Fidelity Investments has significantly increased the valuation of its stakes in Elon Musk’s AI startup xAI, marking a dramatic 70% jump in share value between September and October 2024. According to filings released in November, Fidelity’s Blue Chip Growth Fund now values its xAI shares at approximately $20.35 each, up from $11.96 per share the previous month, bringing the total value of its xAI holdings to over $75 million.
This substantial markup preceded what became a transformative period for xAI and Musk personally. In early November, Musk was appointed as President-elect Donald Trump’s government efficiency boss, and later that month, xAI closed a massive $5 billion funding round. The round attracted major investors including Qatar’s sovereign-wealth fund (Qatar Investment Authority), along with prominent venture capital firms Sequoia Capital and Andreessen Horowitz.
xAI is now valued at $50 billion, more than doubling its $24 billion valuation from earlier in 2024 following its $6 billion Series B funding round. The OpenAI rival has gained significant competitive ground by leveraging X (formerly Twitter) as a crucial source of third-party data for training large language models, one of the essential components for developing advanced AI systems.
Fidelity also increased the valuation of its X holdings in October, marking a 32.4% jump to $28.13 per share. This represents a notable reversal after months of consecutive markdowns. The fund now values X at approximately $12.5 billion, up from $9.4 billion in September, though still significantly below the $44 billion Musk paid to acquire the platform in October 2022.
The synergy between X and xAI appears to be validating Musk’s controversial acquisition strategy. While critics initially claimed he overpaid for the social media platform, it’s now proving valuable for his AI ambitions by providing proprietary training data and supporting his broader technology ecosystem.
Interestingly, Fidelity’s valuation of OpenAI remained unchanged during the same period, despite the investment giant holding stakes in the AI leader through at least five different funds and participating in OpenAI’s recent $6.6 billion funding round with a contribution of at least $100 million.
Key Quotes
While critics initially said he ‘overpaid’ for the social media platform, it is starting to bear fruit — including supporting his AI ambitions and winning favor with Trump.
This observation from the article captures the shifting narrative around Musk’s X acquisition, suggesting that what appeared to be a financial misstep may actually be proving strategically valuable for his AI ventures and political connections.
The AI startup has made up significant ground on its rivals by using X as a source of third-party data, one of the main sources for training large language models.
This statement explains xAI’s competitive advantage and why investors are increasingly bullish on the company. Access to X’s proprietary data gives xAI a unique edge in the data-hungry world of AI model training.
Our Take
Fidelity’s aggressive revaluation of xAI represents more than just financial optimism—it signals a fundamental shift in the AI competitive landscape. The 70% markup suggests institutional investors believe xAI has cracked the code on one of AI’s most critical challenges: access to high-quality training data. By controlling X, Musk has created a vertically integrated AI ecosystem that rivals can’t easily replicate.
The $50 billion valuation puts xAI in rarefied air, competing directly with OpenAI and Anthropic for AI supremacy. What’s particularly noteworthy is the speed of this ascent—xAI has achieved in months what took competitors years. The combination of Musk’s brand, X’s data moat, and now political connections creates a formidable competitive position. However, questions remain about whether xAI can translate this momentum into actual product superiority and market adoption.
Why This Matters
This valuation increase signals growing investor confidence in xAI’s competitive position within the rapidly evolving AI landscape. The 70% markup by a sophisticated institutional investor like Fidelity suggests that xAI’s strategy of leveraging X’s data ecosystem is resonating with the financial community.
The story highlights the increasing consolidation of AI development around major tech ecosystems. Musk’s ability to integrate X’s vast social media data with xAI’s AI development efforts demonstrates how control of proprietary data sources has become a critical competitive advantage in the AI arms race.
The timing is particularly significant given Musk’s new political connections through his appointment to Trump’s administration, which could influence AI policy and regulation. The successful $5 billion funding round, attracting sovereign wealth funds and top-tier VCs, indicates that xAI has achieved legitimacy as a serious OpenAI competitor.
For the broader AI industry, this represents the emergence of a credible alternative to OpenAI’s dominance, potentially diversifying the competitive landscape and driving innovation through increased competition among well-funded AI laboratories.
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Source: https://www.businessinsider.com/fidelity-boosted-the-value-of-xai-elon-musk-2024-12