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High-profile investors who took painful losses backing Elon Musk’s takeover of Twitter are now in line for a sweet consolation prize — in the form of surging stakes in Musk’s artificial intelligence startup, according to a report.
Musk has given 25% of the shares in xAI, which Musk founded last year, to investors who helped fund his $44 billion acquisition of the social media platform X, formerly known as Twitter, in 2022, sources with knowledge of the talks told the Financial Times.
XAI is set to close a $5 billion fundraising round as early as Wednesday – doubling the company’s valuation to $50 billion in just six months, according to the paper.
Those who backed Musk’s takeover of Twitter – which has seen advertisers and users flee due to concerns over a lack of content regulation – have been sitting on billions of dollars worth of unrealized losses. But xAI’s gains could help them recoup the unfavorable investments.
Investors set to benefit from stakes in both Musk companies include Fidelity, Oracle co-founder Larry Ellison, Saudi Prince Alwaleed bin Talal, Twitter founder Jack Dorsey and venture firms Sequoia Capital and Andreessen Horowitz, according to the report.
The unique “reward” system is Musk’s latest way of intertwining his companies, which also include rocket manufacturer SpaceX and electric vehicle maker Tesla.
Many of the investors who helped fund Musk’s purchase of Twitter justified it as an investment not in X, but in Musk himself.
“There are few adages in tech that really hold up,” one investor in Musk’s companies told the Financial Times. “Never bet against Elon is one.”
The billionaire’s AI startup has grown rapidly and will have raised about $11 billion in total investments after this week’s funding round shuts – welcome growth for Twitter investors, who funneled about $7 billion into Musk’s acquisition.
“It’s hard to manage conflicts of interest on this sort of stuff,” an investor in one of the companies told the Financial Times. “You have to be a fiduciary and you’re on both sides.”
In May, xAI completed a $6 billion fundraising round to give it a $24 billion valuation. Some of those who backed Musk’s Twitter purchase, like Andreessen Horowitz, Sequoia Capital, Prince Alwaleed and Fidelity, poured more investments into the startup.
During its latest fundraising round, Musk permitted only previous xAI backers to make new investments, several people close to the matter told the Financial Times.
Musk’s clout has only grown over the past year as he has become a close confidant of President-elect Donald Trump. Musk, the world’s richest person with a net worth of $324.2 billion according to Forbes, pumped more than $100 million into the Trump campaign via pro-Trump PACs and rallied on the candidate’s behalf in swing states.
Since Trump’s win, Musk has remained nearby, meeting with Trump allies and Cabinet wannabes at the president-elect’s Mar-a-Lago residence. He even achieved “uncle status,” according to Trump’s granddaughter.
Musk’s influence on Trump is clear after the president-elect picked up Musk’s pitch to start a Department of Government Efficiency – and appointed the tech junkie to lead it. Though Trump’s pick for Treasury Secretary — “business-as-usual” Scott Bessent, as Musk called him — shows the billionaire doesn’t always get his way.
Since Musk took over the platform and rebranded it X, the social media platform’s value has tanked.
Advertisers fled the platform as racist and antisemitic posts cropped up alongside their paid ads, and after Musk endorsed an antisemitic post.
Left-leaning celebrities have also posted “goodbyes” to their millions of X followers and turned to rivals like Bluesky or Threads over calls for Musk to better regulate the platform.
Banks including Morgan Stanley and Barclays are currently sitting on $13 billion worth of Twitter debt, and Fidelity has written down its X investment by nearly 80% to a $9.4 billion valuation, according to the report.
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