The xAI–X merger is a good deal — if you’re betting on Musk’s empire

When Elon Musk announced that his AI Startup, XAI, had taken over his social media company, X (formerly known as Twitter), in an all-stock deal, it attracted a few eyebrows. But in many ways the deal was logical. Xai’s chatbot, grock, was already deeply integrated with X, X was financially flowingAnd Musk needed a way to make his Twitter acquisition of $ 44 billion less look like an impulsive acquisition and more as a strategic game for AGI -Dominance.

It also be a bit deeper about how Musk’s Empire works: investing in one of his companies is not about a quick return on investments. The point is to buy the mysticism around Musk and swallowing a whole story of success that exceeds the actual figures.

Some call it one stretchWearing Musk’s history of overpromatization and subdivision. But the market becomes increasingly tolerant-even-free-free-of-own investments led by stories, especially when the thread that binds the story together is one of the president’s right hand.

“All companies of Elon are nowadays a company,” Yoni Rechtman, a director of Slow Ventures, told WAN. “It is all Elon, Inc. there are people who work in several companies at the same time. They share a web of capital connections. They do business with each other and he effectively treats them as one company. [the xAI-X merger] Simply ends part of the fiction that the two companies were separate. “

Thinking among Musk Bulls such as Ron Baron, the founder of investment management agency Baron Capital, is that “every thing [Musk] Does everything he does, “as a baron formulated. Other companies under the control of Musk are Tesla, SpaceX, the boring company and neuralink – some of which some Allegedly you share resources.

“When [Musk] Bought Twitter, did he think that there is a chance to have this data, an enormous value for licenses? When he decided that he wanted to go to Mars with SpaceX, he really thought there is a real chance for the internet around the world here, and there will be hundreds of billions of dollars in income chances? When he started with EVs for Tesla, he really thought this will merge into self -driving, where you can earn hundreds of billions of dollars a year extra profit, and grock […] And are you going to go cars all over the world? […] All these companies link themselves. It is the ecosystem. It is the Elon Ecosystem and I find it really interesting if you look at it that way. “

Baron Capital has invested in the Musk ecosystem, an example of the investors Crossover between the different companies of the billionaire. Companies such as 8VC, Andreessen Horowitz, DFJ Growth, Fidelity Investments, Manhattan Venture Partners, Saudi -Aarabia’s PIF, Sequoia Capital, VY Capital and others also cover positions in the Musk Bedrijfsweb.

That brings us back to the Xai-X deal. Pundits wondered how the acquisition X could appreciate at $ 33 billion, more than triple its appreciation just a few months ago, and how the Xai could appreciate at $ 80 billion, given the AI ​​Company Reportedly Has little income. But valuations are not always based on what exists today. Instead, they take into account what investors hope for – and that is especially the case when it comes to the companies of Musk.

Take a look at Tesla. The creator of electric vehicles has been treated for years as technical shares, despite the fact that it has automakermarges, largely based on the conviction that Tesla will one day unlock a groundbreaking autonomy in the form of self -driving cars and humanoid robots.

“The reason why [Tesla’s] Stock trade at 80 times income and the Comp Group transactions with 25 times income is that people bet in the long term, and it is not about what is happening with figures this year, “Gene Munster, Managing Partner at Deepwater Asset Management, WAN told.” That is one of Elon’s super powers, this ability to keep the investors for the long term. “

The Munster company has invested in X, Xai and Tesla. It is precisely the type of all-in musk-backer that benefits the most from a deal like Xai who buys X, assuming that Musk can indeed provide his promise to marry Xa-troove and distribution platform with Xai’s infrastructure and AI expertise.

Consolidated value naturally also comes with an increased risk.

Then Wang, a professor at the Columbia Business School whose research lies at the intersection of company and society, WAN said that the biggest immediate risk factor for investors is the continuous lawsuit with which X is confronted with the Securities and Exchange Commission (SEC). The suit accuses Musk of misleading investors by postponing the disclosure of his earlier investments in Twitter. The SEC has argued that Musk could buy more Twitter shares at artificially low prices.

Wang mentioned a few other risk reasons, such as anti -competition and privacy problems for users, in particular about how X quietly chose all users in data collection for AI model training. The opt-in change has already raised the anger of one regulator, DPC van Ireland, who recently started investigating it as a potential infringement of the AVG law of Europe.

“Another kind of risk here is that there is no consensus framework for how the AI ​​market will be regulated, but you can already see traces in Europe and until recently in California,” Wang said. “Many of these frameworks have to do with how AI models are used in terms of distributing information […] They attribute responsibility to the companies that create AI models, and offer access to those models. ”

Musk can also just lose interest in a project, Rechter said.

“I think that is what many Tesla shareholders now feel,” he said, “where the number one company of Elon has been the Trump campaign in recent months, and his other projects have run away.”

At the request for some of these risk factors, Munster did not seem -geplus. He suggested that they are not good, given the enormous size of, for example, Xai’s value proposition and potential to become a dominant player in AI.

“We bet the company in the conviction that AI will be more transforming than what people think,” he said. “What is the value […] From one of the four brains that the world goes through? ”

Rechter said that Musk Bulls is not necessarily loyal, but simply trusts Musk’s super power to “bend capital markets for his will” in a way that enables him to do things and build companies that no one else can do.

“The people who are in these companies have just gone elon for a long time, and they will continue to go for a long time,” Rechtman said. “So it is not surprising that they will continue to tell you that the emperor is wearing clothing.”

It’s not for nothing, buying Musk’s more speculative bets, such as X, is a way to unlock more investment options in the Musk -fresh, Rechtman said.

“SpaceX is real and it will never be public,” he said. “So the only way to invest in SpaceX is to gain access to the tenders. And the only way to gain access to the tenders is to be in the good grace of Elon.”