and all the controversies about X? There is something, it just seems to me almost going to say uniquely American about him because of the kind of sense that this is all this striving And it really genuinely doesn't matter to people If he fails. I don't know how they're going to feel if the money goes down the tubes as well. But there is this real sense, isn't there? of of wanting him to succeed Yes, in some ways, there's something uniquely American to it, this idea of you know, coming to the U. S and striving and achieving these, you know incredible dreams, you know, running two companies Building them up to trillion dollar valuations and becoming the, you know, Horatia Algeb pull yourself up by your bootstraps kind of American success story And so I think that's where a lot of people draw their inspiration from him. You mentioned the idea of him being a boond villain earlier, but I think there are 't know I wouldn't say' I don't know numbers pan out, but like there are a significant amount of people that seeee him as a hero and see him as someone who is advancing uh, you know, American civilization or global civilization And also don't have you don't have to like him as a person, I suppose. That's the other point. I think it's a complex character. Like on one hand, you can see the achievements. On the other hand, people have to understand, you know, his involvement in politics and his constant tweeting and what he's saying online in terms of what he is fomenting , but I view him as a complex character and that's how I always kind of approach my reporting with him. Just a final thought about Elon Musk himself. is it fair to say as well that not all of the companies have worked out? Because that's an important part of him, isn't it? this kind of risk taking not everything that he has tried to do has worked, has it? Well, it's interesting, I think he has been If you look at some of the things he has failed at it his companies For example, SpaceX with Mars Mars has been the North star of SpaceX for Basically, since it's founding, the idea of getting Humans Sar is making life multip plananetary. You know, he has set a timeline for Mars that he has simply not achieved If you look back at his statements, he has said, you know We get people to Mars by around this time. you know, while he has technically failed On that level He has been able to replace the goal of Mars with other things and find other things for people to fixate on. and be like, you know, I've achieved these things in the meantime and If you look at the current goals of the company, you know, Mars has kind of been placed on the sideline. you know, now they're talking about orbital data centers. And ories on the mooon and colonies on the mooon But in some ways Musk's greatest trait is as a salesman He's able to sell people on kind of the latest shiny goal and maybe get them to forget that he said these things or predicted these things that didn't come to fruition Well, he certainly sold this IPO hasn't they to financial institutions. So we were saying earlily a lot of people around the world wanting to invest. But of course, big financial institutions and indeed NASDAQ, that the actual exchange that is going to be quoted on or it is now quoted on Even chang their rules, did they to get it on Yeah, this is quite u controversial, I guess, but the NASDAq has an index called the NASAq one hundred, which you know people use to trade if you want to have an index fund. A lot of people With retirement funds, invest in index funds so that they trace the developments of, you know US economy, for example. and the NASDAQ one hundred has certain rules that in order to be listed, you have to have to abide by. One of them, for example, is you have to be a publicly listed company for a certain amount of time. You just can't immediately hit it. after an IPO or' something called the cooling off period allowing the stock to essentially find an equilibrium in the market so that there's not wild fluctuations in the price Well, the NAAak one hundred relaxs a lot of these rules so that SpaceX could get into the index, spepecifically rules around timing And that will then essentially put into the index where these passive Funds will essentially be forced to buy SpaceX because they trade using the parameters of the NAazAq one hundred. And so what you're going to see in a couple of weeks time is a lot of these, you know, passive investors buying into the company may be unaware that they're investing in SpaceX because they're trading using indexes like the NSAC one hundred So actually, even people who've made no conscious decision to buy into all of this are actually through their pensions, if nothing else, are going to be boughtght into it. They're kind of everyone is tied up with Elon Musk on this now And to be fair, that's kind of the point of these index funds is like you don't, you know, maybe you don't know that you're invested in Walmart or you you don't know you're invested in whatever oil company But I think what's interesting here is just how many rules have been relaxed for SpaceX the requests of the company. Like this was a strategic move that the company pursued largely because they wanted, you know more more demand for the stock. But if you're invested in Walmart or all the rest of them, that will be a relatively small part, presumably. the risk I suppose, and this then brings us ont to the wider picture as well The risk is that particularly with passive funds that pensions are invested in, etcera, etc, that actually a surprisingly large slice of those funds in the future is going to be taken up by SpaceX and by the other bigig companies that are also about to go public, open AI and anthropic, but there are others as well We're about to see a large amount of IPO activity and fluctuation in the American stock market You know, these are companies nearing a trillion dollars in valuation Both of those companies happen this year, you'll get this kind of But Nans of IPO activity, you'll have SpaceX Anthropic IPO trillion or near trill companies that are about to go public And that's really never happened before in history. So you get this kind of massive amount of tech activity, all involving you know, AI essentially just to emphasize never before in history, never before in history what this size of offering Yeah, the size of offering, the scale of these companies. I mean, a trillion dollars market cap or valuation was unheard of as of a couple years