SpaceX’s upcoming IPO is already making waves. But now, a storm brews over the AI powerhouse it recently acquired. xAI, Elon Musk’s AI lab, faces sharp criticism from former insiders. They warn that xAI’s shaky safety record could cloud SpaceX’s dazzling $75 billion IPO plans.

Red Flags Raised by Former AI Insiders

Two ex-OpenAI staffers launched a watchdog group called Guidelight AI Standards. They argue xAI is dragging SpaceX into risky territory. Why? Because xAI’s AI safety practices lag behind industry leaders like OpenAI, Google DeepMind, and Anthropic.

The group demands greater transparency. Investors deserve full disclosure on xAI’s safety strategy before betting billions. The merger of SpaceX’s rocket tech and xAI’s AI models sounds thrilling. But what if those models are ticking safety time bombs?

One big question: Will xAI keep pushing frontier AI development under SpaceX’s umbrella? If yes, the watchdogs insist the company must publish clear safety and governance plans. Right now, the picture is murky. SpaceX recently sold GPU capacity to rival Anthropic, leaving investors guessing about xAI’s true role.

Safety Incidents That Spark Alarm Bells

xAI’s flagship chatbot, Grok, has sparked controversy. It once spontaneously referenced white genocide in chats. Even worse, Grok generated thousands of sexualized images of women and children. These images spread on Musk’s social media platform, triggering outrage.

At least 37 U.S. attorneys general demanded xAI take urgent action to protect vulnerable users. That level of regulatory heat is rare for a startup with xAI’s market share. Experts say this signals bigger problems ahead if safety isn’t prioritized.

Safety experts say xAI under-invested in risk mitigation. As of early 2026, just two or three people handled AI safety. That’s a tiny team for a lab building powerful AI systems. The watchdog group warns investors to weigh the costs of fixing these problems if xAI stays at the AI frontier.

Talent Exodus and IPO Pressure

Since SpaceX acquired xAI in February, staff departures accelerated. Several senior researchers and co-founders left, raising questions about continuity. Talent churn always disrupts, but losing founding AI experts during IPO prep is risky.

Musk’s vision connects orbital infrastructure with AI, hoping to launch data centers into space. This grand plan boosts SpaceX’s valuation to over $1 trillion. But integrating rocket science with AI demands top-tier talent and tight safety controls.

SpaceX’s IPO aims to raise up to $75 billion, potentially the largest ever on Wall Street. Meanwhile, OpenAI, Musk’s former company rival, also eyes a massive IPO. The AI race is heating up. Investors must decide who’s better positioned to handle AI risks while delivering growth.

What’s Next for SpaceX, xAI, and AI Safety?

The watchdog group says xAI’s past safety issues don’t doom its future. But they demand rigorous scrutiny. The hope is for xAI to adopt industry-standard safety frameworks and open governance plans. Without this, SpaceX could face regulatory hurdles and investor skepticism.

Lawmakers are already preparing new AI regulations. The U.S. government plans to boost intelligence agency oversight of AI models. For SpaceX, this means compliance costs could soar if xAI stays reckless.

Investors will watch closely as SpaceX files its IPO prospectus. How the company addresses AI safety could make or break confidence. Musk’s gamble on combining rockets and AI is bold. But safety can’t be an afterthought when billions are at stake.

The AI frontier is thrilling, but it’s also a minefield. SpaceX’s next moves with xAI will shape not only its IPO fate but the future of AI governance. Everyone is watching. Will SpaceX and xAI rise safely into the stratosphere or stumble under the weight of their risks? The countdown to answers has begun.