SpaceX flags Grok’s ‘Spicy’ mode risks in IPO filing, sets aside $530m for litigation

SpaceX has disclosed in its initial public offering filing that AI features within its Grok chatbot, specifically ‘Spicy’ and ‘Unhinged’ modes, pose significant regulatory and reputational risks due to a lack of safety filters. The company has allocated $530 million to cover potential litigation losses, partly in response to complaints regarding sexualised imagery generated by the chatbot. SpaceX is currently under investigation in the United States and other jurisdictions over allegations that Grok was used to create sexualised images of apparent minors. The AI division, comprising xAI and X, reported an operating loss of more than $6.3 billion last year, despite revenue growth driven by subscriptions and a $15 billion annual deal with Anthropic. The S-1 filing marks the first public disclosure of these financials ahead of the IPO scheduled for June 12.

The nearly 400-page document submitted to the US Securities and Exchange Commission reports $18.67 billion in revenue for 2025, a significant increase from $14.02 billion in 2024. However, the company recorded a net loss of $4.94 billion in 2025, driven largely by the acquisition of xAI, which merged with the social media platform X in February 2025. The documents reveal that xAI incurred an operational loss of $6.4 billion on $3.2 billion in revenue during 2025. The filing also discloses a landmark $40 billion compute deal with Anthropic, securing the entire output of xAI’s Colossus data centre through May 2025.

SpaceX warned investors that features allowing the chatbot to generate raunchy image or voice responses with fewer safety filters could expose the company to regulatory scrutiny and reputational damage. The filing notes that Grok and X have approximately 550 million combined monthly users as of March 31, with 117 million using Grok’s AI features monthly. In comparison, OpenAI states that ChatGPT has more than 900 million weekly users. The company is one of a number of chatbot makers that is being scrutinized by regulators as governments grapple with the societal impacts of generative AI tools.

Disclosing potential business risks is a routine and legally required part of IPO filings, and some of the concerns outlined by SpaceX may never materialize. The company is the defendant in several ongoing class action lawsuits related to its AI products. The filing notes that future "misuse” of AI products could lead to regulatory sanctions, including loss of access to certain markets, which has occurred in the past. A group of nonprofits has warned that xAI’s poor safety record could become a liability for SpaceX investors.

Ad sales for the AI division plummeted by $100 million in the first quarter of this year, attributed to an overhaul of advertiser tools. Revenue from subscriptions to Grok and X rose by $365 million last year and $177 million in the first three months of this year. The AI division's revenue rose to $3.2 billion in 2025, up about 22 percent from the year before. SpaceX attributed part of the surge to increased sales of ads on X, but the services business is faring better than the advertising arm.