ago. and now you're having companies three of them possibly going public at trillion dollar valuations. That's kind of astronomical I guess it shows just how much interest there is in AI how much potential investors see And just, you know, they believe there's appetite for these for these stock And as you were saying right at the beginning, not just people, but data centers, which sort of links it all together, doesn't it? Because they all need data centers. We know, in fact, we did a recent episode on the political, the sudden political against data centers right around the United States And And here's Elon Musk saying it's okay, we'll stick him in in outer space And you know if he manages to do it, again, that's a sort of circular thing, isn't it? which leads to profitability, increased profitability among all of these companies It's very elon to play into this sentiment, right that this anti kind of Earth space Data center sentiment Ironically partarticularly because his company has built two very large data centers in Memphis that have caused quite a bit of controversy And so this idea behind orbital data centers is, look, we have constrained resources in terms of land water, power on Earth you know, we'll solve all that by throwing these things up into orbit They've completely pivot SpaceX has completely pivoted Its goals to being Essentially an AI company. there's AI part of this business was bolted on about a year ago. It was not in the company's plans And now Elon Musk sees this as kind of a money driver, a, you know, a a means to revenue and profitability Even though it's just a concept. What if it all goes wrong, Ryan? What happens to the US economy? How dependent is the U.S economy now on this sector, on these offerings, both the SpaceX one that we've now seen and the other ones that we've just been talking about that are in the offering if it does for some reason badly wrong What happens I mean, AI is the primary growth driver of the US economy at this point. Just look at how SpaceX is done in the stock market. it's kind of bonkers. you know, the bare case for these companies is Let's take the beare case for SpaceX He's been on a podcast saying that he thinks in thirty six months, the cheapest place to operate data centers, essentially is in space in thirty six months. So in three years, He believes AI data centers will be viable So he's giing himself this kind of timeline here and kind of box himself in. Will he hit it? is kind of the big question But if he doesn't, you may start to see a little wobble in the economy. if these AI datas setters aren't reliable, then you'll certainly see people that will start to doubt the company for sure. And if you see that wobble and it's a stock market wobble What impact does that have on the wider economy? So I mean you say growth in America and it's a simple fact, isn't it? The the growth in Amera at the moment is hugely driven? by all of this Does it have an effect that you can see, that you can feel that's tangible to people around the United States if it goes wrong I mean, look, this We're not just talking about sppaceX either or anthropic opening eye. There are massively public companies that are pivoting their whole companies towards AI. I think of matter. Google, Microsoft. You know, these Tllion dollar Apple, for example, trillion dollar companies that are betting this on being the future and you know, the numbers have have borne out and showed that, you know, this AI technology is being adopted There is Certainly some use cases for it. Um But it is fundamentally shifting the economy. and so u let's say in a couple years time that it is not this AI boom is not everything we expected to be we may get a correction similar to what we saw with the dot com bubble, for example. You know, there's all this hype initially all these companies going public And then you get kind of this bus cycle. And out of that bus cycle, you know A couple companies figured out how to make the internet work as a business. But that's fascinating. What you've just said is fascinating is because you can think of that and you can think way back to the building of the railways when there was boom and bust as well, wasn't there? So in the nineteenth century, they build all the railroadways and then they build too many and the business model isn't right and a lot of the companies go bust, but you still got the track And with the internet, as you've just said, you You still got the digital economy, is it as it then became. So there is this real fear and you've said it out that there could be a wobble and worse and it could have an effect on the wider economy. There is something about all of this, isn't there that just is that ability to lay down things that in the end change life b economy is more productive, etcet. that is done in America to a greater extent, than it's done elsewhere. I suppose you look at China now a bit and wonder whether they found a different model of doing the same thing. elsewhere in the world not In terms of innovation or in terms of Yes. in terms of innovation and the ability to take risks and then benefit from them Yeah, I would say AI in China are certainly leading the AI race right now and that's What's driving a lot of the global economy But yeah, I think I'm thinking back to your point on like boom and bus, right? And You know, I guess at this point, you're you're looking at what does success look like for you and what's your what's your time horizon? If it's short term Maybe you think some of these companies will not be as successful with AI development. and like your choice is as an investor is what horse are you betting on here? Are you betting on SpaceX and this vision of orb data centers, or are you betting on anthropic, which has, you know, this kind of vibrant AI coding business and large revenues and that kind of thing And what company do you see is successful in five, ten, fifteen years time? You know, what's going to be the pets. com of the AH that just kind of fizzles out. That's a great open question, Ryan On which to end, it's been such a pleasure talking to you, R Mat from the New York Times. Thank you very much. Thanks for having me Okay, that's it from Ryan and for me. byye So you want to be part of the United States of Americas. Now is your chance. We're building this map of our listeners. It's going to go state by state. We want to hear from all fifty in the end, Montana to Delaware to Arizona, everywhere in between