If You’re Betting on Musk’s Empire, the xAI-X Merger Might Be a Smart Play

When Elon Musk announced that his artificial intelligence startup, xAI, had acquired X (formerly known as Twitter), it surprised many. But in several ways, the deal made sense. xAI’s chatbot, Grok, was already deeply integrated with X. The social media platform was financially unstable, and Musk needed a way to reframe his $44 billion Twitter acquisition—from what looked like an emotional move into something more strategic for the race toward Artificial General Intelligence (AGI).

The deal also offered a window into how Musk’s empire operates: investing in any of his companies isn’t just about profits—it's about buying into the mythos surrounding Musk, embracing a narrative of innovation that often eclipses hard financial metrics.

Critics might call this a grift, pointing to Musk’s history of overpromising and underdelivering. But investors are increasingly tolerant—even enthusiastic—about narrative-driven investing, especially when the storyteller is someone as influential as Musk.

As Yoni Rechtman, Principal at Slow Ventures, put it: “Today, all of Elon’s companies are essentially one company. It’s already Elon, Inc. People work across companies. They share capital and infrastructure. They do business with each other. He runs them as if they’re one unified machine.” The xAI-X merger, Rechtman argues, merely dispels the illusion that these ventures were ever truly separate.

Billionaire supporters like Ron Baron of Baron Capital echo this thinking. He believes that “everything [Musk] does helps everything else he’s doing.” Musk’s vast empire includes Tesla, SpaceX, The Boring Company, Neuralink—and now, xAI. Some of these ventures even share resources.

Musk’s history supports this interconnectedness. When he bought Twitter, was he thinking about its data as a goldmine for licensing? When he aimed for Mars with SpaceX, did he realize the opportunity to provide global internet through Starlink? When he launched Tesla, did he anticipate merging EVs with self-driving tech and global connected networks powered by Grok and beyond?

All signs point to a tightly knit ecosystem—a Musk-verse—where each company strengthens the other.

This strategy has drawn investments from firms like Andreessen Horowitz, 8VC, DFJ Growth, Sequoia Capital, and even Saudi Arabia’s PIF, all weaving themselves into Musk’s web of companies.

Back to the xAI-X deal—analysts questioned how this acquisition could place X’s value at $33 billion, triple what it was a few months ago, and xAI at $80 billion, despite limited revenue. But valuations, especially in Musk’s orbit, are often based on expectations, not current metrics.

Take Tesla, for instance. It’s traded more like a tech stock than a carmaker, largely because of faith in future breakthroughs like full self-driving cars and humanoid robots. As Gene Munster of Deepwater Asset Management puts it: “Tesla trades at 80 times earnings while peers are at 25 because people are betting long. It’s not about this year’s numbers. It’s Elon’s superpower—his ability to keep investors looking ahead.”

Munster’s firm has invested in X, xAI, and Tesla, embodying the “all-in-on-Musk” investor mindset. If Musk can truly integrate xAI’s AI expertise with X’s real-time data stream and content distribution, the payoff could be enormous.

But, of course, high reward comes with high risk.

Columbia Business School professor Dan Wang points to several red flags—like the ongoing SEC lawsuit against Musk for delaying disclosure of his Twitter stake, allegedly allowing him to buy more shares at unfairly low prices. There are also concerns about data privacy, especially after X began using user data to train AI models, a move that has already drawn scrutiny from Ireland’s DPC under Europe’s GDPR laws.

Wang also notes the lack of regulatory clarity in the AI space, making it hard to predict how AI companies will be held accountable for model behavior and information sharing.

Another risk? Musk losing interest. “That’s what some Tesla shareholders are feeling,” Rechtman said. “For months, Elon’s main focus seemed to be Trump’s campaign, while other projects slowed down.”

When asked about such risks, Munster seemed unfazed. To him, the potential for xAI to become a dominant AI force outweighs current hurdles.

“We believe AI will transform the world more than most people realize,” he said. “What’s the price of owning one of the four brains that will drive the future?”

Rechtman adds that Musk loyalists aren’t blindly faithful—they simply trust Musk’s unique ability to bend capital markets to his will, allowing him to build things others can’t.

“These investors are in it for the long haul—they’ve gone ‘long Elon,’” he said. “So it’s no surprise they’ll keep telling you the emperor is fully clothed.”

And for some, investing in speculative Musk ventures like X is a way to unlock access to more exclusive plays like SpaceX. “SpaceX is real—and it’s never going public,” Rechtman said. “The only way to invest is through private tenders. And the only way to access those tenders? Be in Elon’s good graces.”