Elon Musk’s xAI is a mash-up of the social media company X and his xAI particular intelligence company. When the two were thrown together in March, X was given a valuation of $33 billion, and xAI at $80 billion. There was not a great deal to support these figures. However, institutional investors don’t seem to care. Musk recently raised $10 billion for the company, which gives it a $200 billion valuation, a jump of 76% in six months.
The jump says something about Musk or AI valuations or both. xAI competitors have also seen huge increases in valuations. Anthropic raised $13 billion, which gave it a $183 billion valuation. OpenAI, the industry leader, held a secondary share sale that valued it at $500 billion. If OpenAI were a public company, it would be worth more than Exxon Mobil (NYSE: XOM | XOM Price Prediction).
Almost all the money raised by these companies is to build AI server farms, some of which are the size of several football fields. Musk bought a one-million-square-foot piece of property outside Memphis. Meta will build a property in Louisiana to build a 400 million square foot server facility.
Taken together, Meta (NASDAQ: META), Microsoft (NASDAQ: MSFT), Amazon (NASDAQ: AMZN), and the largest private AI companies have announced plans to invest $500 billion in AI facilities this year. And, if AI fulfills the promise of becoming the most important technology in history, the investment may be cheap when people look back on 2025 as the year AI began investing unbelievable sums in it.
The valuation proposition of xAI may be absurd if AI does not take off. However, just as absurd is the value it gave to X, which just a year ago was looked at as the worst investment Musk had ever made. As xAI raised money, the value of the social network will be masked in the calculations. This is good for Musk, because X had become such a severe problem to value a faltering company.
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