Musk's xAI to hit $13b by 2029: Morgan Stanley

Elon Musk’s AI startup xAI is projected to generate over US$13 billion in annual earnings by 2029, citing Morgan Stanley.

Limited financial data shared includes a US$52 million gross revenue in Q1 2025 and a US$341 million EBITDA loss in the same period.

XAI expects US$1 billion in gross revenue by the end of 2025.

Projections suggest EBITDA could grow to US$2.7 billion by 2027 and US$13.1 billion by 2029.

XAI plans to invest US$18 billion in data centers, after already spending US$2.6 billion on capex.

The company is also seeking a US$113 billion valuation in a US$300 million share sale.

🔗 Source: Reuters

🧠 Food for thought

1️⃣ AI valuations reflect a historical pattern of ambitious projections

xAI’s projected $13 billion in annual earnings by 2029 mirrors a familiar trajectory in AI startup projections, where companies typically forecast dramatic growth despite initial losses.

The $113 billion valuation being sought by xAI continues the trend of soaring AI valuations that began in 2012-2016, when AI startup funding surged from $600 million to $5 billion annually, a growth rate of approximately 50% per year 1.

By 2024, investor enthusiasm for AI had intensified dramatically, with AI companies receiving $73 billion in mega deal dollars, significantly outpacing the $47 billion received by non-AI companies 2.

This pattern of high valuations extends across the AI sector, with language model vendors commanding the highest average revenue multiples at 44.1x, substantially higher than AI companies in slower-adoption sectors like Legal Tech and PropTech 3.

Early-stage AI companies consistently receive inflated multiples due to low initial revenue, while later funding rounds see compressing multiples as companies scale and face pressure to demonstrate sustainable business models 3.

2️⃣ Capital intensity is reshaping investor expectations in AI

xAI’s plan to spend $18 billion on data center investments highlights the extraordinary capital requirements that have become standard in the AI industry.