Elon Musk just compensated investors who helped him buy X. He gave them shares of xAI

When Elon Musk bought Twitter for $44 billion, he did so with the support of large investors. However, analysts indicate that Twitter‘s valuation is 80% less than it was when Musk bought it two years ago. Now the tycoon has just compensated those investors, but he has done it in a unique way.

value crash. Banking entities such as Morgan Stanley and Barclays have outstanding debt of 13 billion dollars after the operation, while venture capital investors invested 7.1 billion dollars according to the Financial Times. That investment has not stopped falling in value after Musk’s controversial management, but now the tycoon has made a striking decision.

xAI Stock. To try to compensate those investors, Musk has given them 25% of xAI shares. The startup that tries to compete with OpenAI or Anthropic is about to close a financing round of $5 billion, which brings its valuation to $50 billion.

Beneficiaries. Among the personalities and entities that have received shares are Fidelity, Larry Ellison – co-founder of Oracle -, Saudi Prince Alwaleed bin Talaal, Jack Dorsey – co-founder of Twitter – and the venture capital firms Sequoia Capital and Andreessen Horowitz. Some of them participated in xAI’s investment round last May. Investors can also benefit from the new privileged position that Trump seems to hold after Donald Trump’s victory in the US presidential elections.

Conflicts of interest. One of the investors in those companies indicated anonymously in the FT that “it is difficult to manage conflicts of interest in this type of thing. You have to be a fiduciary and you are on both sides.” Indeed, although this way of compensating investors is interesting, it also poses problems when it comes to acting and making decisions both as a shareholder of xAI and as a director or partner of these investment firms.

xAI remains an unknown. Meanwhile, the investment round gives xAI new resources to develop its AI models. In The Wall Street Journal they point out that the startup is expected to launch its own AI model in December. Trump promised that this model will be the most powerful in the world “in all metrics,” but the doubts are notable. Grok, the chatbot developed by xAI, remains unusable except for X subscribers.

ChatGPT rival in sight. However, that could change soon and according to sources close to the company, xAI is preparing the launch of an independent application for end users that will theoretically compete with ChatGPT.

Colossus. It certainly seems to have the capacity to launch something like this: Musk has managed to create his data center, named Colossus, in just 122 days. It has 100,000 NVIDIA GPUs, something that very few companies can boast of today. Part of the recent funding is actually intended to double the number of chips in Colosssus so it can continue training its models. The goal contrasts with recent concern from companies in the sector, which appear to be experiencing a slowdown in AI.

Image | dvids | xAI

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