Challenges Ahead for xAI Corp Amid Musk-Trump Feud

Financial Projections Complicated by Public Tensions

Even before the highly publicized falling out between Elon Musk and former President Donald Trump, raising debt for Musk’s ventures has always posed a unique challenge for Morgan Stanley. However, xAI Corp. was expected to change that narrative.

Amidst the recent frenzy around artificial intelligence in market trends, internal projections shared by Morgan Stanley with select investors suggest that xAI anticipates generating over $13 billion in annual earnings by 2029, according to sources familiar with the matter.

However, the ongoing feud between Musk and Trump, which has become increasingly public and contentious, complicates the banking landscape for xAI. Trump has demonstrated a readiness to employ unconventional strategies to retaliate against perceived adversaries, and Musk’s enterprises, including xAI, may find themselves caught in the crossfire.

Impact of the Musk-Trump Feud

The exact repercussions of the clash on xAI’s debt sale efforts remain unclear. Nonetheless, as hostilities intensified online, the loan price for X, a social media platform owned by Musk that is closely linked to xAI, fell by approximately 1.25 points on Thursday.

By late Thursday, signs emerged that Musk aimed to de-escalate tensions with Trump. Reports indicated that White House aides had arranged a call between the two to prevent further discord, according to Politico.

Response from Morgan Stanley and xAI

A representative from Morgan Stanley declined to comment on the situation, and xAI did not respond to a request for comment after regular business hours.

Investor Insights Shared Thursday

On Thursday, investors willing to commit at least $50 million gained access to limited insights regarding xAI, encompassing revenue, earnings, cash flow, and future projections. Sources indicated that these figures showcased losses and cash burn typical of startup ventures in the AI sector.

According to materials presented to investors, xAI reported a gross revenue of $52 million for the first quarter, with a significant loss of $341 million before accounting for interest, taxes, depreciation, and amortization.

Future Expectations

Despite initial losses, xAI projects earnings—referred to as EBITDA in financial circles—of approximately $2.7 billion in 2027 and $13.1 billion in 2029. Furthermore, the company anticipates reaching $1 billion in gross revenue by the year’s end, expecting a dramatic increase to $14 billion by 2029.

However, the company’s cash flow from operations was negative $220 million, resulting from $2.6 billion in capital expenditures. Looking ahead, xAI plans to invest around $18 billion in new data centers.

Importance of Financial Transparency

It’s essential to note that the figures shared with investors have not undergone an audit and do not adhere to the accounting standards established for publicly traded companies.

Conclusion

The interplay between significant investors, corporate ambitions, and high-profile public feuds casts a complex shadow over xAI Corp.’s outlook. As the company navigates its financial projections amid external pressures, its future will depend on both its operational performance and its ability to mitigate fallout from the Musk-Trump dispute.