Look, I’ve been following the adventures of xAI, Elon Musk’s AI company, and I’ve come to a conclusion: its only real idea is “What if AI, but with Elon Musk this time?”

What’s publicly available about xAI makes it seem like Musk showed up to the generative AI party late, and without any beer. This is 2024. The party is crowded now. xAI doesn’t seem to have anything that would let it stand out beyond, well, Musk.

To be sure, Musk has tweeted that “xAI is not raising capital and I have had no conversations with anyone in this regard.” Musk says a lot of things in public and only some of them are true, so I’m going to rock with the filing, which I have seen with my own eyes.

xAI (not Twitter) is sort of an odd entity. Besides its entanglement with X (Twitter), it doesn’t really seem to have a defined purpose. The xAI pitch deck obtained by Bloomberg relies on two things: 

xAI (not Twitter) so far has one product, a supposedly sassy LLM called Grok, which users can access by paying $16 a month to X (the Twitter company) and then going through the X (Twitter) interface. xAI (not Twitter) does not have a standalone interface for Grok. My colleague Emilia David has characterized it as having “no reason to exist,” because it isn’t meaningfully better than free chatbot offerings from its competitors. Its clearest distinguishing feature is that it uses X (Twitter) data as real-time input, letting it serve as kind of opera glasses for platform drama. The Discover / Trends section of the X (Twitter) app is being internally reworked to feature Grok’s summaries of the news, according to a person familiar with the development.

Grok was developed very fast. One possible explanation is that Musk has hired a very in-demand team of the absolute best in the field. Another is that it’s a fine-tuned version of an open-sourced LLM like Meta’s Llama. Maybe there is even a secret third thing that explains its speedy development.

Besides X (Twitter), the other source of data for xAI (not Twitter) is Tesla, according to Bloomberg’s reporting. That is curious! In January, Musk said, “I would prefer to build products outside of Tesla” unless he’s given “~25 percent voting control.” Musk has also said that he feels he doesn’t have enough ownership over Tesla to feel comfortable “growing Tesla to be a leader in AI” and that without more Tesla shares, he would “prefer to build products outside of Tesla.”

Tesla has been working on AI in the context of self-driving cars for quite some time, and has experienced some of the same roadblocks as other self-driving car companies. There’s also the Optimus robot, I guess. These do seem like specific use cases that are considerably less general than building another LLM. That Tesla data is valuable and stretches back years. If xAI is siphoning it off, I wonder how Tesla shareholders will feel about that.

There are real uses for AI, sure. Databricks exists! It’s not consumer facing, but it does appear to have a specific purpose: data storage and analytics. There are smaller, more specialized firms that deal with industry-specific kinds of data. Take Fabric AI — its aim is to streamline patient intake data for telemedicine. (It is also making a chatbot that threatens to replace WebMD as the most frightening place to ask about symptoms.) Or Abnormal Security, which is an AI approach to blocking malware, ransomware, and other threats. I don’t know whether these companies will accomplish their goals, but they do at least have a compelling reason to exist. 

So I’m wondering who wants to fund yet another very general AI company in a crowded space. And I’m wondering if the reason Musk is denying that he’s fundraising at all is that there’s not much appetite for xAI, and he’s trying to minimize his embarrassment. Why does one of the world’s richest men need outside funding for this, anyway?

Silicon Valley’s estimation of Musk has been remarkably resilient, probably because he has made a lot of people a lot of money in the past. But the debacle at X (Twitter) has been disastrous for his investors. And Musk has been distracted with it at a crucial time for Tesla, which has been facing increased competition. Tesla’s newest product, the Cybertruck, ships without a clear coat; some owners say it is rusting. (A Tesla engineer claims the orange specks are surface contamination.) And in its most recent earnings, Tesla warned its growth was slowing. Meanwhile, Rivian’s CEO has been open about trying to undercut Tesla directly.

A perhaps under-appreciated development in the last 20 years or so has been watching Elon Musk go from being ahead of the investing curve to being a top signal. Take, for instance, the “GameStonk” movement, when Musk’s tweet was the perfect sell signal — not just for retail investors, but for sophisticated hedge funds. Or the Dogecoin crash that occurred as he called himself the Dogefather on SNL. Or even Twitter, which certainly wasn’t worth what Musk ultimately paid for it and has been rapidly degrading in value ever since, to the point where the debt on the deal has been called “uninvestable” by a firm that specializes in distressed debt.

I don’t see a compelling case being made for xAI. It doesn’t have a specialized purpose; Grok is an also-ran LLM, and it’s meant to bolster an existing product: X. xAI isn’t pitching an AI-native application, it’s mostly just saying, “Hey, look at OpenAI.” 

Musk is trying to pitch a new AI startup without a clear focus as the generative AI hype is starting to die down. It’s not just ChatGPT — Microsoft’s Copilot experiences a steep drop-off in use after a month. There is now an open question about whether the productivity gains from AI are enough to justify how much it costs. So here’s what I’m wondering: how many investors believe “just add Elon” will fix it?

With reporting by Alex Heath.