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After weeks of struggling, Tesla (TSLA) stock seems to have finally regained some of its previous momentum, gaining modestly.
This is likely due, at least in part, to the positive momentum that is sweeping over markets today. Most of Tesla’s Magnificent 7 peers, the tech companies responsible for driving most of the market’s growth in 2023 and 2024, are back in the green after weeks of trending downward.
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That said, TSLA stock is outperforming many peers, possibly due to anticipation of Elon Musk returning to the company. President Donald Trump has hinted that the Tesla CEO’s role within the so-called Department of Government Efficiency (DOGE) may be coming to an end, which some investors likely find reassuring.
Of course, Musk has other things to distract him from running his only public company, including other businesses, including his social media and artificial intelligence companies.
Musk moves put Wall Street on alert
Over the past few years, Musk has done many things that have left investors and consumers scratching their heads. Last week, he continued this trend by announcing a deal between two companies.
In a post on X, Musk announced that his artificial intelligence (AI) startup xAI would be merging with the social media platform in an all-stock deal. While they may operate in different industries, Musk sees the merger as necessary for both enterprises.
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It’s not hard to see why merging X and xAI might make sense, at least from an operational standpoint.
As a leading social media platform, X offers extensive real-time and proprietary data that could be instrumental to the AI startup’s growth.
What likely caught the eye of many people, though, is the extremely high valuation of this newly merged company. With X and xAI valued at $33 billion and $80 billion, respectively, at the time of the merger, the new company’s valuation is roughly $113 billion.
“Of course, in all-stock combinations it is the ratio between the two companies’ sizes — rather than their absolute values — that is most intriguing,” reports the Financial Times. “It determines how big a slice of the combined pie each set of shareholders is going to end up with. In this case, xAI’s are getting about 70 per cent, while those in X are getting the remaining 30 per cent.”
The outlet notes that just how equitable this deal is may be hard to determine, as xAI is still an early-stage startup with little revenue. The private market valued xAI at only $45 billion as recently as late October 2024, so the $80 billion valuation is, let's say, interesting.