When Elon Musk announced that his artificial intelligence startup, Xai, had acquired his social media company, X (previously known as Twitter), in an all-style agreement, raised some eyebrows. But in many ways, the agreement made sense. The XAI chatbot, Grok, was already deeply integrated with X, x was financially grouped and Musk needed a way to make the acquisition of Twitter of 44 billion dollars less as a impulsive acquisition and more a strategic game for agi dominance.
He also underlined something deeper on how Musk’s empire works: investing in one of his companies does not concern a quick return to investments. It is a matter of buying in mysticism around moss and swallowing a successful narrative that exceeds real numbers.
Some call him a grift, indicating the story of Musk of excessive and undermining. But the market is increasingly tolerant-welcoming, even-the investments led by the narrative, in particular when the thread that binds the story is one of the president’s men’s men.
“All the companies of Elon today are basically a company,” said Slow Ventures of Techcrunch Yoni Rectman. “It’s all Elon, Inc. are people who work simultaneously in multiple companies. They share a network of capital connections. Affairs are made between them and all deal with them effectively as a company. Therefore (the XAI-X merger) only a part of the fiction that the two companies were separated ends.”
The thought between Tori Musk like Ron Baron, the founder of the Baron Capital investment management company, is that “every single thing (Musk) does it is helping all the rest he does”, as Baron called it. Other companies under the control of Musk include Tesla, Spacex, The Boring Company and Neuralink, some of which according to what reported they share resources.
“When (Musk) bought Twitter, he had in mind that there is an opportunity to have these data, a huge value for licenses? When he decided that he wanted to go to Mars with Spacex, he really thought that initially there is a real opportunity for the world all over the world and there are really put there for the fact that there are hundreds of billions of billions of dollars? (… will you have cars connected all over the world?
Baron Capital has invested throughout the Musk ecosystem, an example of the crossover of investors among the various billionaire companies. Companies such as 8vc, Andreessen Horowitz, DFJ Growth, Fidelity Investments, Manhattan Venture Partners, Pif of Saudi Arabia, Sequoia Capital, Vy Capital and others hold positions throughout the Musk’s corporate web.
This takes us back to the XAI-X agreement. Experts questioned how the acquisition could evaluate x to $ 33 billion, rather than tripling its evaluation only a few months ago and how it could evaluate xai to $ 80 billion considering that the artificial intelligence company has little in terms of revenue. But the assessments are not always based on what exists today. Rather, they take into account what investors hope – and it is particularly true when it comes to Musk’s initiatives.
See Tesla. The electric vehicle manufacturer has been treated as a technological stock for years despite the fact that he has margins from the car manufacturer, largely based on the belief that Tesla one day will unlock innovative autonomy in the form of autonomous driving cars and human offenders.
“The reason why the actions (of Tesla) are negotiated by 80 times the profits and the compound group marketed 25 times the profits is that people are betting in the long term, and it is not about what happens to the numbers this year,” said Gene Munster, managing director of Deepwater Asset Management, told Techcrunch. “This is one of Elon’s superpowers, this ability to keep investors busy in the long term.”
The Munster company has invested in X, Xai and Tesla. It is exactly the type of all-in Musk backer that benefits from more than an agreement such as XAI who buys X, assuming that Musk can actually deliver his commitment to marry the data of XI real-time data and distribution platform with experience in the infrastructure and in the AI.
Of course, the consolidated value also has an increase in risk.
Dan Wang, professor to Columbia Business School whose research lies at the intersection of business and companies, told Techcrunch that the largest immediate risk factor for investors is the current cause that X is facing from the Securities and Exchange Commission (sec). The cause Musk accuses of being misleading investors by delaying the dissemination of his previous investments on Twitter. The century claimed that this allowed Musk to buy more Twitter actions at artificially low prices.
Wang has listed some other risk considerations, such as anti -concurrence concerns and user privacy, in particular as regards the way in which X has silently opted all users in the collection of data for the formation of the AI model. Opt-in change has already increased the anger of a regulator, the DPC of Ireland, which recently started investigating it as a potential violation of the European GDPR.
“Another type of risk here is that there is no consent framework for how the AI market will be regulated, but you are already seeing traces in Europe and, until recently, in California,” said Wang. “Many of these framework have to do with the way in which artificial intelligence models are distributed in terms of distribution of information (…) attribute responsibility to the companies that are creating artificial intelligence models, as well as providing access to these models.”
Musk could also simply lose interest for a project, said Rettman.
“I think that it is what Tesla’s shareholders feel at this moment,” he said, “where in recent months, Elon’s number one has been the Trump campaign and his other projects have soaked”.
As a question about some of these risk factors, Munster appeared not perplexed. He suggested that they are insignificant, given the enormity, for example, of the proposal for the value of XAI and the potential to become a dominant player in the AI.
“We bet the company on the belief that the IA will be more transformative than what people think,” he said. “What is the value (…) of one of the four brains on which the world is about to run?”
Rectman said that Musk bulls are not blindly loyal, in themselves, but simply confides in Musk’s superpower to “bend the capital markets to his will” in a way that allows him to do things and build companies that no one else can.
“The people who are in these activities have just gone for a long time and will continue to go for a long time,” said Rettman. “So I am not surprised that they will continue to tell you that the emperor wears clothes.”
Not for nothing, buying Musk’s most speculative bets, like X, is a way to potentially unlock more investment opportunities in Muskverse, said Rettman.
“Spacex is a real thing and will never be public,” he said. “So the only way to invest in Spacex is to have access to the tenders. And the only way to access the offers is to be in the good graces of Elon.”
