Later today, Elon Musk’s company SpaceX is expected to raise $75 billion by selling shares to investors in what could be the largest initial public offering (IPO) in history. According to the prospectus for the stock offering, SpaceX is primarily an AI company and includes xAI, which is also a social media company, but is nominally also a rocket company that plans to build cities on other planets. Whatever it actually does, it has another goal: to create such a massive presence in the market that your money—retirement savings, pension—is inexorably drawn to it, whether you like it or not.
Many people in Britain will be unhappy with the idea that their pension will help make Elon Musk a trillionaire. Two-thirds of UK voters polled by Survation in December 2024 (including most reform voters) believe he should not be influential in British politics. You may not drive a Tesla or use the X, and you may be content that you will never give money to a centillionaire known for live greetings at political rallies. But you will anyway.
The reason for this is that immediately after SpaceX starts selling shares, it will be included in major stock market indexes, such as the Nasdaq 100 or the MSCI Global Equity Index. Each index is essentially a basket of companies, usually with more weight given to those that are more valuable or have a higher price. So the Nasdaq 100 contains 100 companies, but most of them make up less than 1 percent of the index, while Apple, which is valued at more than $4 trillion, makes up about 11 percent of the index. So if you invest £100 in a “passive” fund that just tracks the Nasdaq 100, around £11 of that is effectively invested in Apple. And you almost certainly do, because over the past 30 years, passive investing has become the norm for a large portion of the world’s retirement savings. UK savers have more than £3 trillion invested in passive funds; Americans have about $21 trillion invested in them.
That’s good for you — it provides growth that helps your retirement savings outpace inflation — but it’s also good for Elon Musk. It means that the bigger a company grows, the more investment it can expect to automatically attract from index-tracking funds. You’re already invested in Musk because you almost certainly have an indirect ownership of his car company, Tesla, through the funds in which your savings are invested. If SpaceX reaches its projected $1.7 trillion valuation, it will also have a significant weighting in many indexes, and so the money your pension fund manager has invested in index funds will flow to it, whether you want it or not.
Even if you’re not worried about Musk’s politics, you might wonder if this is the best company to invest in. SpaceX’s prospectus tells two stories: one is wildly ambitious, and the other is insane. The first (most plausible) story is that the company will make huge amounts of money from AI, which the prospectus refers to as “a total market opportunity of $26.5 trillion.” This is equivalent to more than a fifth of all economic activity in the world today. Industry – all of it, every factory, refinery, power plant, every mine and construction site in the world – accounts for a quarter of global GDP. Or to put it another way, SpaceX is claiming that if it were to fully capture the value of its market, it would make far more money than Europe (a continent of 450,000,000 people).
That sounds pretty ambitious for a business that has never turned a profit and lost $5 billion last year. But it pales in comparison to SpaceX’s further ambition to “harness the sun to power a truth-seeking artificial intelligence that advances scientific discovery and eventually to build a base on the Moon and cities on other planets.”
Sure, “cities on other planets” sounds like an economic opportunity. Greater Tokyo, the world’s most populous urban area, is home to 41 million people and has an economic output of $1.7 trillion. But to believe that SpaceX could create a similar economy on Mars, you’d also have to believe that millions of people could be convinced to move from our planet, which has wonderful facilities, including a magnetic field and an atmosphere, to a vast wasteland of toxic minerals with background radiation 200 times that of Earth. These people would have to be rich, because the flight alone would cost hundreds of millions of dollars, and they would have to be extremely dedicated, because that flight takes up to six months (using current technology), and they would have to be crazy, because on Mars they would have to stay inside—and possibly underground—for the rest of their lives.
With these points in mind, you might want to know how to find out how much exposure your retirement savings have to SpaceX, and maybe stop helping Elon Musk amass even more wealth and power than he already has. Well, you can’t. It’s not realistic for someone with a typical workplace pension to figure out which of all the underlying assets in their fund could contribute to the SpaceX investment. Even if you could, there’s nothing you can do about its inclusion in those indexes — a number of indexes have actually changed their rules to ensure SpaceX is included more quickly — or the funds that passively invest in them. The only way to secure a portfolio without SpaceX is to switch to active management of all your investments, which is a terrible idea. Almost all (about 90 percent) qualified professionals who actively choose investments fail to beat the market. It would be a lot of work, and you’d probably end up with less money than if you’d let it out on the market (probably less money overall).
All you can do is figure out what Elon Musk is really selling you, for the money you’re probably giving him. What you’re buying isn’t actually a part of a rocket or a data center in space, but a principle: volatility. of Musk skills as a CEO or an engineer are the subject of some debate, but he is — like his president, Donald Trump — undeniably good at delivering volatility to financial markets. Narrative economics – telling the market an exciting story – is now far more important than fundamentals. It may be stupid, but this stupidity is growing assets that will hopefully provide you with income later in life. Even if you were to purge your wallet of Musk-related investments, you would still be subject to this principle and one of the golden rules of the global economy: you can’t avoid giving money to bad people.
(Further reading: Nick Clegg has no regrets about the AI revolution)
