{"id":17503,"date":"2025-04-13T21:14:09","date_gmt":"2025-04-13T21:14:09","guid":{"rendered":"https:\/\/www.europesays.com\/uk\/17503\/"},"modified":"2025-04-13T21:14:09","modified_gmt":"2025-04-13T21:14:09","slug":"the-xai-x-merger-is-a-good-deal-if-youre-betting-on-musks-empire","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/uk\/17503\/","title":{"rendered":"The xAI\u2013X merger is a good deal \u2014 if you\u2019re betting on Musk\u2019s empire"},"content":{"rendered":"

When Elon Musk announced that his AI startup, xAI, had acquired his social media company, X (formerly known as Twitter), in an all-stock deal<\/a>, it raised some eyebrows. But in many ways, the deal made sense. xAI\u2019s chatbot, Grok, was already deeply integrated with X, X was floundering financially<\/a>, and Musk needed a way to make his $44 billion Twitter acquisition look less like an impulsive takeover and more like a strategic play for AGI<\/a> dominance.\u00a0<\/p>\n

It also pointed to something deeper about how Musk\u2019s empire works: investing in any one of his companies isn\u2019t about a quick return on investment. It\u2019s about buying into the mysticism around Musk and swallowing whole a narrative of success that outpaces the actual numbers.\u00a0<\/p>\n

Some call it a grift<\/a>, pointing to Musk\u2019s history of overpromising and underdelivering<\/a>. But the market is increasingly more tolerant \u2013 welcoming, even \u2013 of narrative-led investments, particularly when the thread that ties the tale together is one of the president\u2019s right-hand men.<\/p>\n

\u201cAll of Elon\u2019s companies today are basically one company,\u201d Yoni Rechtman, a principal at Slow Ventures, told TechCrunch. \u201cIt\u2019s all already Elon, Inc. There are people who work across multiple companies simultaneously. They share a web of capital connections. They do business with one another, and he treats them all effectively as one company. So [the xAI-X merger] just ends some of the fiction that the two businesses were separate.\u201d<\/p>\n

The thinking among Musk bulls like Ron Baron, the founder of investment management firm Baron Capital, is that \u201cevery single thing [Musk] does is helping everything else he does,\u201d as Baron phrased it<\/a>. Other businesses under Musk\u2019s control include Tesla, SpaceX, The Boring Company, and Neuralink \u2013 some of which reportedly share resources<\/a>.<\/p>\n

\n

\u201cWhen [Musk] bought Twitter, did he have in his mind that there\u2019s an opportunity to have this data, a tremendous value for licensing? When he decided he wanted to go to Mars with SpaceX, did he really think initially that there\u2019s a real opportunity here for the internet around the world, and there\u2019s gonna be hundreds of billions of dollars of revenue opportunity? When he started off with EVs for Tesla, did he really think that this is gonna merge into self-driving, where you can make hundreds of billions of dollars a year of extra profits, and Grok [\u2026] and you\u2019re gonna have connected cars all around the world? [\u2026] All these businesses link up. It\u2019s the ecosystem. It\u2019s the Elon ecosystem, and I think it\u2019s really interesting when you look at it that way.\u201d<\/p>\n<\/blockquote>\n

Baron Capital has invested across Musk\u2019s ecosystem, an example of the investor crossover between the billionaire\u2019s various companies. Firms like 8VC, Andreessen Horowitz, DFJ Growth, Fidelity Investments, Manhattan Venture Partners, Saudi Arabia\u2019s PIF, Sequoia Capital, Vy Capital, and others also hold positions throughout Musk\u2019s corporate web.\u00a0<\/p>\n

That brings us back to the xAI-X deal. Pundits questioned how the acquisition could value X at $33 billion, more than triple its valuation<\/a> just a few months ago, and how it could value xAI at $80 billion considering the AI company reportedly<\/a> has little in the way of revenue. But valuations aren\u2019t always based on what exists today. Rather, they take into account what investors are hoping for \u2013 and that\u2019s particularly true when it comes to Musk\u2019s ventures.\u00a0<\/p>\n

Just look at Tesla. The electric vehicle maker has been treated like a tech stock for years despite the fact that it has automaker margins<\/a>, based largely on the belief that Tesla will one day unlock groundbreaking autonomy in the form of self-driving cars and humanoid robots.\u00a0<\/p>\n

