The Muskverse enters a new era

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Good morning from the Financial Times. Today is Wednesday, February 4th. This is your FT News briefing.

US Tech. took a tumble, and Elon Musk's cadre of companies is gearing up for an AI future. Plus domestic energy companies in Argentina still have the upper hand. For now. I'm Mark Filippino and here's the news you need to start your day. The tech heavy NASDAQ composite ended the day down a little shy of 1.5% on Tuesday, and the broader SP 500 was nearly 1% lower. And at one point yesterday, Bitcoin hit its lowest point since US President Donald Trump's election in 2024.

Investors are worried about the impact of AI on software businesses. A bunch of analytics groups saw their shares tank after the AI group Anthropic launched productivity tools that can help automate legal work. The sell-off hit a bunch of companies on both sides of the Atlantic.

Analytics groups like SP Global and Relics. The latter is known for owning the legal information platform LexusNexis. Private equity groups that have piled into the software space also got hit, and even European advertising companies. Now here's a quote that really sums up the fears driving the wider sell-off. It's from Michael Rurk at Jones Trading. He told the FT, if legal can be disrupted by Anthropic's new tool, then so can consulting and financial services.

Elon Musk is once again getting ready to burn through a mountain of cash to pursue a big dream. Tech's best known visionary is gathering his resources, and he's going after what he sees as the next big prize robotics, AI, and space. Here to discuss is FT tech writer at large, Richard Waters. Hi, Richard. Hello, Mark. Great to talk to you.

Good to have you back. So what exactly is Musk's next big project? So Musk is combining uh two of his biggest companies. The Muskverse, as people like to call it, is this collection of loosely allied companies. He's putting together SpaceX and XAI into a single unit, XAI, uh which competes with OpenAI anthropic, you know, building these large language models.

And he's ramming that together with SpaceX and he's saying, you know, the reason I'm doing this is I've got to put data centers into space. That's the only way we're gonna get the energy we need from all that solar energy up there. to power the next move in AI. So it is really a a monumental thing. And this is on the back of a a larger announcement from Tesla from last week that it's gonna be moving away from cars and more toward AI and robotics.

Yeah, so Tesla is really doubling down now on what it believes is his own future, which is robotics, either robotaxis or humanoid robots. But at the same time, while it's doing that X AI is building the AI, wants to get into space. You c you know, so you can start to pull all these pieces together as people are and say, well, hang on a minute. If we got huge data centers in space generating AI,

And Tesla is the hardware arm, if you like, of the Muskverse creating all these robots. Well it all ties together, doesn't it, in some way. It's a really gutsy kind of Elon classic move. And will it sustain enough investor interest? We'll see. Why now, Richard? So I think you have to start with the financial logic here. Musk has a track record of folding companies that don't really have a future.

into other companies that do. He did it ten years ago with Solar City, which was a struggling solar panel maker that he was a big shareholder in. He formed it into Tesla. He did it last year with X, the former Twitter, and he folded that into X AI.

And now X AI itself, which is on one level hum horrendously successful to have a a a valuation so high after only three years in business, yet it's not clear what its future is because it's competing with much better funded, uh, much more advanced companies like OpenAI, Google, and so folding that now into SpaceX is a real Exit if you like, and an obvious next step.

The new SpaceX, if indeed it is worth the one point two five trillion he's now saying, if you add that together with Tesla, he's he's playing around with two and a half trillion dollars of market cap. What he doesn't have is cash flow. But w with that market cap, he has the chance to raise money. So SpaceX is lining up a fifty billion dollar IPO later on this summer, by far the biggest IPO of all time.

You know, we can almost now see that as a down payment on what's gonna come next because Tesla needs to raise a ton of money. Tesla's said it's gonna more than double its capital expenditure this year. So the entire Muskverse is gonna need recapitalizing in some way. And I think that's really what Elon has his his sights on here. So Richard, what are you looking out for next when it comes to the story?

Yeah, I think combining X AR and SpaceX is a is obviously a very significant move. Taking SpaceX public is the next big step. And then and this is where it gets really interesting. Musk will then be in control of two very large public companies and his room for manoeuvre will start to narrow, as we saw when he he bought out Solar City a decade ago and that was only a

a two billion dollar transaction. He was tied up in lawsuits for best part of a decade over that one with unhappy shareholders. And I think that's why there might be some caution on on the part of Tesla investors Because what is the future for their company in this emerging vision that Elon has? That's FT tech writer at large, Richard Waters. Thanks, Richard. Great to talk to you.

