SpaceX Hollows Out Its AI Video Division. Elon Musk Now Has Different Priorities Rich Duprey Sat, November 14, 2026 at 8:16 AM EST 5 min read GOOG -1.54% META +2.15% MSFT -0.18% SPCX -2.64% Explore stocks on Coinbase Trading disclosure Trading disclosure The above button links to Coinbase. Yahoo Finance is not a broker-dealer or investment adviser and does not offer securities or cryptocurrencies for sale or facilitate trading. Coinbase pays us for certain activity generated through this link. Prices displayed are informational.
SpaceX reportedly laid off about 60 Grok Imagine employees to chase coding and agent tools, leaving Alphabet with one fewer well-funded AI video rival.
Sundar Pichai said Google Cloud revenue grew 103% on AI demand, while capex hit $51 billion and free cash flow turned negative.
Microsoft's Azure revenue jumped 48% and Meta's capex climbed 85%, showing the AI spending race is continuing beyond Alphabet.
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SpaceX (NASDAQ:SPCX) has reportedly cut most of the team behind its AI video generator. The Information reported on November 13 that SpaceX's artificial intelligence division laid off approximately 60 Grok Imagine employees during the past week, citing people familiar with the matter. Only a handful of employees reportedly remain to maintain the image and video tool, which is still available and operating. SpaceX has not confirmed the layoffs, their scale or the product's future.
The pullback leaves the companies still spending heavily on generative media facing one fewer well-funded rival. The largest of them is Alphabet (NASDAQ:GOOGL).
SpaceX management is reportedly focusing on AI coding tools and Grok Bot, its AI agent product. That shift runs against Elon Musk's March statement that the company was doubling down on Grok Imagine. The Information's reporting points to two pressures. Video generation uses more computing resources than text generation, and Grok Imagine trails leading competing video models in independent benchmarks.
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SpaceX's spending shows the same trend. The company closed its Cursor acquisition on August 14, 2026 at an implied equity value of $60 billion. Third-quarter Super Intelligence unit revenue reached $7.60 billion, up 830% year over year, driven by cloud services agreements, Cursor and Grok adoption. Investors can read the video cuts as tighter capital allocation or as a sign that SpaceX struggled to compete in the category. The available data supports both readings.
Alphabet's third quarter showed AI demand gaining momentum. Google Cloud revenue rose 103% to $30.709 billion, and Cloud operating income climbed to $11.121 billion from $3.594 billion. Chief Executive Sundar Pichai said:
"Google Cloud revenues grew 103%, powered by huge demand for our AI infrastructure and AI solutions. We're also seeing strong demand for our TPU systems across a wide range of customers."
Pichai added that "the Gemini app has reached one billion users," calling it "the fastest-growing product in Google's history." First-party model APIs now process nearly 32 billion tokens per minute. Distribution gives Google a structural advantage in video: YouTube ads brought in $11.207 billion in the quarter. On November 12, Wall St. Engine posted on X that Google was rolling out Gemini 4 Hydrogen "globally to all Search users, calling it the biggest model upgrade to Search yet."
The expansion is expensive. Third-quarter capex hit $51.355 billion and free cash flow came in at -$9.065 billion. Shares closed at $295.77, down 14.92% over the past month.
Azure revenue at Microsoft (NASDAQ:MSFT) grew 48% to $33.16 billion on quarterly capex of $39.37 billion. The CEO, Satya Nadella, said:
"We are delivering greater capability, choice, control, and cost efficiency for customers across our entire stack."
Meta Platforms (NASDAQ:META) is pushing into frontier models while capex climbed 85.38% to $34.906 billion. Mark Zuckerberg cited "launching Muse and Muse Wonder, our first frontier model."
Valuations differ widely. Alphabet trades at a P/E of about 13. Meta trades near 24 and Microsoft near 29. Alphabet's multiple is inflated by large equity-securities gains earlier this year, so its earnings are noisier than the headline ratio suggests.
The key questions are whether SpaceX confirms the cuts, whether Grok Imagine keeps getting updates, and whether its coding and agent products deliver results that justify the shift in resources. For Alphabet, the test is whether Cloud growth and YouTube distribution can turn a thinner field in AI video into revenue before heavy capex weighs further on free cash flow.
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