Reid Hoffman says SpaceX is ‘not an AI company’ & xAI is a ‘complete train wreck'

**SPEAKER_1** (0:00)
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**SPEAKER_2** (0:04)
Anywhere.

**SPEAKER_1** (0:06)
What about fancy places like the Canopy in Paris?

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Yeah, Hilton Honors, baby.

**SPEAKER_1** (0:10)
Or relaxing sanctuaries like the Conrad and Tulum?

**SPEAKER_3** (0:13)
Hilton Honors, baby.

**SPEAKER_1** (0:15)
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**SPEAKER_4** (0:22)
When you want points that can take you anywhere, anytime, it matters where you stay. Hilton for the stay.

**SPEAKER_3** (0:29)
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**SPEAKER_5** (0:58)
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**SPEAKER_6** (1:28)
SpaceX bought Any Sphere, the company behind the AI code editor Cursor, for $60 billion in an all stock transaction.

**SPEAKER_2** (1:37)
Yeah, and they funded that entirely using the market cap gains from their initial public offering.

**SPEAKER_5** (1:42)
Right.

**SPEAKER_2** (1:43)
So, they essentially converted just a few days of public market appreciation into total control of the enterprise coding market, all without spending any operating cash.

**SPEAKER_6** (1:52)
You look at Cursor and you see a software company with roughly $4 billion in recurring revenue.

**SPEAKER_2** (1:58)
Which is huge.

**SPEAKER_6** (2:00)
It's massive. So, the question we're looking at today is, why does a software company with that kind of balance sheet find itself forced to sell to an aerospace manufacturer?

**SPEAKER_2** (2:08)
Well, you have to look past the top line revenue and look at the underlying economics of what they were actually doing.

**SPEAKER_6** (2:14)
Right, because on paper they looked unstoppable.

**SPEAKER_2** (2:16)
Exactly. Cursor was generating roughly 150 million lines of enterprise code every single day.

**SPEAKER_6** (2:23)
Yeah.

**SPEAKER_2** (2:23)
They had secured over $2 billion in business-to-business revenue alone. So, by traditional software metrics, they were thriving.

**SPEAKER_6** (2:31)
But the market share was sliding.

**SPEAKER_2** (2:33)
It was. It dropped from 41 percent down to 26 percent.

**SPEAKER_6** (2:36)
That lost ground went somewhere.

**SPEAKER_2** (2:39)
Yeah. Their main competitor, Anthropic, grew to capture half the category.

**SPEAKER_6** (2:43)
Because the infrastructure costs of artificial intelligence completely warp how normal software businesses operate.

**SPEAKER_2** (2:50)
They really do.

**SPEAKER_6** (2:51)
Cursor was caught in what is essentially a margin trap. I mean, they built a visual editor that developers absolutely loved. But under the hood, they didn't own the engine.

**SPEAKER_2** (3:01)
Right.

**SPEAKER_6** (3:02)
They were relying heavily on Anthropics Cloud models to generate the actual code.

**SPEAKER_2** (3:06)
That means they were paying retail pricing for the application programming interface.

**SPEAKER_3** (3:10)
Yeah.

**SPEAKER_2** (3:11)
So every single time a developer asked Cursor to write a function or debug a file, Cursor paid Anthropic for the computing power to generate that answer.

**SPEAKER_6** (3:20)
Then Anthropic launched their own competing product.

**SPEAKER_3** (3:23)
Right.

**SPEAKER_2** (3:23)
Cloud Code. An Anthropic enjoys wholesale economics because they own the underlying models and they own the compute infrastructure.

**SPEAKER_6** (3:31)
Which changes everything. If you're building a traditional software as a service company, your gross margins usually sit around, I don't know, 80 or 90 percent.

**SPEAKER_2** (3:40)
Yeah, you sure.

**SPEAKER_6** (3:40)
Because you write the software once, and the cost of replicating it for the next user is practically zero.

**SPEAKER_2** (3:46)
Right. You pay for some server hosting, which is negligible in the grand scheme of things.

**SPEAKER_6** (3:51)
Exactly. But artificial intelligence does not have a zero cost of replication.

**SPEAKER_2** (3:57)
Far from it. When a developer hits the tab key to autocomplete a function in cursor, that request doesn't just sit on a local machine.

**SPEAKER_6** (4:05)
It travels.

**SPEAKER_2** (4:06)
It travels to an Anthropic data center. It hits a server rack loaded with specialized graphics processing units.