The US military said that it shot down an Iranian drone yesterday. The drone, quote, aggressively approached an American aircraft carrier five hundred miles off the southern coast of Iran. Hours later, Iranian gunboats threatened to board and seize a US flagged tanker in the Strait of Wormuz.

Now the timing of this isn't great. US President Donald Trump has been threatening military action against Iran over the past couple of weeks, and officials from the two countries are planning to meet on Friday. They're expected to talk about Iran's nuclear program and other issues. Argentina's economy is volatile.

So, over the past couple of years, multinational oil and gas companies like Exxon and Total have scaled back investments in the country. That pullback by the majors hasn't been all bad. It's allowed domestic energy players to flourish. Kira Nugent is based in Buenos Aires for the FT. Hi, Kira. Hi, Mark. So do me a favor, just walk us through how some of these Argentine companies have capitalized on this economic uncertainty.

The domestic oil and gas groups are much better at dealing with the volatility that you mentioned. The really severe triple digit inflation that Argentina has faced, capital and currency controls, which are obviously less of an issue for for domestic companies than for multinationals. they're able to respond to really abrupt policy changes that the government here tends to make much quicker than than international companies.

And the last couple of years this kind of window of opportunity has opened up where multinationals have been selling up, or at least looking at selling up because prices of their assets have risen and they're able to to get out at a good time. That has happened right as the local groups really want to expand because Argentina is entering a shale energy boom. And a key to this boom is one of the world's largest shale developments.

Yeah, absolutely. So Vaca Muerta, this massive shale oil and gas field, was discovered in Patagonia in twenty eleven. It's the second largest shale gas field in the world and the fourth largest for shale oil. And it's been, you know Developing quite rapidly over the last fifteen years, Shell and Chevron made really big early investments.

But we're now at this kind of watershed moment where production is accelerating very quickly because transport bottlenecks have been resolved and the exports from shale oil and gas are becoming a really important part of Argentina's economy. So to be clear, while Argentine companies have seized on this opportunity, the big international companies

Still have a foothold, is that what I'm hearing? Yeah, absolutely. So Chevron and Shell and Total still have presence in Argentina. It hasn't been like a full on exodus, but the story of the last few years has definitely been this kind of foreign groups shrinking their market share and local groups expanding. So how long do you think this advantage for domestic companies is gonna last?

So we might already be seeing the tide turn a bit, continental resources The company founded by US Shell magnate Harold Hamm bought into several fields in Bacamuerta in the last few months. Um and the government is hoping if the economy remains stable and it continues its free market reforms and lowers some costs for the industry, that will start a trend and other multinationals or kind of independent US oil companies will start to pile in

That effort by President Millet to open up the economy isn't just affecting the country's oil industry. You've done some interesting reporting about how it's affecting consumers too. Yeah, it's a pan economy approach that Malay is taking and His moves to cut tariffs and other restrictions on imports have triggered a boom in the use of these like international e commerce platforms like Amazon and Timu, which are obviously very common, very widely used in other parts of the world.

So in twenty twenty five the amount of goods the Argentines ordered from overseas via th those kinds of platforms tripled. And I spoke to one e-commerce site that told me that their most popular projects were Lego sets, Apple computers, and Stanley Thermoses. These are all things that in Argentina have been very expensive in recent years and there's now much more supply as the economy opens up.

The consequence of that is that the local manufacturing industry has complained of having to cut tens of thousands of jobs and there's this kind of quite painful transition for the economy that It's benefiting consumers and and hurting some industries. And that we can expect to see a lot more of that if Malay continues his reforms in the next few years. That's the FT's Kira Nugent. Thanks so much, Kira. Thanks, Mark.

Before we go, effective today, Peter Mandelson is no longer a member of the UK Parliament's upper chamber, the House of Lords. He was once one of Britain's most high profile politicians. But yesterday, Mandelson gave notice that he would quit the chamber after claims he passed confidential UK government information to the late convicted sex offender Jeffrey Epstein. Mandelson declined to comment.

Meanwhile, here in the States, former President Bill Clinton and his wife, former Secretary of State Hillary Clinton, agreed to testify later this month before Congress in an investigation into Epstein. Tomorrow we'll have more coverage of the Epstein Fallout. You can read more on all these stories for free when you click the links in our show notes. This has been your daily FG News briefing. Check back tomorrow for the latest business news.

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