Dec 6, 2023 - Business

How Elon Musk may be spinning up a Plan B to save X

Elon Musk

Elon Musk speaks during the New York Times annual DealBook summit on Nov. 29, 2023 in New York City. Photo: Michael M. Santiago/Getty Images

Elon Musk may have a plan to save X, and it doesn't involve advertising, free speech, or financial services.

Why it matters: There are fascinating signs Musk is turning his attention — and business bull case — to AI. There may be a hidden plan behind what looks like random rants.

The big picture: Musk has publicly admitted that he overpaid for what was then known as Twitter, as did his co-investors. It's still unprofitable, with decreased revenue and increased debt.

  • Last week, Musk literally told Disney and other boycotting advertisers to "go f**k yourselves."
  • This could have been read as a corporate suicide note, particularly by those charged with reviving the business that Musk acquired.
  • But an alt take is that Musk is already minimizing that business, as least as a revenue and valuation driver, in favor of the OpenAI rival he launched earlier this year.

Behind the scenes: X.ai Corp. yesterday disclosed in an SEC filing that it's raising up to $1 billion in equity funding, with nearly $135 million already banked. No investors were listed.

  • It's unclear if X.ai sits under the same corporate umbrella (X Holdings Corp.) as does X Corp. (nee Twitter), and an X Corp. spokesman said he "can't share anything" in that regard.
  • But it would make sense that they share structural DNA, particularly given that X.ai is expected to leverage the flagship's content and user base.
  • For those that helped finance the Twitter takeover, this could mean both direct equity exposure to X.ai plus the right to invest more.

Why it matters: Were X.ai to eventually become valued at where OpenAI sits today — at the relative dawn of generative AI adoption — then those "Twitter" shareholders would be deep in the black.

Caveats: To be clear, that's a very optimistic bull case. X.ai is staring up a steep hill, even if it gets to ride ChatGPT's coattails.

  • It's also expensive. Musk may have access to some excess cloud computing space via his vast business empire, but he'd still need billions of dollars to compete with all the Azure and AWS credits that OpenAI and Anthropic have received in exchange for equity.

The bottom line: Musk, via email, would only say: "I have never lost money for those who invest in me and I am not starting now."

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