\u201cThe reason why [Tesla\u2019s] stock trades at 80 times earnings and the comp group trades at 25 times earnings is that people are making a bet on the long term, and it\u2019s not about what happens to numbers this year,\u201d Gene Munster, managing partner at Deepwater Asset Management, told TechCrunch. \u201cThat\u2019s one of Elon\u2019s superpowers, this ability to keep investors engaged for the long term.\u201d<\/p>\n

Munster\u2019s firm has invested in X, xAI, and Tesla. It\u2019s exactly the type of all-in Musk backer that stands to benefit the most from a deal like xAI buying X, assuming Musk can indeed deliver on his pledge of marrying X\u2019s real-time data trove and distribution platform with xAI\u2019s infrastructure and AI expertise.<\/p>\n

Of course, consolidated value also comes with increased risk.\u00a0<\/p>\n

Dan Wang, a professor at Columbia Business School whose research lies at the intersection of business and society, told TechCrunch that the biggest immediate risk factor for investors is the ongoing lawsuit that X is facing from the Securities and Exchange Commission (SEC). The suit accuses Musk of misleading investors by delaying the disclosure of his previous investments in Twitter. The SEC has argued that this allowed Musk to buy more Twitter shares at artificially low prices.<\/p>\n

Wang listed a few other risk considerations, such as anticompetition and user privacy concerns, particularly regarding how X quietly opted all users into data collection for AI model training. The opt-in change has already raised the ire of one regulator, Ireland\u2019s DPC<\/a>, which recently began investigating it as a potential breach of Europe\u2019s GDPR law.\u00a0<\/p>\n

\u201cAnother kind of risk here is that there isn\u2019t a consensus framework for how the AI market is going to be regulated, but you\u2019re already seeing traces of this in Europe and, up until recently, in California,\u201d Wang said. \u201cA lot of these frameworks have to do with how AI models are deployed in terms of distributing information [\u2026] They ascribe responsibility to the companies that are creating AI models, as well as providing access to those models.\u201d\u00a0<\/p>\n

Musk might also simply lose interest in a project, Rechtman said.\u00a0<\/p>\n

\u201cI think that is what a lot of Tesla shareholders are feeling right now,\u201d he said, \u201cwhere for the last several months, Elon\u2019s number one company has been the Trump campaign, and his other projects have languished.\u201d<\/p>\n

When asked about some of these risk factors, Munster appeared nonplussed. He suggested they\u2019re inconsequential given the enormity of, for example, xAI\u2019s value proposition and potential to become a dominant player in AI.\u00a0<\/p>\n

\u201cWe\u2019re betting the firm on the belief that AI is going to be more transformative than what people think,\u201d he said. \u201cWhat is the value [\u2026] of one of the four brains that the world is going to run on?\u201d\u00a0<\/p>\n

Rechtman said that Musk bulls aren\u2019t blindly loyal, per se, but simply trust in Musk\u2019s superpower to \u201cbend capital markets to his will\u201d in a way that allows him to do things and build businesses that nobody else can.<\/p>\n

\u201cThe people who are in these businesses have just gone long Elon, and they will continue to go long Elon,\u201d Rechtman said. \u201cSo it\u2019s not surprising to me that they will just continue to tell you that the emperor is wearing clothes.\u201d<\/p>\n

Not for nothing, buying into Musk\u2019s more speculative bets, like X, is one way to potentially unlock more investment opportunities in the Muskverse, Rechtman said.\u00a0<\/p>\n

\u201cSpaceX is a real thing, and it will never go public,\u201d he said. \u201cSo the only way to invest in SpaceX is to get access to the tenders. And the only way to get access to the tenders is to be in Elon\u2019s good graces.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"When Elon Musk announced that his AI startup, xAI, had acquired his social media company, X (formerly known…\n","protected":false},"author":2,"featured_media":17504,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3163],"tags":[323,1942,295,9328,53,16,15,1605,1604],"class_list":{"0":"post-17503","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-artificial-intelligence","8":"tag-ai","9":"tag-artificial-intelligence","10":"tag-elon-musk","11":"tag-grok","12":"tag-technology","13":"tag-uk","14":"tag-united-kingdom","15":"tag-x","16":"tag-xai"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@uk\/114332726931097676","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/17503","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/comments?post=17503"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/17503\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media\/17504"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media?parent=17503"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/categories?post=17503"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/tags?post=17503"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}