Elon Musk, Founder and CEO of Tesla and SpaceX, and who acquired Twitter in 2022 for $40B, is launching his own AI company called X.AI Corporation. Musk has brought on Igor Babuschkin, a former DeepMind employee, to lead the efforts.
I’ve been expecting Musk to launch his own AI company after the phenomenal growth and increasing valuation of the company, OpenAI, the company Musk co-founded in 2015. OpenAI is now worth over $30B. Musk left OpenAI after three years over a disagreement with the company’s management regarding the dangers of AI. Musk continues to claim that AI has the potential to destroy mankind, and he recently called for a five-year moratorium on the development of AI. Less than one month later, Musk is launching his own AI company.
Is Musk getting into the AI game because he has found a way to create an AI company that will battle evil AI companies? No.
Did Musk launch his own AI company because he wants to make money, and he realizes he foolishly lost out on potentially billions of dollars by leaving OpenAI? Yes.
However, the real reason why Musk has launched an AI company is because he needs something to salvage his disastrous acquisition of Twitter. According to Musk, Twitter is worth $20B. I believe the number is false. Twitter generated $5B in revenue in 2021, and $4.4B in revenue in 2022. In my opinion, Twitter is only worth between $6 to $8B. It’s inconceivable to me that Twitter, whose advertising revenue has already dropped 75% in 2023, can be worth $20B.
Although one of the wealthiest men in the world, Musk needs another company that will generate billions in revenue while allowing him to accumulate shares also worth billions. Acquiring Twitter for $40B only to have Twitter’s valuation crater has financially impacted Musk more than people realize. To fund his interests, Musk needs additional capital. Lots of it.
The challenge for Musk is that when it comes to AI, there are many individuals who are smarter and more capable at AI than he is. We know this is true because Musk walked away from OpenAI, yet the company blossomed without Musk’s involvement.
Musk is launching X.AI Corporation at the worst possible time. Microsoft, Google and Amazon are intent on becoming leaders in AI and they’ve committed billions to do so. Start-ups such as OpenAI, Anthropic, Adept and StabilityAI, have raised billions of dollars in recent months. Stated another way, these companies are off and running and Musk has just arrived at the starting blocks to begin the race. In all things in business, a first-mover advantage is exactly that – an advantage.
Musk will have to raise billions for his AI company. It won’t be easy. Failing to grow Twitter proves that everything Musk touches doesn’t turn to gold. Investors may choose to ignore Musk and instead, invest in other AI companies.
