In a recent development involving Elon Musk, his AI startup, xAI, has acquired his social media company, X, formerly known as Twitter, through an all-stock deal. This announcement has generated significant interest, though it appears to align with the ongoing integration of xAI’s chatbot, Grok, into X. Financially, X has been struggling, and Musk seems to be steering his $44 billion acquisition of Twitter towards a strategic venture for AGI dominance.
This acquisition highlights a broader perspective on Musk’s business approach, where investing in his companies is less about immediate returns and more about subscribing to the overarching success narrative around Musk. Critics have referred to this approach as a “grift,” citing Musk’s history of overpromising. Nonetheless, the market increasingly embraces investments driven by narratives, especially those connected to influential figures close to the president.
Yoni Rechtman, a principal at Slow Ventures, remarked that all of Musk’s businesses effectively operate as a single entity, commonly referred to as “Elon, Inc.” He emphasized the interconnected nature of Musk’s companies, underscoring the reality of the xAI-X merger as a formalization rather than a change.
Supporters like Ron Baron from Baron Capital argue that every endeavor Musk undertakes supports his other ventures. Within Musk’s portfolio are companies such as Tesla, SpaceX, The Boring Company, and Neuralink, which reportedly share resources with one another.
Baron Capital, along with firms like 8VC, Andreessen Horowitz, and others, have invested across Musk’s business spectrum. This affiliation with Musk’s ecosystem exemplifies the investor overlap within his enterprises.
The xAI-X deal itself has prompted analysts to question the valuation of X at $33 billion and xAI at $80 billion, given the latter’s limited revenue. However, valuations often reflect investor expectations rather than current realities, which is especially true for Musk’s ventures.
Tesla, for example, trades at high multiples compared to traditional automakers due to long-term bets on technological breakthroughs in self-driving and humanoid robotics. Gene Munster from Deepwater Asset Management stated that Musk’s ability to engage investors for the long term is a notable strength, driving support for ventures like the xAI-X merger.
While consolidation brings potential value, it also poses increased risks. Dan Wang from Columbia Business School highlighted several concerns, including an ongoing SEC lawsuit against Musk and other anticompetition and privacy issues. Some users have criticized X’s data collection practices for AI model training, prompting regulatory scrutiny from Ireland’s DPC under Europe’s GDPR law.
Regulatory frameworks governing AI deployment remain uncertain, with emerging traces in Europe and California. These frameworks are poised to hold companies accountable for their AI models.
Wang also cautioned about the possibility of Musk losing interest in a project, reflecting concerns from Tesla shareholders who perceive Musk’s current focus as politically driven. Despite these challenges, Munster expressed confidence in xAI’s potential to revolutionize AI.
Rechtman believes that Musk’s ability to maneuver the markets in his favor allows him to achieve unparalleled business feats. Investors committed to Musk’s vision continue to support his endeavors, viewing participation in speculative projects like X as a pathway to greater investment opportunities within Musk’s empire. Investing in these ventures may provide access to lucrative opportunities, such as participating in SpaceX’s restricted tenders.
