SpaceX Listed Grok's 'Spicy' Mode as a Risk in Its IPO Filing

In its recent IPO filing, SpaceX cautioned investors about the potential risks associated with AI capabilities, specifically Grok's "Spicy" and "Unhinged" modes. These features enable the chatbot to produce explicit image or voice responses with reduced safety filters, making the company susceptible to regulatory examination and possible reputational harm.

As of December, SpaceX has allocated $530 million to cover prospective litigation losses, a portion of which may arise from ongoing claims against its AI subsidiary concerning generated sexualized imagery by the Grok chatbot.

These disclosures reflect how SpaceX has undertaken new financial and reputational challenges following its acquisition of Elon Musk's AI startup, xAI, in February—a transaction that significantly increased the rocket manufacturer's private valuation to over $1 trillion. Within the filing, SpaceX emphasizes that xAI's objective is to create "truth-seeking artificial intelligence." However, this objective has frequently resulted in the deployment of AI functionalities with minimal constraints. While Musk often promotes Grok's unrestricted capabilities as an advantage, it has also led to heightened scrutiny from regulatory bodies.

Identifying potential business risks is a standard and legally mandated component of IPO filings; consequently, some concerns highlighted by SpaceX may not materialize. The company joins several chatbot developers currently facing regulatory scrutiny as governments seek to understand the societal implications of generative AI technologies.

The filing also reveals that SpaceX is under investigation in the United States and various other nations due to allegations that Grok has been used to produce sexualized images of individuals identified as minors. Moreover, SpaceX acknowledged that it is the defendant in multiple ongoing class-action lawsuits. Future "misuse" of its AI products could subject the company to further regulatory actions, including the potential loss of access to specific markets, a circumstance that has occurred previously.

SpaceX indicated in the filing that certain AI products, particularly Grok's Spicy and Unhinged modes, are "designed to generate more candid, direct, or less reserved or irreverent outputs." It elaborates, "These modes may be more irreverent and harsher than our standard offerings, presenting increased risks, including reputational damage, creation of potentially explicit content and misinformation or deceptive outputs, risks of nonconsensual or exploitative imagery, intellectual property infringement, or content deemed exploitative, harmful, harassing, abusive, or discriminatory."

As of March 31, SpaceX reported to investors that Grok and X collectively boast approximately 550 million monthly users, with 117 million accessing Grok's AI features each month. In contrast, OpenAI claims that ChatGPT accommodates more than 900 million users weekly.

The evaluation of whether the risks associated with Grok and X outweigh the potential complications is likely to be a critical consideration for investors ahead of the SpaceX IPO. A coalition of nonprofits has recently issued warnings that xAI's inadequate safety record might pose a liability for investments in SpaceX.

The AI division, which encompasses X and xAI, has significantly impacted the company’s finances, reporting an operational loss exceeding $6.3 billion last year. While revenue from advertisements, data, and subscriptions is increasing, it has not reached a threshold that would promptly pivot the division into profitability. However, a notable development in SpaceX's AI strategy is its partnership with Anthropic, which is willing to pay $15 billion annually for access to SpaceX's data centers.

In 2025, the AI division's revenue rose to $3.2 billion, reflecting approximately a 22 percent increase from the previous year, partly attributed to enhanced advertisement sales on X. Yet, ad revenue fell by $100 million in the first quarter of this year, an issue the company attributes to temporary challenges stemming from a revamp of its advertising tools.

The services sector of the company is performing better, with revenues from subscriptions to Grok and X increasing by $365 million last year and an additional $177 million in the initial three months of this year. SpaceX did not disclose individual subscriber counts for each service. In the U.S., Grok subscriptions start at $10 per month, while X Premium is priced at $3 monthly.